Patent Trolling

8/6/2019 Patent Trolling

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What is a Troll

A popular tale involves a troll

guarding a bridge, who

demanded payment before a

traveler could cross.


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Defining a patent trollPatent troll is a is a derogatory term ,

which is used for a person or

company used to describe a unique

type of patent enforcer - an entity that

makes money from a patent solelythrough litigation or licensing and not

from manufacturing or developing the

patented invention.

Pay Up


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Ac

tivities of a patent troll A troll does not intend to actually practice a patent. Here intention is of primary

importance as small inventors may have the intent to practice a patent, but

do not do so due to lack of resources.

A patent troll does not produce any thing of value but merely acquires patents

with a view to obtain licensing revenue.

They do not make use or sell new products and technologies but solely aim

to force third parties to purchase licenses.


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Causes - patent troll Patent trolls may buy patents cheaply from entities not actively seeking to

enforce them. (For example, a company may purchase hundreds of patents from a technologycompany forced by bankruptcy to auction its patents.)

The cost of defending a patent troll cases by defendant companies are high.

With the costs, risks are also high and high level of uncertainty prevails about theoutcome of jury trials, which might force the defending companies to come to a

settlement.

Distortions in the patent market, such as those caused by long patent

application pendency, promotes patent trolling.

The Patent Troll strikes, demanding huge royalties to be paid or you risk a

lengthy, nasty and very expensive legal battle - with the real danger of losing it.


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Effects - patent troll

They are in a position to negotiate licensing fees that are grossly out of alignment with

their contribution to the alleged infringers product or service", not their non-practicing status

or the possible weakness of their patent claims.

The risk of paying high prices for after-the-fact licensing of patents they were not aware

of, and the costs for extra vigilance for competing patents that might have issued, in turnincreases the costs and risks of manufacturing.

Patent licensing is also considered as pro-competitive because in a way it encourages

investment in bringing new products in to market. Thus, by creating a secondary market for

patents, patent trolls make the ownership of patents more easily available, thereby creating

incentives to innovate and patent.

Giving patents in the hands more specialized licensing companies will facilitates access

to technology by more efficiently organizing ownership of patent rights.


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Mechanics of patent troll

Patent Trolls operate much like any other company that is aggressively exploiting

a patent portfolio.

Monitor the market for possible infringing technologies.

Review published patent applications for signs that another company isdeveloping infringing technology

Target vulnerable company that has much to lose, or little money to defend itself,

hoping that an early victory or settlement will establish a precedent to encourage

other (or bigger) companies to acquiesce to licenses.

Advantages : Uncertainty in patent judicial system.

Uncertainty and unpredictability of the outcome of jury trials.

High cost of legal defense.


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Types of Patent Trolls

A well-known Silicon Valley patent litigator, Doug Lumish, has suggested there are

four types of patent trolls:

True BlueTrolls : These are non-manufacturing holding companies which

acquire patents from inventors.

Thinking Persons Trolls : These folks develop inventions for the purpose of

licensing and enforcement, not to manufacture and sell products.

Incidental Trolls : These are failed manufacturing companies left with patent

assets ready to be exploited, or patents left over from discontinued product lines.

CompetitorTrolls : Often a company will acquire patents to target a competitor

with lawsuit


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Trolls Vs. LegitimateActors

It is also essential to separate two classes of people who might act similarly to

trolls : but are not trolls. They are

1)Innovators

The goal of a patent troll is simply to obtain a patent that it can use to

extract licensing revenues, but innovators develop a new technology that can be

used by a producer.

An innovator seeks not just to obtain a patent, but also to create an underlying

technology that has some value.

(This point can be demonstrated by analogizing the patent to a piece of land. Both the innovator and the

patent troll can potentially own the land, thus having the right to exclude others from it. The innovator,

however, uses the land to raise a crop but a patent troll merely aims at excluding people from the land)


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Trolls Vs. LegitimateActors

2) Producers

Patent trolls do not include those who acquire patents as part of a

defensive or offensive strategy related to their own product line. A producer need

not actually practice the patent to avoid being called a patent troll. The criticalquestion is whether it is enforcing its patent in a market in which it

participates.(For instance, a patentee might manufacture a product that can either use a widget or a gadget. The

patentee has patents on both widgets and gadgets. However, the patentee decides to use only widgets in

its product. While the patentee does not practice the gadget patent, it is not a patent troll. Indeed, even if

the patentee chooses to license its gadget patent to competitors, the fact that the patent relates to a

market that it participates in characterizes it as a producer, rather than a patent troll.)


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IndustryPerspectives

Patent Trolls are more an issue in the IT industry than other industries, including

Biotech/Pharmaceutical industry.

ITindustry :

Easier to enter into business - Low cost of R/D.

Single product often has 100s of patented or patentable features. Thus, even if

infringement was for only one element of the product, Patent Trolls often use the

threat of a permanent injunction to shut down an entire product.

Cross licensing is common because it is difficult and expensive to evaluate theinfringement of all related patents. However, Patent Trolls do not manufacture

products and, therefore, do not respond to cross licensing offers.


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IndustryPerspectives

Biotech/Pharmaceutical Industry :

Difficult to enter into business - High cost of R/D

Single patent can be worth billions of USD with 10-15 years of R/D

Rely heavily on patents granted for a very few, highly important, discoveries. So,

these companies do not license the patents but rather, use them more offensively.

Therefore, if their patents are infringed, they want an injunction

License only for reasons, such as decide not to develop further in-house,

market changes, priority changes, additional clinical studies, cost, resourceconstraints Careful with prior art searches because of enormous cost of R/D, and

prior art searches may be easier to conduct.


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Trolling- Incentives In The Legal System

The difficult process of patent troll avoidance is made harder due to the

fact that

Under many legal systems, especially that of the United States (U.S.), potential

trolls have an incentive to remain hidden and have their patents infringed,rather than to enter into negotiations with developers of technology.

Damages awarded through litigation have the potential to vastly

overcompensate a patent holder whose patent has been infringed rather

than a patent holder who grants a license.


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Trolling- Incentives In The Legal System

Punitive Damages

The U.S. grants punitive damages to patent holders in cases of willful

infringement. These punitive damages can be treble the initial damages claim

Permanent Injunctions

Patent holders seeking to assert a troll-like strategy can also seek

overcompensation by relying on the availability of permanent injunctions

which prevent another party from using the patented technology once a finding

of infringement has been made. This allows the patent holder to be

overcompensated by pursuing a strategy of waiting for its patent to be

infringed and for the product incorporating the infringing technology to be on

the market


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Future Viability of Patent Trolls

Patent Trolls will encounter a tougher environment due to the changes at the court

and possible legislative measures.

In summary, the following may all affect trolling behavior

More constrained venue

Higher incidence of invalidity rulings

Smaller settlements and lower damage awards

Fewer injunctions

Fewer pre-suit settlements

Fewer contingency fee arrangements due to above effects.


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Possible solutions to the Patent Troll Problem

The reasons that the patent troll strategy has developed in the present patent

system appears to result from judicial procedure and its adjudication in

infringement cases.

Some possible solutions are

Open Post-Grant Review

- At the time of patent renewal; and

- Any time a patent is sold.

Compulsory licensing

Granting ofInjunctive Relief in Infringement Suits

Reformulation of Criteria forIndemnifying Patent Holder


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Indian Law Dealing with Patent trolling

The laws related to following have made the Indian system fairly immune to the

problem of patent trolls that have been plaguing many other countries.

Open Post-Grant Review

Compulsory licensing

Domestic working and reasonable period requirements

Pre-grant opposition regime

Post-grant opposition regime


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The Patent (Amendment) Act, 2005, has effectively reduced if not eliminated

the problem of patent trolls.

Most trolling activity occurs in the field of technology patents. This Act disallows

patents on software (including embedded software) and excludes an area with

huge scope for trolling.

Trolling activity has been discouraged is through a strong pre- grant opposition

regime with a time of six months being provided. There is also a provision for

post grant opposition.

The Intellectual Property Appellate Board, which is an administrative bodydesigned to dispose disputes quickly, reduces costs of litigation, such that small

entities which are targeted by trolls need not worry about the high cost of

litigation to defend their patents


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Compulsory License for Patents in India

Compulsory licensing is a method which can be used to reduce patent troll

activity.

Indian Patent Act allows any interested person after expiry of 3 years from grant of

patent even though if he is a license under the patent, may make an application to

the Controller for grant of compulsory license.

Accordingly, any interested person after expiry of 3 years from grant of patent

even though if he is a license under the patent, may make an application to the

Controller for grant of compulsory license

The concept of reasonable period in relation to compulsory licensing in

Section 84(6)(iv) has also been defined as less than six months


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Section 84(1)(c) not worked in the territory of India ground for compulsory

licensing also overlaps to a considerable extent with the Section 84(1)(a)

ground, i.e ., that the reasonable requirements of the publicwith respect to

the patented inventionhave notbeen satisfied.

Section 84(7)(d) provides that the reasonable requirements of the public aredeemed unsatisfied ifthepatentedinventionisnotbeingworkedintheterritory

ofIndiaonacommercialscaletoanadequateextentorisnotbeingsoworkedto

thefullestextentthatisreasonablypracticable.

Similarly, Section 84(7)(e) provides that the reasonable requirements of the

public will be deemed unsatisfied if th

ew

orking of th

e patented inventionin the territory of India on a commercial scale is being prevented or hindered by

the importation from abroad of the patented article by the patentee, his agents,

or third parties against whom the patentee has not enforced the patent.


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