Joe Mullin at Ars Technica reports on a disturbing new trend, public sector patent-trolling:
Patent holders will file a lawsuit about anything under the sun these days, but a man named Martin Jones has embraced an alarming new strategy—suing cash-strapped American cities over their bus-tracking systems.
The most recent suit was filed last week, claiming that Portland’s TransitTracker system infringes a patent owned by ArrivalStar, the patent-holding company that enforces Jones’ patents. Two more, filed in February, claim that transit systems in Cleveland, Ohio and Monterey, California infringe three ArrivalStar patents.
While it appears that ArrivalStar may have a profitable run with this strategy, I have to believe that such suits will inevitably backfire. Patent trolling is already a big problem that is getting increasing scrutiny, and going after local political entities like cities and transit authorities is only going to increase the amount of unfavorable scrutiny.
One of my BU law professors, Mike Meurer, just posted a working paper (pdf) he co-authored with James Bessen and Jennifer Ford titled “The Private and Social Costs of Patent Trolls.” Quoting the abstract:
In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.
This works out to around $25 billion in lost wealth per year. For comparison, even in its pre-Napster days, the RIAA only sold $14.7 billion per year—more than $10 billion less.
Update: More analysis by Ars Technica.
Ars Technica has a post about Apple’s latest response to a lawsuit filed by Lodsys, a reputed patent troll, against of Apple’s app developers:
Lodsys began threatening both iOS and Android developers with lawsuits in May if the developers didn’t pay licensing fees for its claimed in-app-purchasing-related patents. Many independent developers lack the financial and legal resources to litigate a patent infringement claim, so a number of iOS developers began a campaign to get Apple to help, threatening a boycott of in-app purchasing if only to avoid such legal threats.
Lodsys acquired its four patents from former Microsoft CTO Nathan Myhrvold’s Intellectual Ventures patent holding company. It turns out that Apple already has a license to those patents by virtue of an investment deal in Intellectual Ventures. That deal gave Apple (among other companies, including Google) a license to some 30,000 or so patents under Intellectual Ventures’ control.
(In case you missed it, this is the same Intellectual Ventures that was the subject of a recent This American Life episode, which has sparked—to put it mildly—quite a discussion around the blogosphere.)
If Apple isn’t successful in defending its developers here, the whole iOS app ecosystem may be in jeopardy. As innovative as Apple has been in creating and updating iOS devices—iPhone, iPod Touch, iPad—over the past few years, a lot of their success is due to non-Apple creativity. There’s no way that Steve Jobs’ company could have created 425,000 apps over the past four years, and those apps are a (the?) main selling point for consumers purchasing iOS.
If Apple’s licenses with Lodsys/Intellectual Ventures don’t cover its developers and those developers can get sued one by one, two things will probable happen. First, the largest/financially strongest developers will (like Apple itself) reluctantly pay off the patent trolls, surviving by ultimately passing the costs onto consumers. Second, small developers will go out of business.
It’s April 1st, so the jokes are out in droves all over the web. Groupon has decided to post a fake patent for April Fool’s Day joke:
The present invention relates to performing jocular and misleading activities on an unsuspecting individual during a limited timeframe and, in particular, the present invention relates to a perpetrator generating a false statement based on false facts and informing an unsuspecting
individual of the particular false statement, and deceiving the unsuspecting individual into a false belief that the false statement, if true, would have a detrimental effect on the unsuspecting individual. Then, prior to said unsuspecting individual realizing that the false statement is not accurate, the perpetrator announces, usually in a high decibel voice and within the limited timeframe, that the unsuspecting individual has been deceived or mislead.
Ha ha, but isn’t this a little too close to home? Groupon is currently (counter)suing a small competitor named MobGob, as TechCrunch reported back in November. For infringement of patent no. 6,269,343:
The present invention provides a method and system that allows sellers to communicate conditional offers to potential buyers. The conditions include prices that depend on the aggregate amount of goods or services that buyers collectively agree to purchase by a given time and date.
The invention facilitates “demand aggregation”, that is, aggregating demand by potential buyers (who may or may not know each other), for products offered by sellers. This invention allows sellers conveniently to offer “Demand-Based Pricing”, that is, prices which go down as the volume of units sold in any given offer goes up.
A seller can therefor offer volume discounts to buyers acting as a group, even when the buyers may not have any formal relationship with one another.
Telling jokes and aggregating buyers. Maybe this is why we need patent reform.
Perhaps realizing how much money Charlie Sheen’s endorsements are worth these days, the U.S. Patent and Trademark Office recently decided to trumpet the fact that Mr. Sheen is also the proud recipient of U.S. patent #6,283,658:
Charlie Sheen’s patent for a “Chapstick Dispensing Apparatus.” Patent No. 6,283,658 was granted on September 4, 2001 to inventors Carlos Irwin Estevez and Rodger D. Thomason and assigned to Masheen Inc. in Los Angeles.
You can smack your own lips over all 14 pages here. Hat tip to Scott Walshon, friend and patent examiner, for pointing me to the link.
Techdirt points to a story illustrating how strong IP enforcement comes around after going around:
We’ve been talking about how ridiculously aggressive Sony has been lately in enforcing its intellectual property rights concerning PS3s, so it seems like there might be a bit of karmic retribution in the fact that a shipment of PS3s has been seized in Europe as part of an ongoing legal fight with LG over patents covering parts of the PS3. I’m always amazed at how frequently companies who push for stronger and stronger enforcement of IP laws never seem to consider the consequences when those laws are directed at their own activities.
There’s been a lot of talk this week about patent reform since the Senate passed a bill 95-5 that would, among other things, move the U.S. to a first-to-file system similar to what most of the rest of world uses. Some commentators think the proposed statutory reforms wouldn’t amount to much, though others suggest that the FTC’s recent report suggest that administrative reforms may be on the way.
Edward Tenner over at the Atlantic has a few observations about the trend towards ever-longer patents:
Patent numbers are often treated as a proxy for invention or technological creativity. There are many more now than there were at the peak of technological optimism in the late 1990s….[But if each individual patent has] thousands of claims, is none of them very important or — as some speculate — is there a tendency to obfuscate the significant ideas with chaff, defeating the patent’s rationale of disclosure?
I wonder whether another reason for increased patent lengths is the widespread availability of word processing software. One observation I have made in my years of legal research is that court opinions and law review articles tend to be shorter (and have fewer citations) the further back in time one goes. Perhaps our fore-bearers spent just as much time on their “work product” (a.k.a. writing and analysis) as we do but the cumbersome mechanics of research and writing in a pre-digital era nudged one towards focus and concision. Today, of course, the kitchen sink goes in because it can.
Whatever the reasons, you should really check out Tenner’s full post, which offers a few other explanations and ends by arguing that all this increase is not necessarily a good thing.