Patents, infrastructure, and payouts

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.

Quick legal-related links

EFF:  “Courts Call Out Copyright Trolls’ Coercive Business Model, Threaten Sanctions.”  Apparently discovery (in the legal sense of the term) isn’t what it used to be…

Ars Technica:  “Supreme Court weighs legality of putting public domain works back under copyright.”  Golan v. Holder is shaping up to be one of the biggest copyright decisions by the Supreme Court in years.  The briefs are available at SCOTUSblog.

WSJ @ Truth on the Market –> “Litigation funding grows.”  Hedge funds enter the world of litigation…as an investment opportunity.

Patent trolls: 20 years, $500 billion in losses

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.

H/T Groklaw.

Update:  More analysis by Ars Technica.

Righthaven losing that rocky mountain high

I noted yesterday that copyright troll Righthaven hasn’t filed any new lawsuits in the past two months, but I was suspicious that it was all over.  After reading Wired’s coverage today, however, I think Righthaven’s end is near:

The new chief executive of MediaNews Group, publisher of the Denver Post and 50 other newspapers, said it was “a dumb idea” for the nation’s second-largest newspaper chain to sign up with copyright troll Righthaven.…

“The issues about copyright are real,” [John] Paton told in a telephone interview. “But the idea that you would hire someone on an — essentially — success fee to run around and sue people at will who may or may not have infringed as a way of protecting yourself … does not reflect how news is created and disseminated in the modern world.”

I stand corrected.  Barring a court-ordered miracle, it seems only a matter of time before Righthaven closes up shop.

Reversing Righthaven

The court system issued another stunning rebuke of Righthaven and its business model, as an Electronic Frontier Foundation press release reports:

In a decision with likely wide-ranging impact, a judge in Las Vegas today dismissed as a sham an infringement case filed by copyright troll Righthaven LLC. The judge ruled that Righthaven did not have the legal authorization to bring a copyright lawsuit against the political forum Democratic Underground, because it had never owned the copyright in the first place. [emphasis added]

This is a big win for bloggers, and the news gets even worse for Righthaven:

As part of his ruling today, the judge ordered Righthaven to show why it should not be sanctioned for misrepresentations to the court.

More coverage at Techdirt.

I guess we’re starting to get that copyright law clarity I was hoping for

40,000 ways to file a lawsuit

How do you file lawsuits against 40,000 people you think are infringing your copyrights?  Sounds like the answer is “one at a time”:

Thousands of unnamed “John Does” in P2P file sharing lawsuits filed in California, Washington DC, Texas, and West Virginia have been severed, effectively dismissing over 40,000 defendants. The plaintiffs in these cases must now re-file against almost all of the Does individually rather than suing them en mass.

Let’s unpack this.  Copyright owners often don’t know the names of people they suspect of using the Internet to infringe their works — they only know that such-and-such an Internet protocol address allegedly accessed a pirated file of their content.  In order to match that address with a particular person, they often have go to court to compel an Internet service provider to tell them what account/person is associated with that address.  They can only sue individuals once they have actual names.

Copyright owners have been in the habit of suing thousands of “John Doe” IP addresses in one lawsuit and then using those names to settle quickly:

These rulings may have a significant impact on the copyright trolls’ business model, which relies on being able to sue thousands of Does at once with a minimum of administrative expense. The cost of filing suit against each Doe may prove prohibitively expensive to plaintiffs’ attorneys who are primarily interested in extracting quick, low-hassle settlements.

In my view, courts’ rejection of this tactic brings some procedural balance back to copyright infringement lawsuits.  Copyright owners often sue alleged infringers in courts that are convenient for the owner, and this can effect a substantial injustice.

Perhaps a concrete example is in order.  Let’s assume an individual defendant that (1) is unquestionably innocent and (2) lives in Iowa.  Let’s further assume the plaintiff copyright owner is a movie studio based in California who wants to sue her in Los Angeles.  As a practical matter, this defendant has a difficult choice.  Litigation is always inconvenient and expensive, but hiring a California-based attorney from Iowa and flying out to Los Angeles is probably more than a typical defendant can afford.  Under these circumstances, she may pay the studio a $2,000 settlement even though she’s innocent just to make the matter go away.  After all, it’s pretty easy to burn through $2,000 with a lawyer and travel expenses.

Given this procedural tilt favoring copyright owners, it seems only fair that they be required to file their suits one at a time.  If a copyright owner doesn’t think her claim is even worth a filing fee, she probably shouldn’t be filing that lawsuit in the first place.  Copyright was, after all, designed “To promote the Progress of Science and useful Arts”, not to provide extra-judicial windfall profits to content owners.

Thanks to Matt Berntsen for the original link to the EFF write-up.