A lot of startups get sued by Non Practicing Entities (trolls) that have no operating business to speak of. That provides the slimmest counterattack surface - so not sure how useful it is to have a portfolio to hit back.
I think a better defense mechanism would be a legal defense fund that would force the trolls to make their case at trial, to go through discovery, to bring expert witnesses.
Because the law firms that represent them work on contingency, this would effectively cut into the potential licensing fees, and make trolling less profitable (and less likely).
Also, a lot of trolls extract patent licensing fees out of startups for patents that should have never been granted, and that deserve to be invalidated (e.g with prior art), but the process of getting a patent thrown out is expensive, so having a fund would greatly help.
The other strategy that could work is to get all the startups that get sued by a troll for a specific infringement and make a sort of "reverse class action" - making it possible for the startups to re-use the same lines of argument, evidence, etc in their cases.
Others have mentioned this, but this PatentSheield scheme is not useful against non-practicing entities (NPEs or "trolls). It is intended to be used by startups who are at risk of sued by big incumbants. For example, if an IoT startup participates in this program and is sued by an established IoT company, the startup can take title to the portfolio and counter-sue the incumbant for infringement of the portfolio patents. At that point, the companies agree to a cross-licensing deal and both parties live to fight another day.
This kind of arrangement is not useful for countering NPEs because NPEs are non-practicing by definition. Since they are non-practicing, you can't countersue for infringement.
Your note about cooperation between potential defendants is spot-on. The difficulty is in getting them to cooperate. Accused infringers are likely to be competitors who may not be inclined to cooperate. Further, it is to the advantage of each to simply license the patent and wait for another accused infringer to do the work to invalidate the patent, at which point they can all stop paying license fees. (A classic "free rider" problem.)
By the way, a company can buy patent infringement insurance that will pay for litigation or settlement costs, but it isn't clear that it is worth the premium.
Let's say I pay into this fund, then I get sued for patent infringement. How does the fund decide whether this lawsuit is trolling or legitimate? Or would the fund pay for all patent lawsuits?
There are several ways of reaching a distributed consensus about that, like proof of stake.
It is also conceivable that it would be in the fund's interest to defend all lawsuits. That would provide the largest deterrent, since the lion's share of today's suits are without merit, and the cost of defense would be considered the operating cost of the fund.
What the trolls exploit is the assymetry between a defendant without resources and their own resources which are solely dedicated to this.
Without all the licensing fees that startups pay to settle the alleged infringement the business model for trolls would stop working.
That would provide the largest deterrent, since the lion's share of today's suits are without merit
Doesn't this depend on what "without merit" means? It seems unlikely they are "without merit" in the legal sense, since then they would be thrown out at the first hearing.
If you mean they are from patent trolls aka non-practicing entities, then it seems wrong too. I see coverage of tens of cases by NPEs per year, but the entire patent law-suite field must be much bigger than that.
There are probably better sources than this PWC report[1], but it identifies 477 out of 2281 (ie, 21%) cases since 1996 in the districts where NPEs file cases involving NPEs. Their definition of NPE includes universities though, which I don't think is what people generally think of when they think of "patent trolls".
If "without merit" means that they almost always lose, then this doesn't seem right either. The success rate for patent cases varies, but seems around 25-35%. That's far from "lion's share without merit"
Ars Technica reported last year that in 2015 over two thirds of patent lawsuits were filed by trolls and that of all patent lawsuits, 44% were filed in the Eastern District of Texas (where few others than trolls would be filing suits). The report says that although the numbers are up, the trolls' business might be down.
The total number of cases seems to line up between the two reports (5700 in 2015, not including PTAB).
But only 2281 cases involving NPEs were decided between 1996 and 2015[1]. If 66% are filed by NPEs, then this should be much more. Unless the vast majority are dropped I guess?
Yes. Cases issued will not correspond to cases decided, since many cases settle. And there is a long time-lag from starting a case to ending it with a judgment.
> It seems unlikely they are "without merit" in the legal sense, since then they would be thrown out at the first hearing.
In all patent troll cases I've seen, a patent exists, and the defendant is actually infringing the patent. So there is some merit to the lawsuit.
The problem is that the "inventions" in the patents:
* are not novel, or
* are not non-obvious, or
* have not been described in sufficient detail to replicate without further research, or
* a combination of all of the above for various claims in the patent.
so the patent should never have been issued in the first place. But invalidating the patent in court is a tedious and expensive process. You need many expert witnesses debating what is novel, what is non-obvious, and what is sufficiently detailed, it's not something a judge can decide in 10 minutes.
Couldn't the fund just use arms-length consulting patent attorneys to answer the question: does defending this case have a reasonable prospect of success?
It could. It could also force the startup to hand over control of the defense (which the startup would most likely be ill-suited to control) and therefore control the defense strategy.
All that is required is a big enough defense fund that acts as a true deterrent.
Mind you, if the startup loses it doesn't mean that it would not be responsible for the payout - but at least the startup wouldn't fold simply because the costs of defending itself are out of reach.
Google is taking a leaf out of the Mafia playbook here. Classy. Nice start-up you have there. Would be a shame if one of these pesky trolls sued you. But if you join our organization as a partner you will be protected.
The reason you're exactly right, despite the naysayers, is because this is a private organisation stepping in to protect and patronise in an area where legitimate authorities are failing. It is at the level that matters a perfect analogy.
But the upside is similar: If nobody sues Google still has the equity and Google needs the trolls to stay around to make sure people will buy into this program.
Does payment in the form of equity rather than cash affect the incentives in a negative way? It's not enough to call out a distinction: how does it make a difference? If anything, the equity should mean that Google's incentives are more closely aligned with the startup's than the fire insurer's are with the insured.
Yes, because obviously if that equity turns out to be worth a very large amount of money and the company is never sued Google is not going to turn around and say 'oh, sorry for this vastly disproportionate payment, here is your repayment'.
In fact, the best outcome for Google would be if nobody ever got sued. (That's also the best outcome for the companies but there is no way of knowing if they would have gotten sued had they not paid their protection fee.)
How is that different to "You paid an awful lot of fire insurance premiums over the years but never had a fire"? The insurance company certainly isn't giving you a refund either.
It seems to me that if the equity turns out to be worth a lot, then the value of the protection is greater as well - the potential losses are likely to pretty closely track the company's value.
Fire insurance companies are not in a position to legally set fire to the buildings of those who refuse their services either. Here Google's scheme is monitizing its patent portfolio. Currently, the calculation is that this racket provides a better ROI than hiring lawyers and suing. There's still money on the monitize patents table.
When I read this, my first thought was that the ownership stake is helpful in some way for the legal defense. I'll be curious what numbers they're talking about once they are available.
I think Google needs the startups to survive so that they can have innovative companies to buy in the future. Taking equity in the future is a way to pay for protection that will enable said companies to survive without having to pay out of pocket for said survival.
Google has the patent portfolio to do so. Currently it is monetizing that portfolio by offering protection for vigorish. There is no law that prevents Google from providing an object lesson that demonstrates the wisdom of startups paying proper respect.
This is a new line of B2B rent seeking. It is not a not for profit foundation endowed with the patent portfolio and funds sufficient to operate off investment returns. It's a tax on the startup ecosystem.
The other distinction is that the mafia would be the big NPE's, big incumbents with patent portfolios, drug companies given patent rights aren't sector-specific enough, politicians they bribe to make patent suits hell for targets, and a corrupt judge in East Texas. They work together to make all the bad things happen for their mutual gain.
Unfortunately, yes, this is disgusting... But, at the same time, the EFF or any other organization didn't manage to do anything about it. So whatever happens you'll end up paying. I still prefer paying Google than to the trolls...
So basically you give up an unstated x% ahead of time for access to Google+Intertrust's portfolio. A few thoughts.
First, this only provides access to the patent portfolio. It doesn't pay the (considerable) litigation bills.
Second, this portfolio is already available. If Alice sues Bob, Bob can negotiate just in time with Intertrust or IBM or ... for access to a defensive/offensive portfolio. This acquisition of patents during litigation is common practice.
Third, just as Intertrust is going to do their due diligence on you, you are taking a risk that their portfolio is a good match for your risk. You need to do your due diligence on them and on their portfolio.
I might go for this, but it would be at a pretty low percentage, like less than a percent.
patent laws are so broken that patent trolls are everywhere suing startups to get $ from them.
google now has a business that can directly benefit from such increasing number of patent trolls.
sounds not very inspiring to me.
who is always on the losing side? average small companies.
who is screwing the economy & innovation and show no sign of change? governments who refuse to actually reform such a 100+ years old broken system.
This service is not for defending against non-practicing entities - but to defend against patent suits from large enterprises that the startups might be competing against (e.g. Microsoft, Facebook, Samsung, etc) - not that Microsoft et al. engage in that kind of warfare against small-fry, but it's plausible.
If you analyze the life of important inventors and innovators of the 20th century, there has always been some patent pain involved that is not in the interest of the "greater good".
The reason America didn't have a significant air force for WW1 compared to other powers was in part due to the legal battles between Wright and Curtiss. The government intervened in the patent driven battle so planes could mass produced and used in the war effort.
Then, the inventor of the TV (Farnsworth) got sued by radio manufacturers and could never actually profit from his creation.
Then, many patents get extended for excessive periods of time to prevent things becoming public domain (e.g: Disney).
I can't even recall a single time when patents have helped 'the little guy'. The only case that I can think of offhand involve manufacturers holding out until the patent expires, even if it is a decrease in public safety.
I think the most simple, and best, reform for /patents/ is elimination.
While I'm on the subject, returning to the 15 year copyright and 15 more IF you pay a lot to renew sounds like a good starting point for that discussion.
Trademarks should have something similar (a slowly rising fee over time) but be allowed to exist as long as that fee is paid; that's a consumer protection mechanism.
Patents are still important to protect and reward research costs, elimination would destroy the pharma industry overnight for instance.
I have no idea why you have a problem with trademarks. Why should a small family business be paying increasing fees to continue to operate as "Sanford and Son"? Or do you think I should be able to call my product "Heinz Ketchup" because they have had the name long enough?
When you need this I think we can safely say the patent system is broken beyond repair. This is basically extortion (note that I'm not blaming Google!).
Why are you not blaming Google? If Google was not trying to extort patents for profit, they could permit everyone free access to their patents. They have chosen not to do so. (Their patent pledge includes a tiny portion of their patents which are not substantial in any common patent litigation. Now we know why.)
Google has purchased an incredible number of patents, and is now leveraging them for profit. They are not in a morally higher ground than Intellectual Ventures if they continue with this service.
This sounds totally like a squeeze. Google is telling startups "Cut us in if you want to play in this game." I like that they're cutting the lawyers out of the picture though. Instead of waiting till the company gets big, suing, and then getting their take they can now just collect up front and save time and lawyer fees.
Why don't we have something like the open source movement in drugs? Using PATENTLEFT. All those possible inventions for the long tail if people were allowed to build on top of existing discoveries.
It's unnecessary. If you want to prevent something from being patented, just disclose it in a publication. That publication will bar anyone else from patenting your invention. As long as you don't patent it yourself, it will become dedicated to the public.
IANAL, but publishing the invention to preclude patents is a bit like open sourcing your code under a permissive license. Although it allows anyone to use and modify the code, it also allows making closed-source modifications. The patent equivalent would be someone patenting work based on the original publication.
The copyleft equivalent would be to patent your work, but license it to anyone, provided they use the same license for any derivative patents. I think such a scheme might lead to interesting results if some important innovation ends up locked into copyleft, similar to the Linux kernel.
Not true anymore, unless that publication reaches the vast majority of practioners so that it has clearly become part of the normal state of the art (recent court decision) - something very difficult for a private citizen to accomplish. Mere publication to establish priority doesn't matter because priority doesn't matter, being first to the patent office matters; so big companies can legally steal your ideas now. Even if you've published them, in most cases. They make large donations to Congresspeople - you don't.
OK, what I wrote wasn't quite true. The information needs to be published in a way that it is sufficiently accessible to those interested in the art. It needs to be available to the public and indexed somehow. The standard is very low though. If it's on the internet and can be found by a search query for the topic, that's probably sufficient.
First-to-file resolves priority when it comes to undisclosed inventions. Two inventors A and B both invent some new invention and both go to patent it. Whoever is first wins. Two inventors come up with the same invention all the time. The first-to-file rule makes it easier to resolve conflicts than examining evidence of who invented first, and it encourages speedy filing by preventing an inventor from secretly exploiting an invention and then filing when another inventor appears.
By the way, anyone can look at the published patent applications (which are published usually 18 months after filing) and can submit information that they believe would be relevant to the examiner in determining if the invention is patentable. It's called a Pre-issuance Submission. [0]
Sadly a recent judgement, rendered well after the date of your link, seems to have jumped the publication requirements way, way up - to my shock and dismay. I regret I don't seem to have the link handy. I've tried submitting a pre-issuance submission of sorts to the USPTO recently and just got back an instruction on how to begin legal proceedings, at my own expense, the submission itself was discarded as far as I could tell.
So now I can blatantly disregard, copy, and infringe upon on any patents I want while building my startup, simply by paying the price of giving a small amount of equity to Google?
you can purposefully become a patent-troll-troll and try to lure trolls to sue you but you've found a loophole in your product and it doesn't even exist anyway.
Its always nice when the private sector figures out a way to solve a problem that should be solved by government, but government is incapable or unwilling to do so.
There is some good news though. Recent court cases (Alice, etc.) are really cramping the trolls' style. Intellectual Ventures and the like are backing away from the troll model because their crappy software patents are getting invalidated in court left and right.
This solution works, but it's far from ideal - the trade of equity for protection (or rather: access to their arsenal) could be unappealing to startups without much equity to hand-over in the first place - given a $1m lawsuit (which might cost $1m to defend against), or giving up $1m of equity for access to counter-suit weapons (with no guarantee of success - and also probably costing $1m to file anyway).
I think a better defense mechanism would be a legal defense fund that would force the trolls to make their case at trial, to go through discovery, to bring expert witnesses.
Because the law firms that represent them work on contingency, this would effectively cut into the potential licensing fees, and make trolling less profitable (and less likely).
Also, a lot of trolls extract patent licensing fees out of startups for patents that should have never been granted, and that deserve to be invalidated (e.g with prior art), but the process of getting a patent thrown out is expensive, so having a fund would greatly help.
The other strategy that could work is to get all the startups that get sued by a troll for a specific infringement and make a sort of "reverse class action" - making it possible for the startups to re-use the same lines of argument, evidence, etc in their cases.