On Software Patents and Patent Trolls

by Mark Rawls

Patent litigation can be a real mess. James Bessen, of Boston University, estimates that roughly half a trillion dollars was spent in the last twenty years fighting “patent trolls,” including legal costs and an estimated decline in market value. Just ask Microsoft, Google, Apple, Facebook, Amazon, . . . and the list goes on. Each has been sued, often repeatedly, for patent infringement. Then there are smaller companies, or startups, or individuals, who are either sued or chilled by the potential costs of such suits, even if frivolous. Consider Interval Licensing v. Google et al., which Lee Gomes at Forbes describes as “yet another example of the cynical use of the American legal system to extort money out of successful companies — in the name of protecting innovation and innovators. Shame on Paul Allen [Microsoft co-founder] for being part of it.” Further examples of patent trolls abound.

In an effort to shield themselves from liability, big businesses, especially technology businesses (and 75% of patents from the last 20 years are in “computer and communications technology”), amass large war chests of patents, in a sort of mutually assured destruction strategy. “Large stockpiles of patents can lead to a legal détente between tech giants simply because both companies own enough patents to sue the other repeatedly.” Google, for instance, while in the middle of patent litigation with Oracle (see my previous post), recently acquired Motorola Mobility – and their approximately 17,000 patents. Microsoft formed CPTN Holding, with members including Apple, Oracle, and EMC, and in a deal with Novell acquired a patent portfolio of some 882 patents. As part of the deal, a judge required the patents to be shared with Open Invention Network, a company designed to pool patents together for open source developers.

But patent war chests don’t help against patent trolls. In a recent article about patent trolls, Popular Mechanic defined the term to mean, “firms that produce little and exist mainly to buy other people’s patents and enforce licenses.” Their business model turns around collecting royalties – and, often, this means suing for patent infringement, sometimes to collect damages, sometimes just to “convince” other companies that paying royalties is cheaper than litigating. Given the purported intent of patents to “promote the Progress of Science and useful Arts,” the existence of such firms seems troubling, as does the social and economic costs they allegedly cause. To an outsider (well, at least a 1L who hasn’t taken any patent law courses yet), this doesn’t look like a terribly efficient system.

There is certainly a lot of noise against patent trolls. Some of that is part of a wider movement against software patents more generally. The Free Software Foundation, for instance, advocates for not allowing software patents at all. Richard Stallman of GNU, has long expressed distaste for software patents, and the threat they pose to open source developers. There have even been several petitions on the White House’s “we the people project” about ending software patents. Wikipedia has a long article describing the debate. But there is by no means any unanimity in the software community about patents. As long ago as 1992, the ACM published an article in one of its journals called Debunking the Software Patent Myths, focussing on nine supposedly “absurd” software patents specifically. Paul Graham, an influential figure in the software community, has also expressed support for software patents, while noting serious problems with the current system.

One contention among software patent opponents is that software just isn’t patentable subject matter. Software is mathematics; it is algorithms and data. This claim is certainly true abstractly. But the line between software and hardware (which usually is considered patentable by this crowd) is a fine one to draw: is firmware software? microcode? What about FPGAs (including ones that can only be “programmed” once and are then fixed)? Paul Graham explains the problem by suggesting that even mechanical patents might be thought of as patenting an algorithm:

Patent law in most countries says that algorithms aren’t patentable. This rule is left over from a time when “algorithm” meant something like the Sieve of Eratosthenes. In 1800, people could not see as readily as we can that a great many patents on mechanical objects were really patents on the algorithms they embodied. Patent lawyers still have to pretend that’s what they’re doing when they patent algorithms. . . . If you want to patent an algorithm, you have to frame it as a computer system executing that algorithm. Then it’s mechanical; phew. (Seehere.)

But despite all the fuss about patent trolls, maybe they are serving a valuable function. By providing a market for patents, they might encourage inventors. Bessen and his co-authors, however, examined the literature on this topic, and concluded that the cost inflicted by software trolls is, in economic terms, a deadweight loss. But they don’t offer any solutions. And it’s not clear whether all so-called “non-practicing entities” (a somewhat less conclusory term that “troll”) are harmful to the system. Getting rid of software patents seems heavy-handed; a bit like throwing the baby out with the bathwater. All sorts of notable technology companies have depended to no small degree on the protection afforded by software patents. And it’s not clear that software patents are really all that different in kind from other patents, except perhaps for giving the patent office more trouble in determining what is “obvious” to a person of reasonable skill in the art. Can you have a reasonable judicial standard on what constitutes a “patent troll,” as distinguished from a legitimate “non-practicing entity”? There are a few ideas being discussed, but not all that many that I can find. In light of the potential chilling effects of patent trolls, it is interesting to note what advice Paul Graham gives to startups (he funds technological startups as a venture capitalist): “[N]o one will sue you for patent infringement till you have money, and once you have money, people will sue you whether they have grounds to or not. . . . Don’t waste your time worrying about patent infringement.” But should the legal system be spending more time worrying about patent trolls?

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