I have absolutely no problem with enforcing patent rights, and frankly I don’t think it should matter how the patents were acquired, but there is something exceptionally seedy about the use of shell companies going after competitors, or large tech companies selling to known patent trolls. They complain about the troll problem in the halls of Congress on the one hand, but use them to their advantage on the other hand.
The question should be whether there is infringement of a solid patent. If there is a solid patent and there is infringement, then there should be recourse, period. Having said that, it would be naive to pretend that there is not real evil lurking in the patent infringement realm. Stories of $500 to $1,000 offers to settle and avoid patent infringement litigation that would cost millions of dollars to defend abound. False and misleading demand letters prey on unsophisticated businesses.
That there are bad actors is hardly surprising, particularly given the lucrative nature of the business model and the fact that many district courts feel as if they do not have the tools to do anything other than allow their courtrooms to be used in the extortion-like shakedown. Of course, despite what some district court judge say, there are considerable powers that can be exercised if judges really do want to stop the bad behavior. See Judges Can Make Patent Trolls Pay. But the shell game played with the ownership of patents does add a layer of complexity to figuring out what is really going on and who is calling the shots. Why is it so necessary to have such secrecy? As Justice Brandeis once said “sunlight is the best disinfectant.” The troll industry could use some disinfecting. It is a sin that these nefarious actors tar those innovators with real, strong patents that are infringed.
Of course, judges cannot stop the bad actors alone. All too often, companies settle crap cases for a few thousand dollars and then naively proclaim that it is better business to settle than to fight. Unless and until the Silicon Valley elite stand up and fight, this problem will continue to go on and there is little or nothing the Congress can or will do to stop it, and nothing that even willing district court judges can do to prevent it from damaging the patent system and the integrity of the Federal Judiciary.
During the 1980s, the auto insurance companies would settle everything, just like the Silicon Valley elite tech companies do today when faced with bad patent infringement cases. In the bad old days, if you sued an insured motorist, the insurance company would calculate how much they would spend on defending the litigation and then offer you nuisance value to settle, which was of course a little less. They would dispose of the case and feel confident in the belief that they had saved money doing so because, after all, they could pay their attorneys and ultimately lose. So if they could pay less than what they calculated the attorneys would charge, they did.
It doesn’t take a rocket scientist to know what happened next. Every attorney with a pulse signed up every client they could who had been in an auto accident and sued. There was easy money to be had because insurance companies would settle bad cases. It was win-win for everyone except the insurance companies. You see, their decision to settle everything without a fight led to far more claims and that cost them big over the long haul. In fact, it wasn’t until about the early 1990s that the gravy train was over and auto insurers figured out that they had to fight rather than settle specious claims. And fight they did. They fought everything and for a while it was difficult, if not virtually impossible, to settle even good cases where there were real damages and solid liability.
The lesson was and is clear: If you don’t fight, and if you make yourself an easy target, people will sue you on both good and bad cases. And now thanks to the United States Supreme Court, obtaining fees in a patent litigation is so much easier, which is what the tech companies said they wanted. But will they fight patent trolls? Only time will tell whether they pick up the fight or they continue to make up reasons why paying ransom is a better business decision.
Tags: litigation abuse, patent, Patent Litigation, patent troll, patent trolls, patents
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