Chetan Tiwari is a JD candidate at Osgoode Hall Law School and is enrolled in Professor Mgbeoji’s Patents class in Fall 2011. As part of the course requirements, students are asked to write a blog on a topic of their choice.
I believe that one quote concisely delineates the behaviour of patent trolling:
Amongst a host of dormant patents, some will be found which contain new principle…which the inventor, however, had failed to render of any use in his own invitation. And some other inventor, ignorant that such a principle had been discovered…had the genius to render it of great practical value…when, lo! the patent sharks among the legal profession, always on the watch for such cases, go to the first patentee, and for a song, procure an assignment of his useless patent and at once levy blackmail upon the inventor of the valuable patent. –United States Senator Isaac Christiancy
Similar to the troll of Norse mythology, protecting their unproductive land and devouring those who unknowingly trespass, patent trolls impede those who travel in the realm of invention. The Nordic troll maims their unsuspecting prey with giant clubs, while the patent troll typically uses ambiguous patents to subdue their victims. It is these non-practicing entities that create more obstacles for inventors and subsequently increase the costs of inventing. Consequently the incentives to invent are diminished.
Patent trolls increase patent costs in multiple ways. Firstly, the risk of exploiting a new device due to lurking patent trolls whose sole purpose is to claim damages if an infringement occurs, is substantial. The heightened danger of traveling in the realm of invention causes difficulty for the small inventor to exploit their ideas and more importantly obtain the support of investors who cannot withstand heavy litigation fees nor pay large damages if required. The potential for large settlements in favour of patent trolls is illustrated by the $612.5 million awarded in settlement to NTP Inc., a registered “patent-troll” when they filed a claim against RIM for providing its blackberry services. Further studies have shown that patent trolling has cost publicly traded companies approximately $500 billion. Once news of an infringement claims against publicly owned company’s reaches the public shares tend to plummet in value.
Secondly, hiring guardians to shield against patent trolls can be quite costly. Patent purchasing groups such as Allied Security Trust (AST) purchase patents so they will not fall into the hands of a patent troll. Typically organizations such as AST purchase the rights to inventions that can be asserted against the members of the organization. The issue with the AST’s of the world is that they are an exclusive club with a high membership fee. AST charges a membership fee of $250,000 and requires a $5 million deposit in escrow to fund patent purchases. Many investors cannot afford the protection afforded by these ‘knights in shining armour’ and the ones that are able may feel that the cost-benefit balance no longer works in their favour due to the increased costs of patent protection.
The costs associated with invention are inflated due to the increased risk created by patent trolls. The costs are increased further by the measures required to guard against them. This essentially curtails the benefits of invention as well as the incentives for inventiveness.