PATENT TROLLS: TROLLING THE INNOVATION

Author :ABHISHEK YADAV, AMITY LAW SCHOOL NOIDA

ABSTRACT

The basic aim of patent law is to balance the interests of the inventors on one hand and the interests of the public on the other hand. The inventors are rewarded with limited exclusive rights on their invention, for providing technical progress to the public respectively. Innovation, technological advances and the commercial gains which could be derived from such rights have led to the increase in the number of litigations such as patent trolls.

This fundamental goal of patent law is diametrically opposed by a patent troll. A company that enforces its patents against one or more alleged infringers in a way that is deemed unduly aggressive or opportunistic is referred to as a “patent troll.”Patent trolls usually have no intention to manufacture or market the patented invention and their sole purpose is to make some easy money through actions such as sending legal notices and filing patent infringement suits.

This article deals with the concept of patent trolls, how patent trolls impact the innovative environment in a country or world at large, and also, the mechanisms that could be placed in the legal framework that attempt to curb the patent trolls.

INTRODUCTION

According to folklore, trolls are terrifying, avaricious, and hideous creatures that frequently reside under bridges or in dark caverns. A troll waits for an unwary pedestrian to cross the bridge where it resides. The evil troll appears halfway across the bridge to demand a toll to continue crossing, failing which he stops the traveler dead in his tracks.

Similarly, in the dimension of Intellectual Property, there exists a pecuilar breed of ‘Patent Trolls’.

Patent trolls get their name from doing essentially the same thing as a bridge troll, who merely occupies the bridge to keep others from trespassing. These people and organizations lie in wait until a new innovation arises, at the point when they act to charge licensing costs or royalties against the innovator who has inadvertently infringed on the obscure patent. Paying these fees, unsuspecting defendants settle infringement cases based on broad patents that were either unknown or had not been enforced previously.

THE OBJECTIVE OF PATENT LAW

The main goal of a patent system is to encourage innovation by providing inventors with a temporary monopoly so they can make money off of their creations. The fundamental tenet of this system is that innovation will always outweigh monopolies’ short-term detrimental effects for society as a whole. Innovators pursue potential intrinsic motivations for invention in addition to trying to maximize the net present value of their innovation investments.

In return for the exclusive rights granted by the patent, inventors are required by law to reveal their inventions to the general public. By enabling others to expand on previously developed ideas, this disclosure fosters knowledge dissemination and new inventions. The commercialization of inventions and the transfer of technology are facilitated by the ability of patent law holders to sell or license their patents to third parties.

By stimulating investment in R&D, which results in the creation of novel and inventive goods and technologies, patent law fosters economic growth. This ultimately leads to the establishment of new companies and jobs, which boosts the economy’s overall growth. Also by giving inventors protection for their creations in overseas markets, patent law fosters global trade. This promotes international business growth for inventors and makes cross-border technology transfer easier.

PATENT TROLLS

The phrase “patent trolls” was initially came up with by Peter Detkin, a former Intel Assistant Counsel. He explained patent trolls as under:

“businesses that purchase patents rather than invent them, then use the threat of costly litigation to demand disproportionately high license fees”

The majority of patent trolls do not manufacture any goods or services based on the patents they own; in other words, they do not use their patents. Instead, they only obtain patents in order to compel businesses to pay licensing costs. These patent trolls’ method of operation is to obtain patents with the express intent of suing infringers and never intending to use the invention or develop their products.

Though precisely defining a patent troll is difficult, it seems evident from modern definitions that a patent troll is an organization that neither creates new technologies nor uses technologies to offer products or services to the market.

The trolls exploit the high expense of litigation in most jurisdictions by threatening legal action. Even if the alleged infringer is able to defend himself, the trolls may threaten legal action, so in order to save money and time, the accused infringer may choose to resolve the matter outside of court. The troll typically demands a license fee that is less than the time, money, and effort required for legal action, and the alleged infringer accedes to the troll’s demands. This vicious cycle keeps going since the patent troll can use the money to purchase more patents and target more businesses for infringement.

TROLLING: AN INJUSTICE

Patent trolls acquire patents mainly for licensing purposes. They don’t use the patent for subsequent innovations or for their own production.

Their approach involves obtaining patents and subsequently suing production companies for infringement based on the acquired patent, or enforcing patents without making use of the patented material through production or research. They hardly ever advertise any specific goods or services related to the patents they are suing for. These can be thought of as companies made up of attorneys and patent specialists who have combined knowledge of both patent law and litigation.

Patent trolls typically target big, profitable businesses, but they can also target smaller, more specialized businesses like distributors, manufacturers, or retailers. In certain cases, patent trolls do nothing at all and wait for a rival business to create a comparable technology before suing them for patent infringement.

By using such abusive tactics, they intimidate investors, stifle innovation, add needless expenses, and even force businesses to close. They also create a great deal of uncertainty for businesses. It is common to accuse patent trolls of limiting innovators’ freedom of movement and weakening the incentives that patent law seeks to establish.

Because of the possibility of further demands from patent trolls, investors are less willing to fund start-ups as a result of patent trolls. It is almost always obvious for small and medium-sized businesses that they will have to settle because they might not have the funds to pay the costs of defending the lawsuit. Research indicates that 82% of the company’s target patent trolls, also known as patent assertion entities (PAEs), have revenues of less than $100 million, and 55% of them target companies with revenue of $10 million or less.

Due to their constant need to settle, these businesses can be easy targets. However, patent trolls don’t just target startups and small businesses; even well-established innovative companies must deal with the fallout from their actions. According to Microsoft, it usually has to defend against 60 PAE infringement claims, which costs tens of millions of dollars annually. Google, Blackberry, Earthlink, and Red Hat submitted joint remarks detailing that their litigation defence costs have gone up by 400% because patent trolls are filing four times as many lawsuits today as compared to in 2005.

Even when the infringement is unclear, a patent troll may threaten to take legal action against the patent holder (for example, by sending a cease and desist letter). Additionally, it might conceal itself through front companies, making it challenging to recognize and combat. A patent troll may also purchase soon-to-expire patents and file a lawsuit against another party for a comparable invention. The patent troll in these instances possesses scant, if any, evidence of an infringement. The primary strategy is to intimidate the other party into accepting an agreement.

The goal of patent trolls is to secure royalties using a license. The restriction of rights about the patented invention is one of the primary hazards that a business faces when it comes across a patent troll. Even though the invention might still be useful, the company will only be able to do so by paying a hefty licensing fee. This will probably discourage more inventions and require significant resources. This also applies if the business decides to go to court. It’s an expensive, time-consuming process with no guarantee of success. Given the hazards, businesses might just decide to.

Due to their limited financial resources, small businesses like entrepreneurs are especially vulnerable to trolling because they are unable to refute false claims. While media attention is often focused on high-profile legal disputes involving affluent technology companies, recent data indicates that patent trolls now file 60% of all patent lawsuits, primarily against low-income businesses.

The risk to sustainable development is that trolling turns patents’ financial protection into a financial burden. This damages the creativity that is the foundation of sustainable development and lessens the incentive to translate green concepts into green technologies.

INDIA’S SAFEGUARD AGAINST PATENT TROLLS

The structure of India’s patent laws has significantly reduced, if not completely eradicated, the threat posed by patent trolls. For example, the implementation of the Patent (Amendment) Act, 2005 excludes a huge area for trolling by not providing patent protection to software, which is a common subject matter prone to trolling activity in the technological sector.

One way in which India has kept patent trolling at bay is by providing a provision for post-grant opposition which discourages patent trolling activities. This ensures that after a patent is granted, and possible sale of such patent to a patent troll, the patent can be challenged on various grounds.

Put differently, the mere fact that a patent has been granted does not preclude later challenges to its validity or lack of functionality. The presence of a dedicated Intellectual Property Appellate Board is beneficial since it encourages prompt resolution of conflicts and lowers the expense of litigation. This makes it possible for smaller businesses that are the target of patent trolls to defend their patents without worrying about the hefty expenses of legal action.

The practice of compulsory licensing can be used to stop patent trolling. This provision’s main idea is that the public loses out on a patent’s use and benefits if it is not working. In India, an individual has three years from the date of patent issuance to submit an application for a compulsory license. This mechanism reprimands trolls that fail to exploit their patents or put them to work. Further, India’s requirements for domestic working of a patent are highlighted in Section 83 which upholds that Indian patents are not issued just to give patent holders the exclusive right to import the patented product.

This means that Indian patent laws are not tolerant of the basic objective of patent trolls to merely acquire patents without working them in the territory of India. To elaborate further, India is of the view that the reasonable requirements of the public are to be taken into consideration and is deemed unsatisfied if the patented invention is not being worked in the territory of India or is not being worked to the fullest extent that is reasonably practicable.

Thus, India is now less vulnerable to the threat of patent trolls than other nations due to post-grant opposition provisions, the operation of the Intellectual Property Appellate Board, laws pertaining to compulsory licensing, domestic working, and reasonable period requirements.

CONCLUSION

The dark or gloomy side of patent trolls is that studies have shown that patent litigation stunts innovation and discourages venture capital investment, especially in small and start-up companies

Ultimately, it can be argued that patent trolls are more of an injustice than a messiah. The argument advanced by proponents of the practice is that by preventing large corporations from abusing small businesses’ intellectual property rights, patent trolls enable the growth of certain industries or businesses. However, this is the very last thing that a patent troll is capable of doing. A patent troll does not intentionally target large corporations in order to defend and assist small businesses in order to profit from those companies; additionally, the smaller businesses are not negatively impacted by the actions of the patent trolls.

A patent troll causes more harm than good because they severely hinder creativity and damage a company’s reputation, which lowers investor investment. For this reason, it is thought that the World Intellectual Property Organization (WIPO) should make all reasonable adjustments to the new intellectual property laws to prevent patent trolls, as they are more harmful than helpful.

In contrast to technology, laws and regulations take a long time and are difficult to amend. To achieve the greatest outcome for society, they need financing, lobbying, and a shift in the mindset of those in authority. Many businesses choose to resolve their legal disputes rather than endure protracted legal proceedings.

Patent trolls may do little to advance the evolution of technology, and may instead give legitimate NPEs a bad name. They may well be the business equivalent of a schoolyard bully. Sometimes you have to stand up to schoolyard bullies.

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