Sunday, November 25, 2007

What about Trolls?

How would raising the filing fee impact patent trolls? If you are not familiar with patent trolls, check out this excellent blog Troll Tracker. Patent trolls are companies that are set up with the sole purpose of suing other companies for patent infringement on patents that tend to be acquired from individual inventors and companies that have gone out of business.

In a recent post, Troll Tracker reviewed patent lawsuits filed against the Fortune 100 based upon the industry of the defendants in the lawsuits. The most interesting distinction was between the Pharmaceutical Industry and the High Tech Industry. Pharmaceutical had 28 total lawsuits, with 24 coming from competitors and 4 coming from Universities (etc.) but none from patent trolls. High Tech, on the other hand, had 192 lawsuits, with 35 from competitors, 24 from Universities (etc.) and 132 from patent trolls.

What is the distinction between the Pharmaceutical and High Tech industries around patents? Well, first the Pharmaceutical Industry depends on patents to survive because they tend to have a single innovation (the chemical compound used to treat disease x) the price of making a pill is next to nothing and anyone can follow a formula to make a chemical compound. High Tech companies tend to have differentiated products composed of lots of improvements that are very complicated to put together. Second, Pharmaceutical companies spend $800,000,000 to get one new product to market so the consequence of having a weak patent is huge. High Tech also spends a lot of money on new products, but they tend to grow incrementally from one product version to the next.

Pharmaceutical companies tend to have a relatively few number of extremely valuable patents that, were a company go out of business, would quickly be snapped up by a competitor, investor or other interested party, who would produce the compound. High tech companies have lots of patents on small features and if the business should cease, no one really knows the value of the patents. These patents fall through the cracks and end up with the trolls.

If the patent filing fees were raised, then High Tech companies would only file patents on their most important innovations and fewer patents would be more valuable. Thus, they would be less likely to fall through the cracks, and the patent troll market would dry up.


DJF said...

In hi-tech - i.e. land of trolls - there are lots of small inventors who get patents on incremental inventions, and then their IP gets snapped up by a troll (or the patentee, who manufactures nothing himself, hires a contingency fee lawer and becomes a troll himself). That being the case, it's not clear to me how raising the filing fee would reduce the number of trolls - the filing fee is paid at the time of filing, so if I'm a lone inventor (of actual or dubious inventions), there's no disincentive for me to keep filing my applications. Lemelson, the uber-troll, only assigned his patents to his foundation *after* they were granted, right? He wouldn't have been affected by your proposal.

What your proposal might dissuade is the filing by big companies of applications on frivolous inventions. That wouldn't be a bad thing. But I'll bet there are medium-sized companies - including pharma companies - that qualify as "large entity" under the # of employees standard and will be dissuaded from filing applications on non-frivolous inventions that they don't yet know are valuable. (Pharma companies only get into clinical trials after the applications have been filed. So by trying to pick on the large, established filers of lousy patents, many of whom are not trolls b/c they actually make ans sell something, you'd be throwing out the baby with the bathwater.

Most importantly, in the wake of KSR, I think we're going to be seeing far fewer crap patents for trolls to work with. Granted, there will be a lag of 15-20 years until the crap patents that have issued since State Street are all dead, but if KSR means anything it signifies a shift of the pendulum in the opposite direction (perhaps too far, to the point where some things that should be patented won't be, but that's for a different thread). So when push comes to shove, some trolls will get rich during this period and for Sun, Microsoft et al., paying trolls (or defense attornies) will continue to be part of doing business. Viewed that way, your proposal is more likely to lead less innovation, due an inability to patent (or inability to properly value a contemplated patent), than it is going to address a problem that needs fixing, since the supremes already saw to that.

Tim Wilson said...

djf. I don't believe that KSR really changed anything other than increased the PTO's ability to stick to bad 103 rejections (see previous post on two types of patent quality). Patent quality is bad because of the volume of patent applications. When the volume is cut down, patent quality will go up as will the value of all patents. Remember this change is only for large entities. Small entities will be handled by the examiners having more time to focus on their invention (or lack thereof).

Erin-Michael Gill said...

Just posted a long comment here: