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Summary:

The problem of patent trolling is rooted in economics: there is little downside to filing outrageous lawsuits since it often costs the other side more to defend than settle. The Supreme Court is hearing cases that could change that.

U.S. Supreme Court
photo: flickr / dbking

One reason the U.S. patent system is such a mess is because there’s really no downside for those who abuse it. If you’re a patent troll, you can file baseless lawsuits against anyone under the sun and if you win, you strike gold. If you lose, you can just pick up another old patent and try again while your targets are stuck paying their legal fees.

This economic asymmetry is what drives the patent troll problem, and explains in part why the Supreme Court is hearing two cases on Wednesday that seek to determine when a bad patent actor should pay the other side’s legal fees. The issue is important enough that a host of major companies, including Apple and the New York Times, have submitted briefs urging the Court to change the rules.

The details of the cases involve arcane procedural and evidence issues, but much boils down to a rule that companies must show that the other side’s patent claim is “objectively baseless” in order to recover legal fees. That standard is nearly impossible to meet in practice, so it fails to provide any real deterrent for trolls and other bad actors in the patent system.

The Supreme Court’s decision to hear the case reflects its ongoing attempts to correct the decisions of the country’s patent appeals court, which it has overruled unanimously on multiple occasions and which has been labeled a “rogue court.” The Supreme Court is also hearing another case this spring involving software patents, which could curtail what types of inventions are eligible for patents in the first place.

The Supreme Court cases come at a time when all three branches of government are actively trying to reform the patent system, which a growing stack of academic evidence suggests has become a burden rather than a spur to innovation. In response, large patent trolls like Intellectual Ventures are taking steps to halt reform, including launching a PAC to lobby for trolls.

For more details on the legal aspects of today’s cases, SCOTUS Blog and Patent Docs have extensive summaries, and Ars Technica has a feature on the legal and business implications for trolls.

  1. The proposed reforms are worse than the supposed problem they pretend to fix. Patent infringers have little incentive to respect patents because court refuse to grant injunctions, cases take years to wend their way through the courts, the litigation rules are seldom enforced, and damages awards are so small as to be laughable (even the giant award in the Apple v. Samsung case amounted to just 9 days of Samsung’s profits, and by the time it is actually paid (if ever) the infringing products will have been off the market for 3+ years!

    All of the complaints about “trolls” could have been fixed if anyone cared to properly fund and operate the Patent Office so that strong, valid patents were granted, creating more respect and more certainty in the system to reduce “gaming”. For more than 20 years, every administration has taken funds from the PTO, while forcing it to set fees at “break even” rates. The result, a system that is a mess, and an easy target to blame: anyone who dares to bring suit to enforce patent rights — even Apple has been called a “patent troll”.

    If we are unwilling to properly fund and manage the Patent Office, we get what we deserve. Garbage in, garbage out, and knee deep in 541T.

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