Chinese Trolls And Privateers

Inventors, lawyers and scholars are meeting in Silicon Valley at Defense 2.0: New Strategies for Reducing Patent Risk to discuss the wave of patent litigation that is engulfing smartphones, tablets and the rest of tech industry. What’s on their minds? Some highlights:

Trolls, Mafia or Privateers?

What should we call shell companies that buy up patents and file lawsuits even though they don’t make anything? “Non-practicing entity” is the preferred term for those who find “troll” too pejorative — but there are some other candidates too. Michael McCoy, who represents app developers, proposed “the mafia.” Tom Ewing, of patent licensing firm Avancept, has another idea. He likes to think of himself as a “privateer” because he is a good guy pirate like Sir Francis Drake who helped to build a new economic model for his country.

Speaking of rhetoric, Ewing is sick of the constant references to “battles” and “war” that pepper any patent discussion. Ewing says that audiences in other countries would “turn pale” at such language. He then offered the Silicon Valley gathering of patent boffins a $100 prize to the first who submitted a patent paper without military metaphors.

Mobile is Driving a New Era of Patent Wars

In the PC-era, according to consultant Lisa McFall, tech patent squabbles were a gentlemen’s game played by a few large companies that would enter cross-licensing arrangements rather than face mutually assured patent destruction. Now, the disruptive effects of mobile technology has brought the return of company-to-company litigation that is further fueled by the arrival of patent-holding companies.

Intel’s Jeff Draeger echoed that “mobile phones are disrupting books, magazines, MP3 players and cameras” and that the end of detente among tech companies means everyone, small and large, is in a mood to file lawsuits. But he added that the current patent acquisition spree is fueled by a speculative bubble and that “this mania about wireless patents is going to wane.”

Competitors Become Allies

Smart phone fights aside, big companies are tapping a new spirit of legal cooperation. Historically, the companies were reluctant to work together to defend patent suits because they did not want to disclose their strategies and they worried their rivals would settle the case behind their back. Now, though, patent lawsuits have become such a threat that lawyers from different firms are forming common legal fronts to strangle troublesome trolls in their crib. This cooperation, along with new joinder rules, may be turning the patent tide in favor of the tech companies.

Here Comes China

It is not just manufacturing jobs that the US is exporting to China — America has also sent over patent trolls. According to Xiang Wang, a Beijing-based lawyer for Orrick, China is rich ground for non-practicing entities because everyone, everywhere is making products that might infringe a patent. But Wang says the Chinese trolls have only had limited success so far due to inexperience and poorly drafted patents.

China is also going to be a big patent player because of a national policy that calls for obtaining thousands of patents in core industries, according to Joff Wild of IAM Magazine. The country is less likely to invent the patents than to buy them from American companies — which may touch off a new national security debate tied to patents.

In Quotes:

Use a very skeptical eye because most of this stuff is junk — Intel’s Jeff Draeger on buying patent portfolios.

If you have the next big app, they’ll find a way to get to you.. It’s a lot like the mafia — Michael McCoy, Appsterdam Legal Defense Fund.

This is something even our House of Representatives can understand — Karen Boyd of Turner Boyd, on how new joinder rules will make it easier to count patent lawsuits.

There are so many settlements because the average litigation cost is $5-10 million per judgment — Douglas Luftman, CBS (NYSE: CBS) Interactive.

Privateers are the good guy pirates — Avancept’s Tom Ewing on why he would rather be called a privateer than a troll.

Defense 2.0: New Strategies for Reducing Patent Risk is taking place at Santa Clara University and was kicked off by NPR’s Laura Sydell, whose American Life show “When Patents Attack” helped make patents a dinner table topic.