Patent trolls — shell firms that don’t produce anything but instead amass patents in order to sue real companies — have long been tormenting the technology sector. Now, they are coming for media companies and one famous newspaper is fighting back.
The New York Times Co. (s nyt) is engaged in a pitched legal battle with two such “trolls.” One is Helferich Patent Licensing LCC, a Chicago shell firm that claims to own the process for sending links to mobile phones — basically where a company sends a customer a text message. According to the Associated Press, the firm typically demands $750,000 to go away, a fee that it has already collected from dozens of firms like Apple and Disney.
Such demands place companies like the New York Times in a difficult position. The patents in these type of cases are often spurious but it can cost millions to prove that they are, meaning it’s cheaper to simply pay up. If a company pays, the troll can then use the money to target other companies.
“In some ways, it’s a tax for being on the Internet. Millions and millions of dollars collectively is going out of the pockets of people who earned it to people who, in my opinion, didn’t do anything,” the Times general counsel Kenneth Richieri told the AP.
Right now, the Times is paying to have the patents at issue re-examined by the US Patent Office. A Times court filing says the office has already succeeded in knocking down two of the patents, including US Patent 7,499,716 (“systems and method for delivering information to a transmitting and receiving device”). The company is asking a federal court in Chicago to suspend the litigation while the rest of the patents are re-examined.
The Times’ second major troll battle is over “autocomplete,” the function that suggests a word when a user types a few letters. A troll, called Boadin Technologies LLC, is stalking the Times, Bloomberg, USA Today and others for using the autocomplete function to propose stock ticker symbols. Court records show the Times is digging in to contest that suit too.
In the larger picture, the troll cases raise questions about the state of America’s innovation policies. While patents are regarded as a spur to invention, they are increasingly also being used simply as fodder for lawsuits by companies that don’t make anything. The problem has been exacerbated by a US patent office that has issued patents for everything from methods of exercising a cat with a laser to swinging on a swing.
In a highly-publicized editorial in the Atlantic last month, the famous judge Richard Posner called for the system to be reformed.