New York Times’ 5-year fight with patent troll may cost millions

13 Comments

Credit: Rani Molla

Even as belt-tightening has led the New York Times to close sections and shed reporters, the Gray Lady is spending large sums on legal bills to fight a patent troll that claims to own the rights to sending internet links via text message.

The Times has been fighting the case since 2010, arguing that the patent is unenforceable in part because the mobile phone companies that deliver the text messages have already paid the troll, known as Helferich Patent Licensing LLC, to license it.

Even though a federal court agreed with the New York Times and tossed the claims in 2013, the case sprang back to life last month after an appeals court ruled that the patent claims are not “exhausted.” Now the Times must brace for another round of litigation.

The five-year ordeal illustrates once again the dilemma that companies like the New York Times face when confronted by patent trolls: either pay for a dubious license (in this case for sending a text message), or pay even more to go through a legal meat-grinder.

The New York Times and its lawyers would not disclose how much the company is spending on the Helferich case, but this 2013 chart produced by the American Intellectual Property Law Association shows how much these lawsuits typically cost to defend (NPE stands for non-practicing entity, a synonym for patent troll):

Troll litigation costs

Given the length and complexity of the case — docket filings show Helferich has engaged in repeated procedural jousting, and even sought to obtain sanctions against the Times and its lawyers — it’s likely that the legal bills are already in the millions.

This situation, in turn, points to the economic asymmetry that makes patent trolling so effective in the first place.

“One of the business models many NPEs leverage is offering a settlement that will cost less than at trial,” said Michael Strapp, a patent lawyer at Goodwin Proctor, who has written a guide to defending against patent trolls.

Strapp added that, while there are too many variables to predict the cost of a given case, the process of discovery — in which companies have to turn over evidence in the form of documents and testimony — drives much of the cost. Patent trolls, meanwhile, are shielded from most of these costs since they are basically shell companies with little in the way of assets or discoverable documents.

Helferich’s business model has so far been effective enough to extract reported settlements of $750,000 from the likes of Apple and Disney.

As such, by choosing to fight (in 2012 a Times lawyer, Brian Buroker of Gibson Dunn, likened the demand to a “tax on the internet”), the Times may simply be paying more to prolong its legal misery.

The Times case, however, may provide further momentum for patent reform in Congress, where senators like John Cornyn (R-Tx) and Chuck Schumer (D-NY) have long backed measures to rein in patent trolls, in part by reforming the discovery process that makes it easy for trolls to extract settlements.

The case also comes at a time of growing scholarly evidence that patent trolls don’t result in innovation, as their defenders claim, but instead force productive companies to cut operations and R&D.

A lawyer for Helferich, whose operations appear to consist of no more than law offices in Arizona and Chicago, did not immediately return a request for comment.

13 Comments

4ormorechars

This is ridiculous. The transmission method is irrelevant to the concept of hyperlinks. If some future invention allows human brains to communicate directly with each other are they going to let some troll file and enforce patents for sending hyperlinks over this too?

Guest

You’re drinking the New York Times Kool-Aid. Helferich has never claimed to own a hyperlink going to a cell phone. Read the lawsuit.

Concerned American

The NYT’s (a multibillion dollar company) openly steals an independent inventor’s invention and you call him the troll?!

What am I missing here? Isn’t it the NYT’s that charges for delivery of news and advertisements with technology developed by someone else?
The NYT’s isn’t offering a free public service, they are profiting from an inventor’s work.
As far as I can tell not one end user has been accused of infringement. Let’s get real, the NYT’s is picking on the little guy who has (so far) stood up to the pack of thieves — God Bless America

Katie

What you’re missing is that the troll stole the patent from the inventor in the first place. That’s why they’re known as Non Producing Entities. Most NPE’s are nothing more than a couple of patent attorneys, with questionable morals, who submit patent claims for others’ inventions hoping they beat the inventor to it.

exhibit44

Sorry, but sending a link is more vital to mankind than space travel. It’s more basic to intellectual production, and effects more of the economy, than space travel ever could. I know you just have a metaphor here, but what goes on in the information sphere has rapidly become more important than most of the stuff going on in the hard science world. That’s because info-based inquiry is incredibly cheap. Space travel, in particular, is the summit of empirical science, and empirical science finds fewer and fewer surprises on its expensive excursions, and is often outraced by theory.

Einstein, Bohr, et al figured out the universe using pen and paper, and when it was expensively confirmed by expeditions and nuclear accelerators, there were very few errors found.

Fennec

Oh, boo hoo, the New York Times. I’m FAR more worried about patent trolls attacking valid inventions and innovations. I mean a newspaper is all well and good, but if future innovations in space travel are prevented because of your idiotic patent system, it doesn’t matter how many dollars that they’re clutching at when the asteroid hits.

Big Picture

You’re an idiot. The New York Times is doing heroic work here. Helferich is suing everyone under the sun and costing millions to innovative and non-innovative businesses. If the NYT wins this suit it will save businesses (small and large) millions upon millions of dollars.

Guest

The billion dollar New York Times is stealing from the little inventor and you think that is heroic????
By that standard, Edison, Goodyear, Dolby and hundreds more should be considered trolls.

Katie

Helferich isn’t the inventor…they stole the patent FROM the inventor. That’s why they’re called a non producing entity…just a couple lawyers gaming the system.

exhibit44

All inventions and innovations are equally valuable. Provided the patent office doesn’t award a patent for something useless or non-novel (and they’re pretty good about not doing that) there’s no way of knowing which invention will bring the most benefit. This is because, in putting those innovations into practice, new things are discovered.

richbhanover

Thanks for the link to the Schumer/Corwyn legislation.

PS I hope you mean “rein in patent trolls…”

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