Patent trolls — companies that assert patents as a business model instead of creating products — have been in the news lately. This is hardly surprising, given that troll lawsuits now make up the majority of new patent cases. And the litigation is only the tip of the iceberg: patent trolls send out hundreds of demand letters for each suit filed in court. At EFF, we have been following this issue closely and are working hard to bring reform to fix the patent mess.
The recent news is not all bad. Just last month, for instance, online retailer Newegg won a long and hard-fought battle To its credit, Newegg has a policy of never settling with patent trolls. So, after Soverain Software LLC, a company that sells no products but claims to own online “shopping cart” technology filed suit, Newegg took the case all the way to trial in the Eastern District of Texas. It lost that trial — but it lost for a strange reason: the judge refused to let Newegg argue to the jury that the patent was obvious (if a party can prove that a patent was obvious at the time it was granted, a court should invalidate the patent).
Newegg appealed to the Federal Circuit. After considering the prior art (such as a CompuServe Mall that pre-dated the patent), the Federal Circuit ruled that Newegg had proved that the patent was obvious and invalidated it. Not only did Newegg defeat a patent troll — its hard work led to a decision that will make it easier for future defendants to invalidate bad software patents.
Newegg is not the only company to fight back. Twitter (which has never paid to settle a suit with a patent troll) recently won a jury trial against VS Technologies, which owned a patent for a “Method and system for creating an interactive virtual community of famous people.” In that case, the so-called ‘inventor’ was a patent lawyer with no computer science or programming background. Ultimately, a jury found the patent invalid. As these cases show, when they are actually forced to litigate, patent trolls frequently lose, particularly when software patents are at issue. One study found that, among the most frequently litigated patents (those asserted in eight or more lawsuits), non-practicing entities won only 9.2% of their cases.
Unfortunately, the good news is outweighed by the bad. Patent cases can cost well over $1 million to defend. So few companies have the resources, and even fewer have the appetite, to fight a patent case all the way through trial and appeal. The trolls know this and target firms that are less likely to fight back. A recent study showed that more than half of the firms sued by patent trolls have less than $10 million in annual revenue — with startups being a common target.
Even more disturbing is the recent trend of patent trolls going after end-users. For example, a shadowy collection of shell companies has been blanketing the nation with letters demanding that companies pay them $1000 per employee for the privilege of using standard office technology like scanners and email. And this week we learned that a patent troll is targeting the podcasting community. When they are misused like this, patents are a tax on innovation and creators. The patent troll motto seems to be: if you build anything, we will come.
We’ve said it before and we’ll say it again: the patent system needs fundamental reform. At our Defend Innovation campaign, we have proposed a number of reforms including fee-shifting and an innocent infringer defense. EFF is also trying to help by assisting people in finding counsel, giving people tools to fight back. If you're a licensed attorney who can practice in the United States and is willing to advise targets of patent trolls join EFF’s Cooperating Attorneys’ List by emailing firstname.lastname@example.org with the title, "Patent Attorney Wants to Join Coop Attys." We appreciate any of the help you can offer!