Two Congressmen recently introduced a bill that would create a special type of patent called an “Inventor-Owned Patent.” Having classified a group of “inventors,” the Inventor Rights Act (H.R. 5478) goes on to give them a long list of special privileges that will help them sue other people for patent infringement. If the bill passes, patent owners whom the government deems “inventors” will be able to exploit a big list of legal loopholes—including the ability to shut down product lines, avoid Patent Office reviews, and blow off important venue reforms established by recent Supreme Court rulings. Then, those who have “inventor-owned patents” will be able to return to venues that have historically been widely abused by patent owners, such as the Eastern District of Texas.
We’ll take a closer look at the Inventor Rights Act in a subsequent blog post, but first we need to answer a more basic question. Are most patent owners “inventors,” with all the weight that word entails? Are “inventors” a special class of patent owner, separate and distinct from the “patent trolls” that we track and critique here at EFF?
How Patent Trolls Make Money
Abuse of our patent system is, unfortunately, widespread. There are a vast array of people, companies, and institutions that make money by using patents, particularly software patents, to threaten or sue other companies, instead of developing or building technology of any kind. These lawsuits don’t spur innovation—they’re just exercises in rent-seeking. There are hundreds of patent owners, big and small, who live parasitically off companies that actually develop inventions, products, and services. Some of the trolls’ targets are big companies—after all, big companies have the most money to write big settlement checks. But lots of them are smaller—some of them very small, mom-and-pop businesses, sole proprietorships, or companies with just a few workers.
Those are the companies who will suffer most from efforts to tilt the scales further in favor of patent owners. They often can’t afford to mount a legal defense against patent trolls. Even if they’re likely to win, litigation costs could bankrupt them before that day ever comes. On our Saved by Alice page, we’ve published some true stories of small business owners who’ve been harmed by patent trolls, including video interviews with business owners Ruth Taylor and Justus Decher.)
There’s so much money to be made in abusing the patent system that there is an entire ecosystem of institutions that threaten people for licensing money. Stanford Law School has even created an database, the NPE Litigation Database, to categorize and track the various types of “non-practicing entities” that have businesses based on patent assertion. There are also companies like Unified Patents, and RPX, that collect and sell vast stores of data about the various types of patent assertion entities—companies that people who work in the tech sector often call “patent trolls.”
One type of patent troll refers to a company that buys up others’ patents, and then uses them to file lawsuits. An example of that would be Acacia Research Corporation, which buys patents (or “partners with” with patent owners) to sue companies, and splits the proceeds.
But that’s really only one type of patent troll. Others are firms that failed years ago, and now exist as shell companies that hold and assert patents. Or companies that never got a product off the ground, and now focus instead on litigating patents in court. And some patent owners never tried at all—they are simply individuals who acquire patents from the U.S. Patent Office for the purpose of making infringement accusations against others. It’s all bad behavior that hurts innovation—whether they use the term “inventor” or not.
Government-Approved “Inventors” vs. True Invention
When we talk about patent trolls at EFF, we’re looking at any individual or shell company that’s focused on threatening and suing people over patents—not making products or services. Some of those trolls are original patent owners—they applied for their patents from the U.S. Patent Office, ultimately received them, and haven’t transferred them to others. That makes them, legally speaking, “inventors.” But they aren’t inventors by any standard definition that we would understand them—because very often, the patents simply aren’t inventive.
When a company is focused on repeated legal attacks, and doesn’t actually provide any goods or services, that’s an abuse of the patent system—a system of limited monopolies that the Founders authorized Congress to grant only to “promote the progress” of the useful arts. Abuse is abuse, whether it’s done by an “original” patentee, or a third party who bought the patent. An inventor may have a fractional interest in a patent, with outside investors owning part of the action.
Many patent owners, and even named inventors on patents, aren’t true “inventors” by any common definition of the word. There are tens of thousands of non-inventive patents issued every year by an overworked government office. Those low-quality patents can easily become fodder for abuse.
It’s people and their accomplishments, not patents, that prove who the world’s inventors are. That’s why the idea of anointing a special class of patent owners, as the Inventor Rights Act would do, is a fundamentally flawed idea.
Calling Out The Trolls
Our “Stupid Patent of the Month” archives, and our Saved by Alice project, highlight lots of patents that would likely qualify as “inventor-owned” under the Inventor Rights Act, H.B. 5478. Consider a company like Motivational Health Messaging LLC, which held a patent on the idea of sending motivational text messages. The named inventors behind this patent, one of whom was an attorney, were also inventors on patents that other patent trolls had asserted hundreds of times. The same inventor got a patent related to message notifications, which was used to sue a Sonoma County bike gear company, a small business selling brownies, and many others.
While we don’t know the exact ownership breakdowns of these patent assertion companies, it’s very likely that the named inventors, who have been making money from patent lawsuits for a long time, have a significant stake in them. These are exactly the so-called “inventors” who are trying to get special privileges from Congress right now. They’re making claims that they “own” vast areas of technology, and are owed royalty payments.
We also fight those claims legally—like we did with the Personal Audio “podcasting” patent, a bogus language teaching patent, and the recent Inventergy GPS tracking patent. But we can’t take every case. Sometimes, we simply call out the patent’s ridiculous claims in public, so that users and technologists can share information about the legal demands being made by patent trolls. And in a case where a patent owner claimed it was defamatory to even call him a “patent troll,” we told the court to stand up for free speech—and won.
Some notorious patent trolls are the named inventors; other times, they’re buyers or licensees of patents. But the solution isn’t to create a separate class of “inventor-owned” patents. In our next blog post, we’ll explain more about the special privileges that the Inventors Rights Act seeks to bestow on certain types of patent trolls.