[David Strom's Web Informant] The scourge of patent trolls

David Strom david at strom.com
Tue Aug 22 12:59:24 EDT 2017


Web Informant, August 22, 2017: The scourge of patent trolls

One of the tech industry’s dirty secrets is enabling an entire class of
bottom-feeders called the patent troll. These are lawyers that exist solely
to sue other firms and bleed them dry from the threat of patent
infringement. A new documentary is out by Austin Meyer, who suffered from
one troll purely because he uploaded his app to the Google Play store. The
troll claimed his patent covered such activity, which is just utter
nonsense. As shown in Meyer’s movie, almost all defendants settle patent
cases to avoid the costs of discovery and a protracted legal battle. There
are several thousand troll-based lawsuits filed annually, and the number is
increasing.

Sadly, what these trolls do is also perfectly legal. But what gets my goat
is that the trolls don’t actually make anything: it isn’t like they have a
competitive product line that they are trying to protect with their
lawsuit. They are really just racketeers, extortion con men. Many of these
firms, like Virnetx and Uniloc, are companies that you never heard of, and
are getting rich from these troll payouts.

For example, several years ago Virnetx beat Apple and now gets $300M a year
in royalties because Facetime was claimed to infringe on secure network
communications patents it held. That took years to work its way through the
courts in eastern Texas.

Wait a minute. Why Texas? Isn’t Apple’s HQ in California? Yes, but until
recently, trolls could file wherever they pleased. Many of the patent cases
are tried in eastern Texas, because the area’s court system is especially
friendly to trolls. For example, in the small town of Marshall, Judge
Rodney Gilstrap oversaw more than a quarter of the country’s patent cases
in 2015, reports the Electronic Frontier Foundation
<https://arstechnica.com/tech-policy/2015/10/eff-asks-appeals-court-to-shut-down-the-eastern-district-of-texas/>.
Marshall figures prominently in Meyer’s movie, where he takes us literally
on a tour of the empty offices across the street from the county courthouse
where these patent cases are tried. All these offices are quite
representative of these shell companies that are the trolls.

One delightful tidbit that he missed was that hotels in Marshall are so
commonly frequented by lawyers that one even purchased a subscription to
the electronic court-records system
<https://www.dallasnews.com/business/technology/2017/05/24/east-texas-supreme-court-ruling-setback-towns-final-verdict-locals-say>
Pacer. You have in-room Wi-Fi, now there is in-room legal records search.
How convenient. Earlier in May this year the US Supreme Court unanimously
ruled <https://www.supremecourt.gov/opinions/16pdf/16-341_8n59.pdf> that a
defendant should only face patent litigation in the state where it’s
incorporated, which for many tech businesses are either in California or
Delaware. Meyer tells me that that hasn’t really stemmed the tide in
Marshall, so probably that hotel will keep their in-room Pacer
subscription.

Not all trolls succeed. In one case, Uniloc was defeated
<https://www.engadget.com/2016/03/26/uniloc-patent-troll-defeated/> when a
group of gaming companies showed the flaws in their argument in a case that
was decided by an internal review by the US Patent office earlier this
year. Uniloc is one of the more notorious trolls, but this is a minor
setback: they have a huge collection of judgements from other cases. Uniloc
was who sued Meyer, btw.

One of the issues mentioned in Meyer’s movie is how once the trolls
identify a potential victim (not too small and not too large, so that the
firm will be motivated to payout rather than fight), they are often hit
repeatedly by other trolls. The typical lawsuit will cost several million
dollars. Another issue: trolls sue people that use the patented idea, no
matter how ridiculous the patent may be.

Patent trolls isn’t a new topic, indeed there is another documentary by Lex
Lybrand <https://www.amazon.com/Trolls-Lex-Lybrand/dp/B01LYTUY71>called The
Trolls that came out last year that documents his experience, when his
crowdfunded company was hit by a troll. And John Oliver did one of his HBO Last
Week Tonight shows <https://www.youtube.com/watch?v=3bxcc3SM_KA> on patents
a few years ago. (He illustrates his points with several Shark Tank
snippets.)  Meyer is also featured on Oliver’s segment.

Meyer has several suggestions for improving the patent process, and many of
them have little hope of happening, thanks to trial lawyer lobbies and
other market forces. But if you want to see how broken our patent system
is, the movie is well worth your time.

Meyer’s movie, The Patent Scam <https://www.thepatentscam.com/>, is now
available for a fee to download and soon will be on Netflix and other
streaming services.

Comments always welcome here:  http://blog.strom.com/wp/?p=6119
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