Patent-Bin-Laden

No bombings. No hijacks. No recorded messages. And no exclamation marks. This terror will simply strike your share prices. Your product is the hostage and your bottomline is the ransom. Pay up, or read on...

Patent terrorism is perpetrated by ‘patent trolls,’ who are also called ‘patent terrorists.’ The term ‘patent troll’ was coined in 2001 by Peter Detkin, assistant general counsel for Intel, when he defended Intel against lawsuits by companies claiming to hold microprocessor patents of ‘critical’ importance. In 1999 alone, the claims were to the tune of $15 billion. Says Detkin on coming up with the new term, “We were sued for libel for the use of the term ‘patent extortionists’ so I came up with ‘patent trolls.’ A patent troll is somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced.”¹ Patent trolls are the individuals/organizations whose business models are based on patent litigation as a threat, and who generate revenue through patent licensing.

Patent troll companies acquire crucial patents of other companies and then scout the market to threaten those companies of patent lawsuits, which may be engaged in business activities infringing on the acquired patents. They may demand the infringing companies to pay them royalties or license fees, or both, or may compel those companies to cough up large sums as a one-time settlement in lieu of patent litigation. Patent trolls neither have the intention to develop products based on a patent, nor to sell a product, nor to acquire new customers. They don’t enter into cross-licensing agreements, as they themselves don’t invent or manufacture any product. Whenever they find any company infringing on the acquired patents, they try to extort retroactive licensing fees from them. They don’t bother about building or maintaining good customer relationships, as it goes contrary to their ideology.

However, many people in the legal fraternity, across the globe, strongly disapprove of this patent terrorism. Says David Simon, the Chief Patent Counsel of the Business Software Alliance, “Too many of these (patent litigation lawsuits) are filed in search of a quick buck through settlement negotiations, rather than a party legitimately asserting a right, because the infringer is interfering with commercial objectives.”² Robert Merges, Professor of law at the Center for Law and Technology at the University of California, Berkeley, feels that patent terrorism is a very tricky issue. Says Merges, “Sometimes people will become pretty good at playing the patent game. They’ll get a patent and not really contribute anything significant in terms of technology, but just be a little ahead of the curve and be pretty clever about working the patent system. It’s kind of a tricky policy issue. How do you slap down and try to stop the illegitimate guys while not wrecking any of the beneficial uses people have found for patents?”³

Patent terrorism has been very widespread across the globe. One form of patent terrorism tries to anticipate the future of technological innovation in a specialized field and acquires patents in that field. Another form of patent terrorism involves the acquisition of a portfolio of patents of an obsolete technology encompassing another’s innovation. In both these instances, the patent troll tries to siphon off a huge sum from patents that infringe upon the claimed territory.

Patent Trolls on a 'Roll'

There have been many examples of patent trolls, of which the following are notable ones:

Intergraph Vs Intel & Texas Instruments

In late 1996, Intergraph filed an infringement lawsuit against Intel for infringing upon its patents on Clipper Processor technology, which dealt with cache memory management. This lawsuit, won by Intergraph, resulted in a series of litigations and judgments that have totalled $675 million hitherto, while the royalties will continue to be paid till 2009. In 2003, a trolling company demanded $8 billion from Intel and threatened it of a permanent injunction after it acquired a patent for $50,000. In September 2003, Texas Instruments had to cough up a one-time payment of $18 million as licensing fee for infringing upon Intergraph’s patent related to Parallel Instruction Computing (PIC) technology.

TechSearch Vs Sears Roebuck & Hyatt

Between 1999 and 2001, TechSearch LLC, an Illinois-based private company engaged in buying, owning, licensing, and enforcing of patents, made millions of dollars by acquiring a data transfer patent. About 100 companies, including UAL Corporation, Sears Roebuck, and Hyatt Corporation, have obtained licensing rights from TechSearch than engaging in expensive court litigations. TechSearch now holds nearly 24 patents, after having acquired the rights from inventors or sharing the licensing revenues, which account for about $3 million just for the web patents.

RIM's BlackBerry Vs NTP

The controversy surrounding the patents of BlackBerry involving Research in Motion (RIM) and NTP is a classic case of patent troll. The battle has been going on for six years. In 2000, NTP Inc., a small holding company, based in Arlington, Virginia, first sued RIM, the Canadian-based manufacturer of BlackBerry, for infringing on some of its patents on BlackBerry, the wireless internet device. NTP, with no products and little infrastructure, is considered by many as a patent trolling company, which acquires patent portfolios with the intention of threatening to file lawsuits against potential infringers. NTP was founded by late Thomas J. Campana Jr., and his northern Virginia lawyer, Donald Stout. Campana was an engineer in Chicago, and in 1990, he had created a unique innovative system to send e-mails through wireless devices, which was showcased in the Comdex computer show in Las Vegas. Campana worked for his own company and his main customer was a wireless carrier called ‘Telefind.’

In November 2001, NTP filed a lawsuit against RIM for patent infringement in the federal court in Richmond. A jury concluded that RIM had infringed upon NTP’s patents and ordered RIM to pay 5.7% of BlackBerry’s sales to NTP.

NTP – who claim to own the US patents for the software that powers BlackBerry, and which expires on May 20, 2012 – had filed another lawsuit against RIM in 2002