Share |

On 'Patent Trolls' and Injunctive Relief

May 12, 2006
Alexander Poltorak

Ten reasons why injunctive relief should not be tied to practice of an invention

page 1 of 1

I find it rather ironic that at the same time I was speaking on the subject of "Patent Trolls" at the Patent Strategies 2006 conference in New York, in Washington, DC, the Supreme Court was deliberating this very topic in connection with eBay's appeal of an injunction granted to MercExchange by the U.S. Court of Appeals for the Federal Circuit. "The long-anticipated eBay case gets to the heart of the debate over so-called patent trolls — companies that obtain patents only to license them, often using the threat of an injunction to extract a high price from infringers." Woellert, L.: eBay Takes on the Patent Trolls. Business Week, March 30, 2006. One of the arguments that eBay made was that non-practicing inventors, quaintly nicknamed "patent trolls," should not be entitled to an injunction as a matter of course. This suggestion, however, seems to fly in the face of the Constitution, patent law, and common sense. Here are 10 reasons why injunctive relief should not be tied to practice of an invention:

1) "The Congress shall have power … To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries … " (U.S. Constitution, Article I, §8.) The language of the Constitution guarantees "the exclusive right" (ie, right to exclude by getting an injunction) to authors and inventors without qualifying that these authors should sing their own songs if they are song writers, play their own music if they are composers, act in their own plays if they are playwrights, or that inventors should build and sell their own inventions. Just as it would be absurd to put such limitations in copyright law by tying the exclusive right of authors to the performance of their creative works, so it is equally absurd in patent law to tie injunctive relief to the practice of an invention. Moreover, it would be unconstitutional.

2) The law states that a patent secures a right of the patentee to exclude others from using, making, selling, or importing the patented invention (35 CFR §271). The emphasis is on others. It is inconsequential in the eyes of the law whether or not the inventor practices the patented invention. To tie injunctive relief to the practice of an invention has no basis in law.

3) The possession of a patent does not even confer on the patentee the right to practice the patented invention. There may be patents owned by others that block the inventor from practicing his or her patented invention. It would be illogical, therefore, to require patentees to practice their patented inventions when the patent does not, in and of itself, give them this right.

4) The prevailing philosophy of patent law views a patent as a bargain between the inventor and the state whereby the state induces the inventor to disclose his or her invention to the public in exchange for a limited monopoly. It is the disclosure of an invention — which the state deems to be good public policy and endeavors to encourage — not the practice of an invention that is rewarded by the grant of a limited monopoly. The state and society have no interest in a particular individual practicing a particular invention. The state and society do have an interest in encouraging the disclosure of inventions and discoveries in order "to promote the progress of science and useful arts … " (U.S. Constituition, Article I, §8) Therefore, it would defeat the very purpose of the patent system to tie the reward (a limited monopoly) to the practice of an invention in which the state has no particular interest.

5) Just as composers may not be best suited to perform their own musical compositions, which are best left to performers (musicians, singers, etc.), some inventors may not be the best entrepreneurs, businessmen, or managers, and they may not have the wherewithal to bring their own inventions to market. It has been well recognized in economics that patents serve as a convenient conduit for technology transfer to allow those who invent to transfer their invention to those who can best bring their inventions to market. We live in a highly developed industrial society whose hallmark is a high level of specialization. We do not typically sow, harvest, or bake our bread, nor do we sew our clothes. It is just as unreasonable to require inventors to make and sell their inventions when it is best left to others who are better suited to these tasks. Punishing inventors for not practicing their inventions, by denying them injunctive relief, would make no more sense than punishing scientists for not producing the drugs they discover. On the other hand, limiting the grant of a limited monopoly only to practicing inventors would create an incentive for inventors to practice their inventions, which would create economic inefficiencies by distracting them from what inventors do best — invent. It would be no more logical than creating incentives for patent attorneys to practice the inventions for which they draft patent applications.

6) Taking away the exclusionary right from a patentee amounts to a compulsory license. Most economists agree that a compulsory license is a poor incentive to innovation. In fact, most countries that required compulsory licenses abandoned them. Reviving a compulsory license would amount to reverting back to pre-industrial times.

7) The threat of an injunction is one of the main factors that motivate infringers to negotiate a license or settle patent infringement litigation. If taken away, the infringer will be no worse at the end of litigation, even if it loses, than in the beginning. Indeed, under the worst-case scenario, the infringer will be required to take more or less the same license that it is offered before litigation. This would remove the incentive to license or settle and would only promote litigation.

8) Most small inventors fail to commercialize their inventions mainly due to lack of funds. Cash-strapped garage inventors may not have the capital necessary to produce and market their invention. Arguably, discriminating against non-practicing inventors by denying them the right to an injunction on what amounts to economic basis may violate the Equal Protection clause of the Constitution. Albeit economic status is not a suspect classification and, strictly speaking, the 14th Amendment does not apply to the federal government (the Due Process of the Fifth Amendment does), granting different rights to practicing and non-practicing inventors essentially amounts to granting different rights to poor inventors and rich corporations.

9) One of the recognized aims of law is consistency and predictability. This is the fundamental rationale behind the stare decisis doctrine in the U.S. legal system. It has long been a tradition in the U.S. courts to grant an injunction to patent owners who prove infringement. Overturning this long-standing tradition would send our patent system into a tailspin and eliminate the last vestiges of predictability in the U.S. patent regime. In fact, Seth Waxman, MercExchange’s counsel, argued this very point when he said to the Court, “Any suggestion of uncertainty to come out of this case would dramatically destabilize settled law.” Biskupic, J.: Supreme Court Hears eBay Patent Case. USA Today, March 29, 2006. Moreover, Justice Ruth Bader Ginsburg said if trial judges had more discretion on injunctions, a patchwork of policies would emerge. “You’d get a tremendous disparity among jurisdictions,” she said. Biskupic, supra.

10) Lastly, the statute recognizes that a patent is personal property. Consequently, it can be sold, bought, and mortgaged; and it can be treated in every respect as any other personal property. Countless inventors have traded one form of intellectual property — their trade secrets — for another form of intellectual property — patents — in reliance on the scope of protection that includes an injunctive relief. Countless more bought such intellectual property. Diminishing property rights by taking away an injunctive relief from inventors may, arguably, violate the Fifth Amendment. Denying the right to an injunction only to those who are not the original inventors, but who bought and now own the patent, has no constitutional basis and no conceivable rationale either. Discriminating against a patent owner who is not the inventor, and who seeks to enforce a patent, would be akin to not allowing homeowners to enforce their property rights against a squatter simply because they did not build the house themselves or because they do not live there. As Justice Antonin Scalia remarked, “We’re talking about a property-right here. All he’s asking for is ‘give me my property back.’” Holzer, J.: Patent Trolls at Supreme Court. Forbes, March 30, 2006.

To paraphrase an old Western adage, God created big corporations and small inventors, and He created an injunction to make them equal.

Notwithstanding Waxman’s assertion that “This is not a patent troll case,” (Ibid.), eBay’s counsel, suggested that trolls should not be entitled to any automatic injunction to give them leverage. He and Justice Anthony Kennedy had an amusing exchange over whether “troll” meant the ogre under a bridge, or someone fishing for something. (As reported by SCOTUS-blog, March 30, 2006; “Analysis: no penalty for patent ‘trolls,’” by Lyle Denniston (See www.scotusblog.com/movabletype/archives/2006/03/analysis_no_pen.html).)

Who are these evil “patent trolls” anyway? The term was first coined by Intel, whose in-house counsel was quoted to have said, “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.’” Sandburg, B.: Inventor’s Lawyer Makes a Pile from Patents. The Recorder, July 30, 2001. According to this definition, a non-practicing inventor is a patent troll.

Conclusion

The arguments listed above clearly demonstrate that U.S. patent law: (a) encourages the disclosure of an invention, not its practice — argument number 4; (b) entitles a patentee to exclude others, regardless of what the inventor is doing with the patented invention — argument number 2; and (c) a patent does not confer the right to practice a patented invention — argument number 3. Lastly, anyone who makes money in the stock market, without participating in the companies whose stocks are being traded, or speculates on real estate, is a troll (according to Intel’s definition of “patent trolls”).

Later, the definition of “patent troll” was modified to describe those who buy patents, which they do not practice, for the sole purpose of assertion. Under this definition, to be a troll one needs to (a) buy a patent, (b) not practice the patented invention, and (c) assert the acquired patent. As I have argued in Making Innovation Pay — Turning IP into Shareholder Value (B. Berman, ed., John Wiley & Sons Publishers, Inc.) (2006), this definition is patently absurd. We have already dealt here with the “not practicing” issue. The same arguments that have been raised with respect to a non-practicing inventor apply equally to a non-practicing patent owner (except for argument number 4, which only applies to original inventors). Element (a) — buying a patent — is unfounded because it is common knowledge that a patent is personal property, which may be bought, sold, mortgaged, or otherwise monetized — argument number 10. Element (c) — asserting a patent — is even more absurd because what else can you do with a patent besides assert it? Whether a patentee licenses a patent or asserts it in litigation, both are really assertions. A “carrot license” is nothing but a “stick license” in disguise, because a patent is an exclusionary right and the only thing a patent owner can do with the patent is to assert it to exclude others! To summarize, the so-called “patent trolls” are stuff of myths and legends, not of sound reason. The arguments to take an injunctive relief away from “patent trolls,” ie, non-practicing inventors, are based on fuzzy logic. Let us hope that reason and sound logic prevail.

© Copyright 2006, Law Journal Newsletters

Share |
Search
paid advertisement