Patent trolls are increasingly appearing and litigating in Europe, too

Summary: An outline of recent developments in the US and even in Europe, focused entirely on patent trolls, patent parasites, and actions against them

"Out of the 47 patent lawsuits filed today," wrote United for Patent Reform earlier last week, "42 of them were filed by patent trolls."

"In 2000," it continued, "East Texas ranked 35th for patent cases; it's been 1st for the past 9 years as trolls take advantage of the friendly venue."

"Another course of action is elimination of software patents because an overwhelming majority of troll lawsuits involve software patents, based on statistics gathered some years ago."It is abundantly clear that the US has a serious problem with patent trolls, who are most typically (albeit not always) using software patents to launch legal assaults (or threats thereof, in hope of settlement) against a large number of practising companies. The defendants are sometimes large corporations, but such corporations -- unlike small companies (such as startups) -- neither have paranoia over it nor an existential risk as they have dedicated lawyers and much money in their coffers. European institutions like the EPO are still, increasingly, allowing this plague to enter Europe. We must stop this.

In this post we gather several weeks' worth of news, mostly in sincere hope of shedding light on just how big a headache patent trolling can be. It should be avoided at all costs and one way to tackle this problem (although it is suppressed in the corporate media) is reduction of cross-border action (compartmentalisation) -- something which the UPC (more like globalisation) seeks to promote in Europe, thereby inviting patent trolls, much like in the US where separate state are not legally separable. Another course of action is elimination of software patents because an overwhelming majority of troll lawsuits involve software patents, based on statistics gathered some years ago.

Biases in the Patent Trolls Debate

The Internet says a great deal about patent trolls, unlike software patents (the latter debate has been abandoned, perhaps at the behest of large stakeholders who also influence and sometimes own the media). One recent headline said that a "Stanford Professor [Stephen Haber] Insists Consumers Are Helped By Patent Trolls". Here is a portion of the counter-argument from Mike Masnick: "Actual research shows that the leading reasons for innovating have absolutely nothing to do with patents. Rather, people and companies tend to innovate because (1) they need something themselves or (2) they see a need in the market. And the "ensure they are paid for their invention" makes no sense. If they have an invention people want, then they can sell that product and make money that way. You don't need patents for that. Yes, some others may enter the market as well, but that's called competition, and that's a good thing." The case that Stephen Haber alludes to will be discussed later on, in the section about Unwired Planet, which attacks Android/Linux.

Patent trolls are a parasitic element. Claiming them to have had a contribution is akin to claiming that diseases are good because they help depopulate and thus keep the human population 'in check'. The aforementioned professor was mentioned here before (a few times earlier this year) for other, similarly pro-trolls, views. He has a conflict of interests, as his very own bio serves to demonstrate. See Masnick's articles for further details.

Here we have the patent maximalists of IAM glorifying trolls. As Benjamin Henrion put it, "IAM just published a hate list of the best patent trolls and other patent bullies" (IAM responded to him dismissively).

In a sense, patent lawyers stand to gain from patent trolling, even in Europe (where IAM's writers are based). We should always take their views with a barrel of salt and perform some cui bono analysis.

"Don't foolishly look away or naively expect it to always remain just a US problem, however, as we increasingly hear about trolling in Europe."Days ago the plutocrat's media, Fortune, published an article titled "Are patent trolls taking over the fashion industry?"

To quote bits of interest, "Shar Simantob and his Los Angeles-based textile company, United Fabric International, are used to following trends in the fashion industry. The company works as a middleman between mills and labels to develop fabrics and prints in line with what tastemakers say will be hot in the coming seasons. [...] According to figures sourced from Bloomberg Law, Doniger/Burroughs has filed more than 700 copyright infringement cases over the past five years, including more than 30 since August 1. Most of the complaints are filed in Southern California, which is now home to more than twice as many fashion, textile, and wholesale jobs as New York City, as well as $18 billion in revenue for fashion companies based in the region, according to a 2014 report sponsored by CIT Group for the California Fashion Association."

For the time being this is a US problem. Don't foolishly look away or naively expect it to always remain just a US problem, however, as we increasingly hear about trolling in Europe. It's trendy and it's expanding.

This time, for a change, a Stanford Professor actually opposes trolls. "Prof. Goldstein quoted on rising trend of patent trolls in fashion industry," wrote Stanford Law. He is quoted as saying: “There is this gap that puts all citizens at a disadvantage. Anybody can sue anybody over anything. You are out of pocket and inconvenienced until you get back attorney fees. That is one of the prices you pay for living in a society under the rule of law.”

Looking at Wharton's site (another academic source), they now have an article there titled "Why Investment-friendly Patents Spell Trouble for Trolls". They refer to trolls using a euphemism, "NPEs". To quote some bits from it: "There is little doubt that the world of patent monetization is dominated by patent trolls. A troika of favorable patent assertion fora, contingency-fee based legal services, and a proliferation of patent ownership structures that stand divorced from commercialized inventions has produced breathtaking return multiples for so-called non-practicing entities (NPEs, which are organizations that own patents but do not commercialize them). The currency of this assertion market is the vast arbitrage exploited by the NPEs. Several factors account for this – including the lack of any acceptable, up-front methodology for valuing patent as assets per se, the significant legal expense defendants face from such assertions, and the costly and post-facto timing of court-ruled infringement determinations. All these work to dislocate the patent market from the commercial market in which patents are used in the real economy."

"Patent derivatives," as Henrion calls them, are "the next bubble" (yet to have burst like the bubble of software patents in the US).

So-called 'Reform' Focused on Patent Trolls Only

Once upon a time patent reform focused on various aspects like patent scope, i.e. which domains should be excluded from patentability criteria (software for instance). Nowadays all the bills which are tabled regarding "reform" deal almost exclusively with "trolls" and get watered down by large corporations (some of them behaving just like trolls), to the point of being worse than useless. We wrote literally dozens of articles about it.

Watch how GOP-leaning sites come out for and against patent reform, still. To quote one of them: "Trial lawyers, for instance, hate patent reform because it will deprive them of an easy cash cow. In fact, it was their opposition that drove Harry Reid to kill patent reform in the last Congress. Needless to say, the interests of the trial bar are not something a Republican Speaker has any reason to lose sleep over."

This is actually a correct observation. It's one that we alluded to above, specifically in relation to IAM, whose biases we shall deal with again later on.

Here is the large corporations-funded site Patent Progress remarking on patent reform in relation to the corporations-leaning (and corporations-shaped) PATENT Act [1, 2, 3, 4, 5, 6, 7, 8].

To quote Patent Progress: "Whether we on the pro-reform side agree with the complaints isn’t relevant here. The reality is that some compromise is necessary to get the changes we need to deal with patent trolls. The PATENT Act left the Judiciary Committee containing unacceptable language on how to handle amendments during IPR and a promise to keep working on it. And the Senate Judiciary Committee staff came up with a creative solution."

The Apps Alliance, which is obsessed only with patent trolls and not patent scope (as it represents mostly victims of trolling), wrote: "How will ​the ​STRONG​ Act​ help small ​businesses? Looks like a handout to trolls.​"

Whatever reform one looks at these days, it's rather useless or worse than useless. See the AOL article titled "Patent Reform Tries Again". It wrongly frames big companies as the victims when it says: "Technology companies and their lobbyists in the software and high-tech industries that have been victimized by PAE lawsuits in the past, such as Overstock.com and The Software & Information Industry Association, have applauded the legislation."

This misses the fact that many of those same technology companies (Microsoft and Apple for instance) are themselves patent aggressors and the most important victims of patent trolling are actually small companies. Some of them get crushed out of existence, whereas for companies like Microsoft and Apple trolling often means reduced profits (imagine the wrath of millionaire shareholders!). Don't expect corporate media like AOL to get this story straight though. This is not what AOL does and since it bought Tech Crunch we haven't seen much worthwhile reporting over there. Once upon a time, some time around 2007 (before the AOL takeover), Tech Crunch informed myself and my colleagues that we were about to get laid off (before our software-centric employer said so, having been forced to do so by such independent media).

"SCOTUS has NPEs on the mind," wrote some patent boosters, "see J Kennedy's dicta on NPEs in Commil which involved no NPEs" (recall that SCOTUS already helped tackle software patents in the US, quite effectively in fact).

Let's look at some recent story involving particular patent trolls, some being more famous (or conversely, infamous) than others.

MPHJ Technology Investments

We previously wrote about Mac Rust, a notorious patent troll who made a splash and received a lot of publicity by suing a lot of companies. Thankfully, Rust is now losing it all. As a trolls expert put it: "One of the most maligned patent trolls, MPHJ Technology Investments, will have to face claims in state court that it violated Vermont's consumer protection laws.

"MPHJ and its owner, Texas attorney Mac Rust, gained national attention after sending tens of thousands of letters out to small and medium-sized businesses stating that any business using scan-to-e-mail technology owed MPHJ around $1,000 per worker for patent infringement."

Let's hope that we never hear of MPHJ ever again. Somehow we doubt it's the end of all that because this troll bet his entire farm on litigation and extortion. There are no products to offer or actual business to revert back to.

Kyle Bass

Earlier this year, at the end of summer or thereabouts, Kyle Bass made it into a lot of news headlines because of his dirty tricks with patents. It's like a new kind of patent extortion (or trolling), but not the conventional type.

Bass is "exploiting [a] weakness in [the] system," say his victims to the corporate media and lawyers/bloggers continue writing about it. To quote IP Kat: "So why is Bass making these challenges? The America Invents Act allows for reviews of poor quality patents by using an Inter Partes Review Procedure (usually referred to as an IPR) and the hedge fund managers have seized an opportunity to use the new relatively low-cost system to their advantage. Reviewing a patent is likely to affect share prices, making companies attractive for the short selling market while stock prices fall. Shire’s price fell after the decision.

"Drug companies have asked the USPTO to stop what they see as an abuse of the review process by hedge fund managers, but this recent decision which broadens the “real party in-interest” definition looks like that will not succeed. The phenomenon of reverse trolling hedge fund trolls is going to be a tricky issue to handle politically. Lobby groups and technology companies see the advantage of challenging the hold they perceive that large corporations have on controlling markets, especially in the biotech and software areas. These lobby groups often have the ears of the politicians and high drug prices, especially in the US is a thorny issue: see the views of presidential candidate Hillary Clinton."

It will be interesting to see to what degree -- if any -- the USPTO will ever bother responding to this. Issuing bogus patents and later invalidating them is sound business for both patent lawyers and those who issue patents.

Acacia

Techrights wrote a lot about Acacia after it had taken staff from Microsoft and then started to sue Linux companies. There is a setback at Acacia right now because, according to this new report: "The nation's top patent court has given its seal of approval to a hefty $1.4 million award of legal fees against the largest publicly traded "non-practicing entity," Acacia Research Corporation.

"The award was granted one year ago by US District Judge Gregory Sleet, and it was one of the first to be decided under the new Octane Fitness caselaw, which makes it easier for defendants to get their legal fees in baseless patent suits. On Friday, the US Court of Appeals for the Federal Circuit upheld (PDF) Sleet's decision without further comment."

Acacia is not the only Microsoft-connected troll that attacks Linux. Remember Intellectual Ventures.

Intellectual Ventures

IAM's patent maximalists give a platform by which to glamourise giant trolls like Intellectual Ventures right now. "Last week we ran a story on a surge in speculation that Intellectual Ventures is up for sale," the author said. "IV strongly denied that it was on the block and in discussions with a Chinese buyer, and we were happy to print what the firm had to say."

This increasingly-defunct troll (with layoffs and everything) will hopefully vanish sooner rather than later because as we mentioned here quite recently, it's connected to attacks on Android/Linux. This patent troll is connected to Microsoft through Intellectual Ventures and it attacks Linux devices other than Android, by the millions.

Unwired Planet

Speaking of attacks on Linux and Android (which is based on or built on top of Linux), the patent boosters have this new article titled "Unwired Planet v Huawei: FRAND showdown begins in UK court".

As we stated last week, patent trolls have come to the UK (and hence, by extension, Europe) to attack Linux/Android. "Some of android’s biggest players prepared for battle this week," wrote the patent boosters, "after Unwired Planet’s patent infringement suit trial against Google, Samsung and Huawei began in the UK."

This is a great example of the grave dangers of allowing patent trolls to enter Europe.

Core Wireless

"Patent Troll based in Luxembourg wants to redefine the meaning of an integer," Henrion wrote, alluding to the Luxembourg-based (part of Europe) trolls that just like MOSAID (with patents from Nokia) received their patents from Nokia. To quote the alarming EFF message, titled "Our Broken Patent System at Work: Patent Owner Insists the “Integers” Do Not Include the Number One":

Patent trolls are a tax on innovation. The classic troll model doesn’t include transferring technology to create new products. Rather, trolls identify operating companies and demand payment for what companies are already doing. Data from Unified Patents shows that, for the first half of this year, patent trolls filed 90% of the patent cases against companies in the high-tech sector.

Core Wireless Licensing S.A.R.L. is one of the patent trolls attacking the high-tech sector. Core Wireless is incorporated in Luxemburg, and is a subsidiary of an even larger troll, Canada-based Conversant. It owns a number of patents that were originally filed by Nokia. It has been asserting some of these patents in the Eastern District of Texas. In one case, a jury recently found that Apple did not infringe six of Core Wireless’s patents. In another case, it is asserting sixteen patents against LG. One of its arguments in the LG case came to our attention as an example of what patent trolls think they can get away with.

We will surely hear more about this in the future. This is yet another example of patent trolls entering Europe.

Vringo

IAM's patent maximalists still like to defend patent trolls, saying that the matter (regarding trolls) is "less black and white than they [EFF] like to pretend" (as if there is such a thing as "good" trolls).

"You have got to admire Mark Cuban’s chutzpah," they said, "if nothing else. As a self-proclaimed enemy of patent trolls, a vocal advocate for fundamental change to the US patent system and the funder of the EFF’s Mark Cuban Chair to Eliminate Stupid Patents, Cuban has long been a darling of the patent-sceptic side of the US reform debate. Never mind that back in 2012 he became a major investor in Vringo, Cuban is on the side of the angels."

We already mentioned Vringo's actions and Cuban's support of them. As IAM puts it: "As part of that redemption process, Cuban might want to sit down with the EFF and other anti-patent groups to explain that perhaps this whole troll thing is much less black and white than they like to pretend, that SMEs and lone inventors often need third party support to enforce their rights and that backing legislation which makes it even more expensive and even riskier to assert patents is going to make securing such support even harder than it is now."

Well, Cuban's involvement in the EFF (by paying the EFF to hire some lawyers) has been repeatedly criticised here because they now try to crack down on "bad" patents rather than software patents and we often find the EFF's Cuban-funded campaigns rather useless, even though Cuban himself once slammed software patents, explicitly. Now we see that proponents of many patents (including software patents) use Cuban to discredit the EFF and the EFF's message overall against trolls. Great move, eh? The patent maximalists of IAM aren't too stupid, just selfish (for profit), and they are quick to exploit what's rightly perceived as hypocrisy. The other day IAM wrote that the US "Supreme Court has said No to Vringo's appeal against CAFC decision in IP Engine case. No surprise, but frightening" (frightening to lawyers who profit from litigation and trolling, that's for sure).

Unified Patents

Henrion, who had led the fight against software patents in Europe for quite a few years, took Unified Patents to task over this charade. To quote a lawyers' news site: "Unified Patents, the San Jose-based provider of consulting services to help businesses deter lawsuits filed by nonpracticing entities (NPEs), has launched two new programs designed to help start-ups avoid the threat of frivolous litigation.

"The first, called Secured by Unified, enables members to include a logo on their homepage indicating they are members of the group. This would signal to abusive NPEs, also known as patent trolls, that attempts to extort money by threatening litigation will not work."

Henrion sarcastically says that patent "trolls will be scared by a logo on a website? How many of those failed strategies are we gonna see?"

Unified Patents said that it "Launches Program to Help Startups Avoid Troll Litigation," but we too are sceptical. It's not going to lead to a solution. It's probably just a waste of focus, time, and effort.

In the coming weeks we are going to write a lot more about patent trolls and about the situation in Europe. It's not just about software patents anymore. It's a global disease, so universal vaccination is very urgent a matter. ⬆