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01.26.16

The United States’ Patent System Lets Software Patents Rot, as Patent Trolls Take Over the System and Unrest Grows

Posted in America, Patents at 2:58 pm by Dr. Roy Schestowitz

Summary: A long roundup of recent patent news from the US, where things are changing for the better in some aspects but are still pretty grim, mostly because of the centralisation of patents (very few corporations holding the lion’s share) and widespread exploitation by trolls

THINGS in the United States have changed rather drastically since the Supreme Court (SCOTUS) ruled on Alice with that silly software patent. Gradually, if not reluctantly too, the USPTO amended its guidelines so as to become more in line with courts’ judgments (which as a consequence of Alice chose to invalidate a lot of software patents). This long post will provide an overview of some of the things that happened earlier this month.

CAFC

The Court of Appeals for the Federal Circuit, often referred to as CAFC (shorthand), is where software patents got started. It’s also where many of them came to survive, or to receive the court’s blessings. We covered many examples of this before and after the Bilski case. According to the patents-centric (and pro-software patents) blog Patently-O, patent litigation continues to be a major headache where only lawyers win. “The Federal Circuit did not award fees or costs to either party,” the post concludes. Patent examiners and applicants ought to be aware of what patent lawyers are really after when they encourage patenting, lawsuits, etc. They always win, irrespective of the outcome (who wins).

Patent Lawyers

Patent lawyers who are also the most vocal software patents proponents are now trying to lecture the world about the views of opponents of software patents. One of them says: “The loudest argument against software patents is not that software shouldn’t be patented because it is not innovative, but rather that patents are not needed because with software it is all about speed to market and the advantage that the so-called first mover will achieve. As the theory goes, all you need to do is get to market first and a tremendous advantage will be achieved by getting early adopters to use the software and integrate it into their lives, or businesses.”

Actually, this isn’t the argument I ever hear from opponents of software patents, not even the FFII. It’s easy to debunk or to refute an argument which was never made in the first place, like a straw man or a red herring.

Patent Profiteers

Going back to Patently-O, a maximalist of patents (watch who runs the site), in a series of recent posts [1, 2, 3] it wrote a lot about SCOTUS and the Constitution. If one actually follows the US Constitution, then one soon realises that those who wrote it would most likely oppose software patents. We covered this one particular aspect of the law several years back. The SCOTUS rulings seem to agree with our views on that, hence the Alice case.

“Wow,” wrote this one patent lawyer from Europe, the “US software patent invalidation rate [is] at 82,9% due to Alice abstract idea test!”

This one lawyer, Bastian Best, profits from patent maximalism and realises that software patents got too tough a business. He has just written a detailed post about it.

All sorts of patent lawyers, not just in Europe but also in Australia, have become interested in US patent law. One of them, Mr. Blows (real name), posts lots of analyses of US cases involving Alice [1, 2]. Blows says that the “US position on software patents has gone through a significant change in the last five or so years, from being broadly accepting to becoming a difficult jurisdiction. [...] What precipitated this? If the concurring opinion of Circuit Judge Mayer in ULTRAMERICIAL, INC. v HUKU, LLC 2010-1544 (Fe. Cir. 2014) is to given credit, then the blame rests squarely with vexatious litigants, particularly “patent trolls”. [...] Many believe however, that the legal framework (the Alice 2-step abstract idea test) that has been developed is a blunt tool that throws the baby out with the bathwater. It is a shame, and it would be desirable if more targeted approach could be found. [...] Determining if a computer implemented invention is patentable in the US can be difficult. This heavily cited decision is clearer than most, and shows how a routine implementation of an “abstract idea” may be found to be patent ineligible.”

We have been gratified to learn of cases since the middle of 2014 where software patents got squashed by citing Alice. There’s no sign of changing this and no foreseeable case at SCOTUS level that can reverse this.

Non-litigating Academics

We are big fans of Bessen and his colleagues or co-authors. We last mentioned him two months ago. Over the years Bessen wrote many papers and articles about software patents, patent trolls, and so on. Here he is quoted in “The Rise of Lawyer 2.0″ as follows: “James Bessen, a BU School of Law researcher, found a positive relationship between the degree of computerization in a particular job category and employment growth. A good example of this for lawyers is e-Discovery. It has created more document review work for lawyers. At the same time, it has also accelerated the disaggregation process and has ushered in the age of legal service providers.”

Patent lawyers think about patent lawyers. Bessen is not a patent lawyer but more of an economist. His academic page describes him as a professor who “studies the economics of innovation and patents. He has also been a successful innovator and CEO of a software company.”

Rather than listen to sites such as IAM (Intellectual Asset Management) more people out there should pay attention to the likes of Bessen. He has nothing to gain from bias.

Corporate/Wall Street Media

Of course it’s not just patent lawyers who want more patents everywhere. What’s with Forbes (the plutocrats’ rag) publishing so many pro-patents (and pro-software patents too) pieces as of late? Well, look who’s writing pieces such as this. To quote his own introduction: “I am the chairman and CEO of the intellectual property (IP) advisory and optimization firm Dominion Harbor Group, and have been named one of the world’s top intellectual property strategists by Intellectual Asset Management magazine.”

Intellectual Asset Management ‘magazine’ (IAM) is an EPO-funded propaganda site for patents. That explains his bias and patent maximalism, which IAM is known (or notorious) for.

The solution to this is twofold. First, expose the issues with the current ‘news’ sites that claim to be covering patents (a lot of them are funded by patent lawyers, who are considered subscribers and thus command the agenda/bias). On the other hand, waste no time trying to change corporate media. It won’t work. Make alternatives to it. Lead to a situation whereby corporate media dies (too expensive to maintain) and people go to sites such as Groklaw for information about patents.

IAM: A Case Apart

IAM is not an ordinary site. It’s a parallel universe. This, for example, is pro-patents propaganda titled “US start-up employment and sales growth rates boosted by patents, new research reveals” (‘research’ in scare quotes).

It has nothing to do with patents; they are doing fine, in some cases, IN SPITE of patents, not thanks to them. IAM is the voice of the occupiers in the patent world; the EPO-funded IAM ‘magazine’ is now crying for patent aggressors such as SEP trolls (similar to NPE trolls). Here is IAM defending the patent mafia Sisvel under the headline “German appeal court halts Sisvel injunction in key SEP litigation case”.

People who invalidate patents are “death squad” in the minds of IAM ‘magazine’ (writers there are people who call patents “assets”/”property”, not man-made monopolies on ideas).

IBM Glamour Over Patents

About a week ago Florian Müller linked to this article titled “If Patents Are So Valuable Why Does IBM’s Intellectual Property Revenue Continue To Decline”. This article too is from Forbes and it says: “While the value of patents isn’t calculated just by the revenue they generate, it is interesting to see how IBM is doing with this financial line item. Between 2008 and 2012 IBM’s patent portfolio generated between $1.1 and $1.2 billion per year. It has fallen each year since then to $742 million in 2014 and could fall again in 2015 to under $700 million.”

Another noteworthy article which mentioned IBM (there were plenty, but most just mentioned the number of US patents granted to IBM) was titled “2015 “Most patent disputes in history”, IBM most patents again”. Citing UnifiedPatents, the article said:

A wave of patent reports has been doing the rounds at the start of this year, as legal experts from a range of industries attempt to summarize the sometimes complex field – from the myriad of patent disputes to the countless patents granted or declined.

A patent dispute report from UnifiedPatents, which observes filings with both the US Patent and Trademark Office and disputes in federal district courts, found that overall patent disputes totaled 5,500 in 2015 – an increase of 13% compared to the previous year, and the highest ever recorded.

By industry, UnifiedPatents reported that the majority of patent litigation in 2015 involved high-tech patents (patents covering technologies related to computing or consumer electronics) that were asserted against high-tech and non-tech companies. Of all the high-tech litigation cases of 2015, a mammoth 87.6% involved non-practicing entities (NPEs), otherwise known as patent trolls.

We wrote a lot of articles about this before, including a few articles about the latest figures from IBM and from UnifiedPatents. Proponents of software patents are doing a lot of damage to the USPTO because it now tops the lowest of leagues (lowest patent quality) by doubling the number of patents granted. This isn’t innovation, it’s dilution and lowering of a bar. “Small guy”/”poor inventor” IBM also helps debunk the “small guy”/”poor inventor” myth. Who is this system really intended to serve? Articles such as “IBM keeps top spot as US patent leader, study says” and “IBM tops patent list for 23rd time” remind us that it’s not a new problem.

Patent Trolls Love It

“88% Patent Troll rate,” claimed this person earlier this month, sharing the image below.

Trolls report

Does that help support the “small guy”/”poor inventor” myth? No, it serves to show that the only “small” entity which benefits is a parasite, or a troll. “Patent Trolls Laughed All the Way to the Bank Last Year,” says this recent headline from Spectator. To quote some key bits: “Lost in the haze of New Year’s Resolutions and wall-to-wall election coverage, a very disturbing fact for America’s inventors emerged early this month: The number of lawsuits filed by non-practicing entities (NPEs), more properly known as “patent trolls,” increased by 25 percent in 2015. As a quick reminder for those who might not have followed the issue yet, patent trolls are companies that exist solely to extort money for (often comically vague and totally unused) patents, at the expense of actual inventors and small businesses.

“Indeed, patent abuse in general had a pretty strong year in 2015, with its poster boy probably being Martin Shkreli, the infamously extortionate hedge fund manager who jacked up the price of the drug Daraprim by over 5000 percent simply because he owned the (expired) patent for it. Shkreli, fortunately, was quickly outcompeted by generic drug manufacturers, who took advantage of the patent’s expiration, but not everyone was so easily saved from patent profiteers.”

A short while ago even the patent lawyers from IP Kat found themselves having to admit that there’s a problem here . “Much ado about the patent troll problem,” one section said. “Earlier this month,” wrote their biggest proponent of software patents (‘Amerikat’), “an analysis published by RPX Corp reported that non-practicing entities (NPEs) filed over 3,600 patent cases in the US in 2015. This was an increase of over 700 cases from the previous year. With NPEs being the most active in the high tech sector, it is no surprise that their 2015 top target was Samsung with 71 cases brought against it by NPEs. AT&T (50), HP (43), Apple (40) and Dell (40) were not too far behind.”

There’s no decent way to justify this or characterise this as desirable.

ACSLaw also weighed in very recently. It asked: “Why are so many patent cases filed in the Eastern District of Texas? It’s not for the barbecue. And it’s not because the remote, largely rural district is a technology hub. Rather, it’s because local rules and practices make the district attractive to patent plaintiffs. More specifically, local practices make the district very attractive to companies – known as patent trolls – whose sole business model is to buy patents and sue.”

People from FFII haven’t been saying much about patent trolls, which basically stole the thunder of the debate about software patents (that patent trolls typically use). “Does not change much on the inability of independent developers to defend themselves,” ranted the FFII’s President the other week, “then focus on curing the disease, not the symptoms like it is proposed.” (see context here)

“EDTX [Eastern District of Texas] had 95% Patent Troll rate overall last year,” one account is quoted as saying. “89% of Patent Trolls Target Tech,” this account added, citing Figure 10 from some unknown paper:

Figure 10

Locked behind a paywall is this article about the known issue in Texas. It says:

The United States has 94 federal judicial districts, but in 2015, almost half of all new patent cases were filed in just one—the Eastern District of Texas.

Texas is also mentioned in this analysis about change of patent venue (to courts more favourable to the plaintiff, usually the trolls). “In the pending mandamus action of TC Heartland,” it says, “the merits panel has taken one step forward by ordering oral arguments – set for March 11, 2016. Although the order was a per curiam decision by the Merits Panel, it does not, on its face, reveal the identity of the three judge panel. The petition asks the Federal Circuit to change its rule on patent venue and personal jurisdiction. If the petitioner here wins, we could see a dramatic shift in the geographic distribution of patent cases. In other words, it would become much more difficult to bring an infringement action in the ongoing hot-spot of the Eastern District of Texas.”

Texas, the patent trolls’ haven, may lose a lot of business if the rules do change. Expect Texas to fight to keep this kind of wild west of patent litigation.

It’s not always trolls that sue over patents or even more specifically software patents. Here is a recent example that made the news:

Two major providers of police body-worn cameras have become embroiled in a patent battle.

Kansas-based Digital Ally sued Arizona-based Taser International late last week. The company accused Taser’s Axon Flex body cameras of infringing its US Patent No. 8,781,292. The patent describes linking together a body-worn camera, a vehicle-based camera, and a “managing apparatus” that communicate with each other.

IDG recently published the article “What’s next for patent trolls, and can the Supreme Court stop them?”

Well, in order to stop them one needs to check who gives them (or funnels to them) patents in the first place and what for.

It seems like a case of some obscure LLC versus Cisco may soon reach the Supreme Court. Remember that Patent Troll Tracker was a Cisco lawyer at the time. Cisco had suffered a lot from patent trolls.

Troll Feeders

It is worth noting that many trolls, including those that act as Microsoft’s satellites, play a role for large companies. They engage in proxy wars. Blackberry, as we warned in many articles in the past, is feeding (or prepares to feed) a lot of patent parasites for money. This is sad news, especially in light of Blackberry’s adoption of Android, but it back in September that “the company’s CEO John Chen talked about monetisation of its 44,000-strong patent portfolio as being “an important aspect of our turnaround”.”

We recently mentioned some patent trolls that effectively act as Microsoft’s henchmen. We mentioned Finjan in the distant past and recently revisited it. Watch this article which says: “Finjan Holdings, Inc. (NASDAQ: FNJN), a cybersecurity company, [subsidiary Finjan, Inc.] today announced that the Patent Trial and Appeal Board (PTAB) for the United States Patent & Trademark Office (USPTO) denied six of Symantec Corporations petitions for Inter Partes Review (IPR) of Finjan patents with two serial petitions denied on 7,756,996 (’996 Patent), and further denials on Finjan’s patents 8,141,154 (’154 Patent), 8,015,182 (’182 Patent), 7,930,299 (’299 Patent) and 7,757,289 (’289 Patent).”

Finjan is rapidly becoming a medium-side patent troll, smaller than entities such as Acacia or Intellectual Ventures (Microsoft-connected). The latter two entities have the advantage of being effectively immune from litigation because they have no products of their own, unlike Microsoft or its friends at Finjan.

A new article by Joe Mullin, titled “Wait… we sued who?! Patent troll drops case one day after Newegg’s lawyer calls”, shows that in some rare cases patent trolls can actually be deterred by something, despite having no products to be sued over. To quote Mullin: “A shell company that sued dozens of computer peripheral makers has quickly dropped Newegg house brand Rosewill from its list of defendants. The motion to dismiss, filed yesterday, comes just days after Newegg’s lawyers filed notices of their appearance in the case.

“Minero Digital LLC dismissed its case against Rosewill one day after Newegg Chief Legal Officer Lee Cheng authorized his outside lawyer to try to settle the case in exchange for a “nominal donation to charity.” During that conversation (the attorneys’ first discussion about the case), Newegg’s outside counsel said that although the proposed agreement wouldn’t pay Minero anything, it was likely to be Newegg’s best and final offer. He suggested Minero search the Internet for news articles about Newegg’s policies on settling “patent troll” type cases. (The short version: Newegg doesn’t pay patent trolls.)”

Software Patents

Patent maximalist Dennis Crouch wrote the other day about Alice. Crouch gives an overview of SCOTUS patent cases, which is handy, among other things, but this time he said that a “patent is not permitted to effectively claim an abstract idea. In Mayo/Alice, the Supreme Court outlined a two-step process for determining whether this exception applies to Section 101’s otherwise broad eligibility principles: (1) is the claim at issue directed to a patent-ineligible concept and (2) if so, does the claim include an “inventive concept … sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.””

Techrights was always (and still is) predominantly opposed to software patents, not patents as a whole. We hope that when the US gives a deathblow to software patents the rest of the world will too. This includes the out-of-control EPO.

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