Changes in Patents May Be Pending; 'Patent Trolls' Come out of the Woodwork after Companies Have Spent Billions on a Product

By Levy, Steven | Newsweek, March 12, 2007 | Go to article overview

Changes in Patents May Be Pending; 'Patent Trolls' Come out of the Woodwork after Companies Have Spent Billions on a Product


Levy, Steven, Newsweek


Byline: Steven Levy

Jon Dudas's flight was canceled, so he didn't make the first day of last week's Tech Policy Summit held in San Jose, Calif. Just as well. One of the subjects of the day was patents, and he could not have avoided hearing the familiar refrain that the system is "broken." Dudas, who is under secretary of Commerce and director of the Patent and Trademark Office, hates that term. As he explained to me over breakfast, after he belatedly arrived in California, the process is certainly not perfect--but even more certainly not broken. "It's the envy of the world," he says. "Brazil, China, other countries, they want to know how we do it."

I'll wager, however, that China would be less than delighted to emulate us if the consequences included events like the one in a San Diego courtroom last month. Following the rules of our system, a jury laid a whopping $1.52 billion judgment on Microsoft for infringing on a patent involving the mechanics of playing MP3 music files. Here's what is outrageous: Microsoft had already licensed MP3 technology from the consortium that developed the standard, for $16 million. Years later, after MP3 technology took off, Alcatel/Lucent (inheritor of patents filed by the fabled Bell Labs) emerged to file its suit, and won almost 100 times as much as what was determined a fair license fee originally (because Microsoft had unwittingly infringed that patent). Unless the judgment is overturned, more than 400 other firms using MP3 technology are prone to a similar ambush.

I'd also guess that China or Brazil does not envy the outcome of the case where Rim (BlackBerry) had to pay $612 million to settle a case--even though the patents in question had been re-evaluated as invalid after the suit had been filed. Those are only two of a number of cases where patent holders used the system to extract huge, apparently unearned, sums. …

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