Don't Feed the Patent Trolls

By O'Rourke, Morgan | Risk Management, July-August 2013 | Go to article overview

Don't Feed the Patent Trolls


O'Rourke, Morgan, Risk Management


In recent years, patent lawsuits from non-practicing entities (NPEs)--companies that hold patents but do not use them to create or manufacture a product--have skyrocketed, particularly in the technology industry. More commonly known as "patent trolls," these entities either attempt to charge licensing fees for their patents or sue companies for infringing upon them.

According to a Boston University study, in 2011, patent trolls cost the U.S. economy $29 billion--and that number only accounted for direct legal costs. Another study found that in 2012, these lawsuits represented 56% of all federal patent infringement suits, up from 24% just five years earlier.

As a result, in June, President Barack Obama proposed a series of reforms designed to curtail these frivolous patent infringement lawsuits. Along with other bills circulating through Congress, this measure indicates that the reign of the patent troll may finally be coming to an end.

The Original Patent Troll (1895)

Usually regarded as history's first patent troll, George B. Selden filed a patent application for an early version of the automobile that he called a "road engine" in 1879. A patent attorney by trade, Selden never began production on his invention but instead spent the next 16 years purposely delaying the patent's issuance while he waited for the fledgling automobile industry to become established. In 1895, he allowed his patent to finally issue and began collecting lucrative royalty fees and threatening lawsuits against any automobile manufacturers he felt infringed on his intellectual property. When Henry Ford refused to pay any fees, Selden took him to court. After a protracted legal battle, Ford prevailed in 1911 when the court finally ruled that Selden's patent was invalid.

BlackBerry Battle (2000)

In 2000, patent holding company NTP sued Research in Motion (RIM), makers of the BlackBerry, over patents relating to wireless email. Faced with the prospect that an unfavorable verdict could have effectively killed the BlackBerry's email delivery system in the United States, RIM paid NTP a reported $612.5 million to settle the case in 2006. Since then NTP has filed suit against virtually every major company in the wireless space, from smartphone manufacturers like Apple, Google, HTC and Motorola, to carriers like Verizon, AT&T and Sprint. It ultimately reached undisclosed settlements in 2012.

[ILLUSTRATION OMITTED]

Twitter's Defense (2011)

Claiming that the microblogging service infringed on its 2002 patent for a "method and system for creating an interactivevirtual community of famous people," VS Technologies sued Twitter for more than $8 million in 2011. …

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