Responding to a Patent Troll’s Threats
By Joel B. Carter The term “patent troll” is used to denote any entity that asserts patent rights based on a patent it owns but does not practice. In other words, if you own a patent but do not produce a product covered by the patent, then you become a patent troll when you assert your patent rights against an alleged infringer. Patent trolls make money by alleging infringement and offering to license their patents to the alleged infringer in exchange for a royalty that is much less than the alleged infringer would pay defending a claim of patent infringement. Patent trolls have been subject to ridicule in the press, but they can enhance the ability of inventors to police their patents. In fact, many celebrated inventors have used patent trolls to enforce their patents. Thomas Edison’s licensing firm was an extremely aggressive patent troll. Patent trolls may help inventors enforce their patent rights, but patent trolls who bring frivolous claims are rarely punished and their numbers are on the rise. According to recent studies, patent assertions by patent trolls in the United States, including settlements and licensing fees, carry an annual price tag of at least $30 billion. This amount has increased fourfold in the past decade, and the figure appears to be increasing rapidly. Alleged patent infringers with annual revenues of $10 million and less bear 40% of patent troll costs. Patent trolls have asserted their patents against many Arkansas businesses, especially those in the patent troll wheelhouse—big enough to pay a substantial licensing fee or royalty but too small and inexperienced to effectively counter a patent troll attack alone. This article discusses three types of patent trolls and addresses what to do should one of them threaten to gobble up a client. Patent trolls come in all shapes and sizes, but they can usually be classified as one of
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three types: inside patent trolls, heat seeking patent trolls and trolling patent trolls. Knowing a few things about the patent troll will often determine your initial response. One type of patent troll is affiliated with an entity that produces or uses the inventions subject to its patents. The producing entity has decided to monetize its patent portfolio by using an “inside” patent troll to assert its patents, especially against those that compete directly with the producing entity. Inside patent trolls usually have substantial numbers of in-house lawyers who may have been responsible for drawing up the patents in the patent portfolio. Inside patent trolls regularly engage in patent infringement litigation. If you are reading this article on a smartphone, tablet or computer, there is a good chance the manufacturer asserts its patents through an inside patent troll. Another type of patent troll is not affiliated with a producing entity. It owns a patent portfolio it has acquired through any means available, including bankruptcy sales, corporate asset purchases or from individual inventors solely for the purpose of asserting them. These “heat seeking” patent trolls actively seek out potential infringers and may hire outside lawyers to do the same. Heat seeking patent trolls often hire lawyers on a contingency basis and usually have an argument that their targets are infringing their patents but also bring bogus infringement claims from time to time. Heat seeking patent trolls regularly engage in patent infringement litigation. One example of a heat seeking patent troll is Lennon Image Technologies, which regularly asserts a patent entitled “Customer Image Capture and Use Thereof in a Retailing System” against online clothing and apparel retailers who allow customers to “try on” items using pictures of themselves they upload to the
retailer’s website. Yet another type of patent troll shares the same basic characteristics as the heat seeking patent troll, but upon examination, its patents are extremely weak or the target’s activities have nothing to do with them. These “trolling” patent trolls fish for any and all potential targets by dragging their patents, often accompanied with draft complaints, in front of schools of targets, hoping a few will agree to a license. Their lawyers will usually tell targets to seek the advice of a patent lawyer to make sure they know how much defending a patent infringement suit can cost. Trolling patent trolls and their lawyers know the patents they assert would probably be invalidated if they risked litigation and that they would have a hard time proving infringement and are therefore unlikely to file a complaint. If your client is threatened with a patent infringement suit due to the manner in which it has connected office equipment to the internet, a trolling patent troll is probably the culprit. Many sources can help you gather clues to determine a patent troll’s species. Here are a few: general internet searching; PACER; ask a patent attorney; Edgar searching to determine if the troll is public or affiliated with a public company; obtain a patentJoel B. Carter is an associate with Quattlebaum, Grooms Tull & Burrow, PLLC with a practice focusing in intellectual property and corporate law.