Last week, the Obama administration called the nerds of America to arms. The target: “patent trolls” — companies that buy up patents and then seek money from companies that infringe upon them. Trolls are blamed for everything from stifling innovation to skyrocketing legal costs, and the White House offered a laundry list of solutions, ranging from tougher scrutiny of new patents to more effective bans on patent-infringing products. Across the tech community, the plan was met with polite applause.
Scratch the surface, however, and many admit that it probably won’t make any difference. Innovation is complicated, and simplistically labeling companies as trolls is more likely to make things worse.
The term is wonderfully nefarious. Has there ever been a good troll? Yet as White House personnel condemned the practice, a simple question lingered in the air unanswered: Who qualifies as a patent troll?
Just about every Fortune 100 tech company has run up against patent-holding firms that don’t employ engineers or manufacture products of their own — but do file infringement cases against deep-pocketed tech giants. Even when these cases settle out of court, the legal bills and licensing fees add up. The president argues that trolls “leverage and hijack somebody else’s idea,” while other administration officials assert that the tactics are “distracting greater innovators from innovating.”
There’s no question that we live in a litigious society. Patent lawsuits are all too common and frequently unwarranted. Still, “distracting innovators” shouldn’t be against the law. A patent is a property right, written into the Constitution by the Framers to encourage innovation. The trolls have legally bought and own their patents. Arguing that some patent holders have full rights to sue while others do not flouts the principle of equality under the law.
The deeper problem begins with bad patents. When the US Patent and Trademark Office issues a patent that is overly vague, broad, or trivial, it invites uncertainty and litigation. The administration’s instruction to require more clearly defined patent claims illustrates this point. Don’t blame the person who made the application; blame the government that granted them 20 years of exclusivity.
Frivolous lawsuits are equally at fault. But nuisance lawsuits plague every corner of our legal system. The solution isn’t fixing the trolls; it’s fixing the courts. In fact, the most meaningful of all the White House recommendations would give judges more power to shift legal fees onto plaintiffs filing “abusive” litigation. Good luck with that. Even modest “loser pays” proposals have been thwarted time and again at the federal level by the American Trial Lawyers Association.
The anti-trolls lament that the cost of litigation “hurts the economy.” Indeed it does. By far the biggest costs, however, are borne when the giants go head-to-head. The day of the White House announcement, the front pages were filled with the latest chapter in the patent battle royale between Samsung and Apple. Ruling against the latter, the International Trade Commission halted imports of the iPhone 4 and several models of iPad as well.
Of course, court decisions in other cases have favored Apple over Samsung. So who’s the troll there?
The complex truth is that patent holders occupy a spectrum as broad as the nation’s economy itself. If we insist that only manufacturers are legitimate patent holders — as President Obama seems to be doing — we marginalize and weaken an incredibly important segment of American innovation that often supplies the Apples and Samsungs of the world with the competitive edge they need.
Some of those suppliers are applied research firms developing everything from algorithms that process digital signals to genetic sequences for disease-resistant crops. They are in business to develop new ideas, build a portfolio of proprietary technology and patents, and license or sell rights to the highest bidder.
Pure research also abounds at colleges and universities. Today, most big schools maintain sophisticated licensing offices that earn royalties from patented technologies developed in campus laboratories year after year.
And lastly, what about individual inventors struggling to perfect innovations of their own? Without the resources to pursue every company that may try to use their idea without authorization, selling patents to someone with deeper pockets often represents the best way to guarantee the income they deserve.
When the president defines trolls as entities that “don’t actually produce anything themselves,” he fails to understand the complexity and strength of American innovation. Legislation that fundamentally restricts the actions of “trolls” will almost certainly hurt research-focused businesses, universities, and individuals.
Ultimately, the need to protect these valuable institutions means that despite the rhetoric, the White House proposals won’t kill the trolls. Even the president of Acacia Research, widely viewed as one of the biggest patent trolls, said his firm wouldn’t object — noting that if it really dealt with abusive behavior, “then we’re all for it.” When the trolls come out in favor of the anti-troll manifesto, it might be time to rethink the plan.