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    Senators ramp up push for PATENT Act

    Senators ramp up push for PATENT Act

    The end of trolling for profit?

    Today Senators John Cornyn (R-TX) and Chuck Schumer (D-NY) hosted a Google Hangout with entrepreneurs who have first hand experience dealing with “patent trolls”—firms that come in and sue companies over “patent violations” that don’t actually exist. The Hangout was part of a renewed push in the Senate to achieve meaningful patent reform.

    The PATENT Act is the latest in a long history of efforts to prevent patent trolls from shaking down small startups. The bipartisan bill would help protect innovators from the crippling pre-litigation costs (think discovery, which in patent cases takes anywhere from 3 to 5 years) that trolls use as leverage against startups that can more easily afford a payout than they can afford years of legal fees.

    Until very recently, patent trolling was an issue that mostly affected the technology and pharmaceutical industries; now, however, patent trolls are going after “main street”—think small business owners, startups, and independent inventors—and end users, meaning that people who simply use allegedly patented technology are being hit with bogus lawsuits.

    You can watch the Hangout here:

    David Bloom, a New York entrepreneur and founder & CEO of Ordrx (formerly made it clear during the discussion that, at least in his experience, patent trolls care less about innovation, and more about achieving a quick payday. Bloom was sued over software he developed to help restaurants share their services and accept orders online. The firm insisted that his invention infringed on a patent that extended all the way back into the late 90s—long before the coding techniques he used to write his software had even been invented. When he countered with a memo laying out a laundry list of reasons why his invention wasn’t covered under the patent, Bloom says the firm responded by saying, “Everyone says that, and everyone pays.” By the end of the ordeal, Bloom’s legal bills exceeded his total salary payouts; his customers were concerned, and the the bad publicity from the lawsuit affected business.

    Bloom closed up shop a few weeks ago.

    Van Lindberg, an attorney and engineer who serves as Vice President of Intellectual Property at cloud hosting firm Rackspace, has seen similar tactics leveraged against Rackspace’s creative development. “It’s as close to legalized theft as you can get,” said Lindberg, as he described what many consider to be the extortion tactics of high-dollar patent trolls. Rackspace’s litigation budget has fluctuated between 3 and 5 million dollars over the past three years; after settling their first few patent disputes, Lindberg and his colleagues discovered that firms that had received a payout were coming back with new entities claiming new, infringed-upon patents.

    Lindberg describes these firms as bullies that don’t care about “true invention”; I’m ready to believe him, given the fact that when Rackspace actually jumped through the hoops necessary to challenge the trolls’ claims, Rackspace won on the merits.

    Rackspace has been fortunate enough to survive the barrage of claims, but each claim—no matter how vague or frivolous—takes hours and thousands of dollars to even begin to address.

    The PATENT Act’s biggest critics claim that if implemented, the new rules will cheapen the value of private property rights. The bill, however, doesn’t actually prevent legitimate lawsuits from moving forward. Normally, patent litigation takes years to make its way through the courts; if passed, the Act will slow down the discovery machine until a judge rules that a claim does or does not have merit. If a claim is deemed frivolous, the Act’s fee shifting provisions will hit the troll with the other side’s legal fees. It only punishes frivolous claims (meaning, claims that aren’t “objectively reasonable.”)

    The bill isn’t perfect, and doesn’t fix the problem of low-level patents being awarded to begin with, but it’s a good start in the fight to separate legitimate patents from illegitimate ones. You can read more about the bill’s provisions here, here, and here.

    The PATENT Act heads for markup in the Senate tomorrow. We’ll keep you updated on the bill’s progress.


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    Bruce Hayden | June 3, 2015 at 6:16 pm

    Until very recently, patent trolling was an issue that mostly affected the technology and pharmaceutical industries; now, however, patent trolls are going after “main street”—think small business owners, startups, and independent inventors—and end users, meaning that people who simply use allegedly patented technology are being hit with bogus lawsuits.

    Not really, but keep up the propaganda. See my earlier comments about the economics of patent litigation. This is pretty egregious rent seeking on the part of companies like Google, which, not coincidentally, was putting on that confab.

    Zhinlo | June 3, 2015 at 6:57 pm

    So Bruce, what would you do about:

    1) Shakedown letters that demand ~10% of the litigation cost ($40,000 – $50,000) “or else” that have NO specifics other than general accusation, and

    2) Patents that to any practitioner are obviously bogus (i.e. standard processes “with a computer” as Mouse said.)

    If you have forinstances of legitimate computer related patents from small inventors that are being trampled by Google et al, I’d like to read about them.

    The abuses I’ve seen cataloged are pretty obvious lawfare to me, not cases where legitimate inventors are being harmed by corporations stealing their ideas — so, I’m looking for the opposite presentation of people whom Google has stepped on.

    You’ve used “IP creators” in a way that’s vague enough that it readily encompasses the shysters along with the virtuous, and all the media coverage focuses on the shysters.

      Bruce Hayden in reply to Zhinlo. | June 4, 2015 at 3:57 pm

      First, and foremost, keep in mind who is funding this legislation. It isn’t the poor victims of trolls, but large tech IP consumers, led by, yes, Google. We are talking tens, if not hundreds, of millions of dollars being spent over the last year or two pushing this legislation. The money is going to an army of lobbyists, a lot of academics to write papers showing just what you are claiming, etc. The small companies, etc. don’t have the money to play in this league. Not even close. Follow the money and don’t get side tracked by all the diversions that are being orchestrated by the massive international companies pushing the legislation.

      Demand letters are nothing new. You see them on a routine basis in patent, copyright, trademark, and even trade secret areas of IP. What anyone who receives one should do is to consult with a licensed patent attorney, and have them review the patent, its claims, file wrapper history, and how the client’s product might infringe those claims. In most cases, you should be able to get a feel for whether the party making the demand has a valid claim, or doesn’t. Most often, they don’t. My view is that anyone who pays up without getting expert advice is a fool very quickly separated from his money.

      And, none of this is the least bit new. I worked with a guy some 20 years ago who loved this sort of thing. He would get clients in, send out a couple demand letters, and then dump the clients if and when the target companies did not pay up. You see exactly the same dynamic with most of the accident attorneys you see on TV. They mostly don’t litigate their cases, but mostly are in it for the quick settlements. If they actually have cases, and the other parties don’t settle, they will very often refer the case out to real litigation attorneys who specialize in this sort of cases (and who don’t tend to advertise).

      Bruce Hayden in reply to Zhinlo. | June 4, 2015 at 4:00 pm

      You’ve used “IP creators” in a way that’s vague enough that it readily encompasses the shysters along with the virtuous, and all the media coverage focuses on the shysters.

      Of course that is the case – the same companies that are spending so much on lobbying Congress, buying academic papers, etc., are also working the media. They have entire departments whose job it is to deal with such. It is a very, very, lopsided battle.

      Bruce Hayden in reply to Zhinlo. | June 4, 2015 at 4:18 pm

      Let me add that there really aren’t that many computerization of routine stuff patents being issued. Never have been, since it is mostly (legally – see 35 USC 103) obvious. Making things even worse – the Supreme Court in Alice specifically addressed this subject. The result there is that not only are they legally obvious, but also constitute non-statutory subject matter (35 USC 101).

      Yes, there are bad patents that manage to get issued. That shouldn’t surprise anyone – after all, patent examiners, etc., are all civil servants. They are government workers, and that means there is a lot of mediocrity. Making things worse, they are mostly unionized. Think of the other unionized government workers we see, whether they be teachers, TSA, IRS, etc. Even the worst workers are hard to get rid of. Plus, counterproductive work rules.

      Should we be surprised that this isn’t being addressed by this legislation (and, yes, it has been brought up repeatedly)?

      The bigger problem with the patent process (ignoring that examiners are unionized govt. workers) is that of prior art. This is esp. bad in the software arts, and not that bad with old, staid, art areas, esp. in the mechanical areas. Several things have made it worse for software patents. One is that the USPTO refused to grant very many software patents until the early 1990s, and as a result, there is not the patent prior art there as there is in other areas. And, even though the examiners have database access for searching non-patent prior art (for example, they have a subscription for the entire IEEE database of articles), they still tend to use issued patents and published patent applications as their primary source. The other problem is that terminology is not as standardized, and that affects the sort of key word searching that they tend to employ.

      Still, and keep this in mind, a large percentage of software patent applications right now are never going to issue as patents thanks to the Alice decision. Many of these inventions are novel and nonobvious, but now considered non-statutory subject matter. Entire art units have essentially shut down allowing claims (and therefore issuing patents) as a result. The Federal Circuit has yet to find a way around Alice, which means that appeals from the rejection of those software patent application claims are likely to be rejected, and litigated software claims invalidated.

      This is already happening, and the proposed legislation has nothing to do with it. Nothing.

        Bruce Hayden in reply to Bruce Hayden. | June 4, 2015 at 4:27 pm

        Quick clarification to my last post.

        The reason that prior art is critically important is that it is how patent claims are determined to be not novel or obvious. Put simply (it is a bit more complex), if a claimed invention is described in a single prior art reference, it is considered to be anticipated, and, therefore, lacking novelty (35 USC 102). If the examiner (or judge) has to put together two or more prior art references, then it may be obvious (35 USC 103). Most of the prior art cited by examiners consists of issued US patents and published patent applications. But, it can be anything that is written or printed, including the Internet (the Wayback machine is used heavily for such to nail down dates, etc.) You also see scientific papers, etc. But, also sales brochures and the like.

        A couple of things come together here. First, the burden is on examiners to prove that claims in an application are not patentable, and this has traditionally meant lacking novelty, or being obvious (see above). They have to build a written record for this, esp. since most of the prosecution and appeals process is written. And, that is why the examiners cannot just say that they think that it is obvious. They have to be able to back that up, and for novelty and non-obviousness, that means printed prior art.

    MouseTheLuckyDog | June 3, 2015 at 7:21 pm

    I came across a very timely story:
    The EFF is being sued for criticizing a patent in a blog post!
    Before I talk about the story itself, here is the patent in question:

    tell me what is being patented.

    Hmm. You sure? Look at it again.

    I couldn’t figure it out until I read the blog post, and I’m an engineer by trade.

    Seems that patent describes something to do with a package out for delivery and some kind of text message. Maybe change the destination via text? Change the time of delivery? Request that the deliverery be to some third part location ( a UPS center, a post office )? Finally I got it.

    Ok. I guess I’ve given enough “spoiler space”. The patent describes
    sending email, texts, phone calls etc to a driver to change the quantity/amount of something to be delivered.

    To put it in simple English, if a driver is supposed to deliver 10 widgets to company Y and his superviser texts him and tells him to drop off 25 instead, then the company had better have a license for this patent.

    Oh and take a close look. This patent has been issued by the USPTO, so on the face it is valid. Oh and that part before about changing time of delivery via text. The company has another patent on that. Recently invalidated.

    So the EFF ( for those of you in Rio Linda that’s short for Electronic Freedom Foundation ) print a blog article, by a lawyer where he names this patent, “Stupid Patent of The Month”. So the company owning the patent has come back and sued the EFF and the writer for defamation.

    BTW the actual lawyer doing the suing, is threatening to sue another company called CaseRails which is an online legal document handling company, for having Case in it’s name > He owns a website called CaseWebs and he claims any legal site with the word Case in it is a violation of it’s trademark.

    caseym54 | June 3, 2015 at 11:06 pm

    Large companies like Microsoft and Google never do patent searches for their products. If they do, and find that their upcoming product *might* infringe on a patent, they have to worry about treble damages. So they proceed intentionally ignorant. Then they complain about patent trolls when they’ve infringed.

    In any event, a true patent troll won’t go after a small fry because there’s no money there. If anything it’s the giant companies trying to squash a disruptive competitor. Perhaps there needs to be a way to quickly determine if a claim could< have merit, but it has little to do with so-called trolls.

      Small companies need no less protection from patent trolls than big companies. This nonsense of using the courts for extortion has to end.

      Perhaps criminal penalties – with the attendant higher burden of proof – should apply to patent trolls.

        Bruce Hayden in reply to | June 4, 2015 at 3:37 pm

        See above – it is not economic viable to sue small companies for patent infringement. Remember, you don’t get attorneys’ fees in patent litigation.

        Bruce Hayden in reply to | June 4, 2015 at 3:43 pm

        The patent “trolls” mostly aren’t using the courts to extort small companies. That is because it is not economic to sue them. Period. And, once they file suit, they lose complete control over the case. For example, if they try to withdraw, they may get the patent(s) invalidated (invalidity is one of two standard defenses, the other being non-infringement).

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