Patent Troll: What They Are and How to Combat Them

In reality, trolls were creatures described by Scandinavian mythologies as ugly and deformed, living under bridges. Their means of subsistence was charging a kind of toll to travelers who needed to cross these structures to avoid passing through turbulent and dangerous rivers. These monsters even extorted passersby, threatening to harm them if they didn’t pay what was demanded. This might be why, in 1999, Peter Denkin, a lawyer for Intel Corporation, started using the term “patent troll”. He referred to all companies that, without manufacturing any product, filed lawsuits against users of patents they supposedly owned.

The expression became popular in the United States, where the phenomenon has a long tradition. The fact is that this practice has spread to Europe, and it is necessary to take precautions to avoid unjustly affecting users and manufacturers.

What is a patent troll?

Specifically, a patent troll is an organization that profits from the rights associated with it without manufacturing or selling the products and services described in these rights. Their practice consists of acquiring patents and litigating for the ownership of an idea that, paradoxically, they will not bring to reality. In the United States, these types of companies are known as non-practicing entities (NPE). When they do not buy patents directly, they partner with their owners to sue user companies and split the profits with them.

Often, these trolls can operate with veiled threats, through communications from their lawyers “inviting” them to pay an established amount under the threat of filing a lawsuit. As mentioned, the United States has been a paradise for these entities, as the legal costs for those sued for patent infringements are very high. However, the plaintiffs take almost no risk. Additionally, the granting of protections in that country is very broad, which is why the plaintiff has many chances of winning without requiring a significant investment.

The Electronic Frontier Foundation (EFF) assures that the abuse of the US patent system is widespread. Many individuals, companies, and institutions obtain income from the use of patents, particularly software patents. Their purposes are none other than to threaten and sue other companies, not to develop technologies of any kind. Indeed, these lawsuits do not stimulate innovation. Their objective is to achieve financial benefits.

How does the patent troll harm companies?

According to the EFF, the patent owners, both large and small, can be counted in the hundreds. They are rightly labeled as “parasites” that live off companies that do develop inventions, products, and services. Certainly, the patent troll has “in its sights” large companies, as they have enough money to pay the settlements demanded.

However, they also target small companies, family businesses, and even freelancers. In the long run, these types of businesses are the ones that suffer the most in trying to prevent extortion by the patent holders. Indeed, there are many cases of companies that do not have the capacity to pay for a strong legal defense to confront the trolls. Moreover, even if they were to win, the litigation costs could ruin them before the judge issues a ruling.

Among the few cases that the defendants have managed to win is that of the Lodsys Group against Kapersky Labs Inc in 2013. Paradoxically, Lodsys is a subsidiary of Intellectual Ventures (IV), considered the largest patent troll worldwide and founded by… Peter Denkin! Remember? The very lawyer who “patented” the derogatory term we are discussing. It’s no wonder that Kaspersky celebrated standing up to IV, instead of giving in, as Symantec, HP, and Samsung did to avoid going to trial. In total, 55 companies were sued at that time by the aforementioned troll, of which only four refused to give in to the extortion.

The patent troll phenomenon in Europe

Not content with harming US companies, American trolls have established themselves in Europe. Darts-ip, a consultancy specializing in intellectual property, identified IV, Marathon Patent Group, Pan Optis Patent Management, and Form Holdings as the organizations that account for 60% of patent trolling in our continent.

The same darts-ip states that in 2007 there were 56 actions related to NPE activity in Europe. The phenomenon grew to such an extent that by 2017, this number had tripled. Specifically, the same consultancy reports that IT-related patents accounted for 75% of the cases recorded between 2013 and 2016. In this sense, it is no coincidence that companies in this sector are among those sued. Particularly those related to smartphone manufacturing and derivatives: Huawei, HTC, LG, Samsung, Apple, Vodafone, ZTE, among others.

Even so, according to the Spanish Patent and Trademark Office (OEPM), Europe and particularly Spain have managed to limit these practices somewhat. Precisely because the judicial system is more accessible and the granting of patents occurs after a very rigorous examination. For this reason, they are considered high-quality patents.

This does not mean that Europe takes it lightly. Measures are being taken here to curb the expansion of the patent troll phenomenon. Especially, legislators are focusing on the registration of low-quality patents with the aim of suing future technology users. In this regard, it is essential to introduce even stricter examination procedures and a strict application of the patentability criteria in the patent application process. Such measures will set a barrier to the granting of poor-quality patents and, at the same time, the emergence of new patent trolls.

What is happening in other countries?

It is worth highlighting the efforts made by countries such as China, the United Kingdom, and Australia to contain the rise of the phenomenon we are analyzing. In these countries, there have been real brand wars that are very specific and often long-lasting. In the technological field alone, in the United Kingdom, there were more than 2,000 lawsuits for patent infringement in 2010.

Indeed, the statistics of judicial proceedings initiated vary greatly between countries. For example, in France, plaintiffs are trolls in just 4% of intellectual property rights cases. In the Netherlands, the percentage reaches 5.5%.

In contrast, in Germany the ground is fertile for the proliferation of patent trolls. No less than 19.5% of intellectual property rights cases have these entities as plaintiffs. It is surprising that there is a system where one court examines the validity of a patent and a different court handles infringements. In this way, patent trolls’ victories in the lawsuits they initiate are more frequent.

At ISERN, we advise you so that you do not fall victim to this practice

Our 100 years of experience in the registration and protection of patents and trademarks allows us to understand, identify, and avoid the phenomenon we studied here. At ISERN, you will find the right advice and legal support to provide your patent with the necessary strength for its registration. We also help you grant licenses or transfer your industrial property and intellectual property rights under the most beneficial and fair conditions.

Of course, we defend your rights over solid patents, very different from the cases involving a patent troll. Contact us and visit us at any of our 12 offices throughout Spain!

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