Wednesday, 5 December 2012

Patent Trolls, a brief description on innovation Tax...

Patent troll is a pejorative term used for a person or company who conducts patent litigation against one or more alleged infringers in an aggressive or opportunistic manner, with no intention to manufacture or market the patented invention.
In 1999 Peter Detkin, a lawyer at Intel Corporation, was frustrated. Companies that had never produced a single semiconductor chip were suing his firm for a total of $15 billion for patent infringement. Detkin referred to his antagonists as "patent extortionists." Threatened with a libel suit, he toned it down to "patent trolls." Detkin was referring to fairy-tale trolls, like the ones in "Three Billy Goats Gruff," who live under the bridges and threaten those who try to cross them. His name for the companies stuck.
Patent trolls may buy patents cheaply from entities not actively seeking to enforce them. For example, a company may purchase hundreds of patents from a technology company forced by bankruptcy to auction its patents.
The cost of defending against a patent infringement suit, as of 2004, is typically $1 million or more before trial, and $2.5 million for a complete defense, even if successful. Because the costs and risks are high, defendants may settle even non-meritorious suits they consider frivolous for several hundred thousand dollars. The uncertainty and unpredictability of the outcome of jury trials also encourages settlement.
According to research recently published by Boston University School of Law, last year patent trolls won a cool $29 Billion. One of the most worrying findings of research in to patent trolls is that the mere threat of a suit is enough to induce fear and make creators pay up.
The average legal cost to defend a patent case is $420,000 for small and medium sized companies and $1.52 million for large companies. The average settlement costs are $1.33 million for small and medium companies and $7.27 million for large companies.
The study notes that the America Invents Act, which passed last year and led to the creation of the look at the 500 suits, added rules that make it harder for these patent monetizers to file complaints against several defendants at once.
The findings come as technology giants, including Apple, Google, and Microsoft, meet in Switzerland to discuss patent litigation reform at a roundtable with the U.N.'s International Telecommunication Union. It's a very relevant topic given that some of technology's biggest players are fighting over software patents in courts around the world.
Critics say patent trolls soak up money that could be used on research and development and pass on precious little of it to inventors. Their heavy-handed enforcement tactics appear to be a drag on the very companies that are putting new technology to work. Many believe the fear of being sued for infringing on obscure, often vague patents discourages companies from innovating.
The risk of paying high prices for after-the-fact licensing of patents they were not aware of, and the costs for extra vigilance for competing patents that might have been issued, in turn increases the costs and risks of manufacturing or worst stop production.
The idea of licensing patents isn't new. In 1895, an inventor named George B. Selden patented a gasoline-engine-driven carriage. Though he wasn't successful as an automobile manufacturer, he collected plenty of fees from manufacturers in the burgeoning car market. In 1911, his patent was challenged successfully by Henry Ford when an appeals court ruled that the engine then used in cars differed from Selden's version.
By purchasing many patents focused on one area, trolls are able to cite so many instances of possible infringement that it makes it harder and more expensive for the target company to defend the suit.
Their attorneys are only paid if they win the case. Legal costs for the NPEs are reduced, while the legal fees for target company they're sky-high.
The impact of patent trolls falls most heavily on companies that invest in exploring and creating new products and technology. The cost, this study suggests, is a kind of tax on innovation. What's more, researchers found that very little of the wealth lost by target companies was transferred to inventors. In most cases, the companies that were sued were already using the technology, which they had developed independently. The lawsuits came years after the patent application, suggesting that the patent trolls were waiting until the related product achieved success in its intended market before striking. The Boston University researchers concluded that patent trolls, for the most part, exploit weaknesses in patent law. By attacking companies that inadvertently infringe on vague patents, they stifle rather than promote innovation.
Sometimes the inventors are not able to commercialise their products and they cannot afford defending their patents. Then selling the patent to a patent troll may be a way to benefit from the invention, thus encouraging innovation and promoting science and technology. However, the patent trolls may both promote and stifle the development. Therefore, the laws and regulations should be carefully balanced between too little benefits for the inventors and between too stifling patent troll opportunities. If some patents are issued for too weak inventions, that is a different problem to be tackled separately.
The continued rise of the patent troll has the American Federal Trade Commission and the Department of Justice hosting a public forum in December to study the issue more closely. While further developments in technology go through the discovery phase, it is still likely to hit one or two infringement suits along the way towards production. The probable fallout is a country that has no means of manufacturing new products. Also competing countries will arrive at a technical solutions faster then a country that allows innovation to stifle. The resultant conclusion is a country thrown back into the stone age. While emerging sciences and technologies cross over so many disciplines, the law on ideas have closed its borders reducing progress to a slow crawl. If this modern Innovation tax was to continue further, one would guess the infringement suits would extend towards a dystopian nightmare...

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