Posted in Anti-Troll / Patent Purchase Conglomerate, Patent Reform, Patent Trolls, tagged Cisco, IBM, Intellectual Ventures, IV, Patent Reform, patent trolls, RPX on November 26, 2008|
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I was thinking about Zusha Elinson’s “New Business Targeting Patent Trolls Signs IBM and Cisco” article in which he discusses how RPX Corp appears to have the business model of aggregating patent assets (likely relevant to their members) “off the street” so that patent trolls cannot get to the assets first and enforce them against their members. Additionally, the article discusses how the company is buying NOT to enforce their patents against their members.
The issue here is two-fold: 1) whether RPX can control itself regarding costs to its own members and not become a mafia-type of organization extorting funds from corporations who have the choice of “join or be sued,” and 2) what RPX will do to companies who choose NOT to join their organization.
As per the question of whether RPX can control itself internally, I see from looking at Wall Street that companies do not and can not control themselves when there is opportunity to get away with an abuse. It reminds me of the old “moral versus legal” discussion I used to have in law school about whether one should be permitted to do something immoral and wrong even though it is not illegal, and whether all immoral activities should be illegal (obviously the answer is no — when there too much control, wrongdoers surface and look to find loopholes in the system, and the question becomes only whether something is legal versus whether it is moral.) With the over-regulation and under-enforcement by the federal regulators, my opinion is that there are few controls and risks for companies who violate laws and it is simply too costly to enforce the laws against those companies breaking them. Thus, people do what they can to make a profit and their conscience has no part in the equation. My opinion about this issue is that government must cut down on the regulations and must stop over-regulating, but MUST significantly increase their enforcement of rules that are on the books.
Similarly with regard to RPX’s activities towards companies that choose not to be part of their posse, the danger is that a for-profit organization has a profit motive, and often the ability to grow profits will overtake ethical considerations such as fairness and morality, as discussed above. A company infringing a patent soon-to-be-owned by RPX obviously should either 1) take a license, or 2) get sued for patent infringement. However, my question is more about questionable bullying practices which are likely to occur as soon as a for-profit organization has muscle.
I have read on the web about some questionable litigation tactics where abuses of the legal system force a company take licenses when they are not necessarily infringing the patents being asserted against them. The reason here is that the cost of litigation ends up being HIGHER than settling and taking a license to the assets even though the company is not infringing them. This is a serious abuse and is something that should be addressed in the form of legislation and/or regulation.
Robert Z. Cashman is a patent litigation attorney / a patent attorney in Houston, TX. He started an informative website using the name Patent Prophet which will be a resource for those who wish to obtain a patent or for those who would like to find out how to prevent companies from stealing their inventions. Services will include help with entering into IP Agreements & Licensing options, IP Enforcement and Litigation, Strategic Counseling, and much more.
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There was an informative article on Phillip Brooks’ Patent Infringement Updates web site where a user inquired about valuation methods and Ocean Tomo, an auction house for patent transactions. My comment to that article is below.
Ocean Tomo appears to be the next step in moving patents from A) being property that can be sold by the inventor to an individual looking to benefit from ownership of that patent, to B) a commodity that can be valued and traded by public opinion and/or rules of supply and demand, akin to stocks the stock market.
I have spoken to guys at Ocean Tomo, and my opinion is that what they intend to do is quite innovative. Right now patents are generally valued by analysts who work either independently and know the technology field or work for the company doing the purchasing. The problem with valuation in its current form is that there are usually only a few people looking at the value of a particular set of patents before an offer is presented for the purchase and/or sale of the patents. However, with Ocan Tomo’s method, the value of a patent is not only (hopefully) valued initially by an analyst, but that value is then CONFIRMED by bids and valuations by those looking to purchase the patents and/or by those who have some sort of input as to the value of the patents.
Of course there is room here for fraud where one can have individuals bidding up the price where the valuations would end up being inflated, but while this will eventually need to be addressed, for now, the goal is to have more of a “consensus valuation” method rather than a valuation by an individual analyst.
Hearing all this, I have not yet formed my opinion which is better. An individual analyst lacks bias. Consensus pricing invites bad behavior which can undermine the goal of their model. However, all this being said, they do run a good business.
Robert Z. Cashman is a patent litigation attorney / patent attorney in Houston, TX. He has started an informative website using the name Cashman IP which will be a resource for those who wish to obtain a patent or for those who would like to find out how to prevent companies from stealing their inventions. Services include help with entering into IP Agreements & Licensing options, IP Enforcement and Litigation, and Strategic Counseling.
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As I was writing this comment (below) to the “New patent aggregator RPX may have an Oedipal complex” article by Matt Asay, I got chills down my back. You know I’m all for business and profits, but I am also for innovation and the furtherance of technology. If for no other reason, I got into patent law to help be a part of the future, as I believe that technology can solve the world’s problems… it can also cause and aggravate them. When you have patent holding companies that are so big and who wield so much POWER and CONTROL over those who have patents in subject matters which fall within their line-of-sight, it stuns me how quickly these conglomerates could kill businesses by “patenting past” their technologies.
Okay, first of all, very cute analogy to Oedipus. You even got a chuckle out of me. Secondly, a business model such as theirs IS something to be feared, but ALSO in an awe-stricken kind of way. Companies who cheated inventors out of licenses that rightfully should have gone to the inventors have created trolls and troll conglomerates. Obviously patent reform will somehow address this issue because corporations are shaking in their pants when a conglomerate such as this one or its family knocks on the door. Perhaps they’ll eventually have to hang on to the same patent law they threw under the bus when they decided to infringe in the first place. I equate a conglomerate to the Angel of Death (AoD). If one is virtuous (e.g. if a company stays within their protected rights covered by their patents and rightfully takes licenses to those inventors whose patents they are practicing), then that company will get a pass and they won’t have to submit to the will of the AoD.
What scares me is not the acquisition of patent rights from inventors who have been cheated out of licenses that rightfully belong to them, but think tanks of scientists who patent “just to stay ahead of technology.” Now that is frightening, because a company with enough resources can rule the world if they speculate and patent each and every speculation. This appears to be exactly what is happening, and from a corporate perspective, it is HIGHLY profitable.
That being said, I am sure that once patent conglomerates begin to stifle business’ ability to grow because they have to pay the keeper to cross the bridge — the true meaning of a troll — then at that point if not before, government will have to step in to preserve the patent system and restore it so that patents are returned to being used to further innovation rather than to stifle productivity.
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Another article appeared discussing patent trolls. The article is called, “Looking to fend off patent trolls, IBM, Cisco support startup RPX” by John Cook. It appears I have a crusade here to properly define the issue of patent trolls for the patent community. My comment is below.
“Look, you are throwing around the term “patent troll” too loosely. A patent troll is one who acquires a patent for the sole purpose of enforcing it against someone else in litigation.
Everybody admits that the issues are 1) frivolous patents are awarded which duplicate subject matter in the prior art, 2) corporations infringe patents and bully inventors who deserve to be compensated for their innovations, 3) big patent-holding conglomerates are SCARY because they hold too much political and commercial power (according to some).
While the concept of a troll, e.g. company who buys patents to enforce them, seems to make them appear to be evil, remember that there would be no trolls if corporations were fair in their licensing practice and if they took licenses where licenses were appropriate. Instead, they play games and initiate stalling tactics to force the inventor into bankruptcy or to scare them into not pursuing them due to lack of funds. THIS is the problem. Get rid of this problem, and these helpless inventors will not sell their patents for pennies on the dollar.”
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Another paste of a comment from the TechDirt article on “New Patent Buying Firm Swears It’ll Never Litigate Over Its Patents”
Re: Mafia – Nov 25th, 2008 @ 1:29pm
There is no reason that those looking for patent protection have to pay the equivalent of a mafia in order to have protection from would-be infringers. The laws themselves should provide enough patent protection to the inventors, but they don’t in their current form.
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A paste of a comment from another TechDirt article on “New Patent Buying Firm Swears It’ll Never Litigate Over Its Patents”
Comment – Nov 25th, 2008 @ 1:27pm
I agree. The goal of the whole patent process is to INNOVATE and to protect the INVENTOR against others reverse engineering and copying his/her ideas. Perhaps the problem is allowing patents to be transferable.
Obviously I don’t have a solution, but the patent law system is obviously broken at the point where inventors no longer can enforce their patents and are forced to sell to larger companies (often called trolls) who have the muscle to enforce. Maybe in addition to giving inventors more protections to enforce their patents, preventing the purchase and sale of patents in itself is also a solution. I know a solution like that would upset a lot of people, but at least it would protect the integrity of the patent system.
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