Defining the patent troll

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Defining the patent troll

Analysis: Has the CSIRO imposed a tax on innovation?

A growing number of technology patent wars around the world has highlighted the rise of the “patent troll”: rights holders whose claim to an invention does more harm than good.

Non-competing entities that litigate over software patents are often accused of imposing a tax on innovation by blocking others from developing products despite having no intention of doing so themselves.

The concept of a patent troll is particularly relevant in the US, where relatively unknown entities that may not make any products lay claim to a core process employed by a commercially active software maker.

Australia’s intellectual property authority, IP Australia, revealed last month that computing-related applications accounted for six percent of patent applications in Australia and ten percent in the US.

Software patent applications and grants in the US have grown slightly faster than total patents, with software patents accounting for nearly a quarter of all patent lawsuits in the US by the end of 2010. 

A 2011 study by James Bessen at the Boston University School of Law found that most US software patents were awarded to firms outside the software industry.

The majority of software firms did not rely on patents, and the patents that contributed to the acceleration in software the industry were mostly granted to large firms, Bessen found.

The number of disputes has prompted digital rights group Electronic Frontiers Foundation (EFF) amongst others to oppose software patents, placing some blame on the US Patent and Trademark Office for giving trolls the weapon to make their claims.   

EFF staff attorney Julie Samuels said software patents should be an “oxymoron”, arguing that software was “fundamentally situated as a building block technology”.

“I am not sure there is a single root cause [to patent trolling],” Samuels told iTnews.

“But I do believe the prevalence of software patents – especially those of dubious quality – have done the most harm by giving patent trolls tools to exploit the federal litigation system in the US.

“The patent system we currently have stops making sense when we start talking about software.”

One of the “trolls” Samuels points to is Lodsys, a Texas-based company that owns several patents without using them in any products.

It sold a license to Apple covering an in-app payment feature that was made available to iOS developers, but has gone on to threaten legal action against to dozens of developers. 

Florian Mueller, FOSS Patents blogger and patent law consultant, pointed out that iOS developers in Lodsys’ sights could fight to invalidate the patent, but doing so may cost anywhere between tens of thousands or millions.

Fred Wilson of Union Square Ventures argued for less patent protection in IT, no patent protection for software and business methods, and the elimination of the patent troll

In 2009, Wilson raised the idea that software trolls were a “huge tax on innovation”. Union Square Ventures includes amongst its investments Twitter, SoundCloud, FourSquare and Kickstarter.

Although he was “all for” protecting the small inventor, he wanted the US to introduce a “lose it or use” clause in the patent system, because the solo inventor brings less economic value to society than the entrepreneur who commercialises the technology. 

Read on to page two to find out why the CSIRO has been accused of patent trolling.

The “patent troll” concept was brought home by the recent suggestion that Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) had trolled the US companies on a massive scale. 

In April, the CSIRO reached a $220 million settlement over three US telcos’ usage of wireless local area networking (WLAN) technology that it invented in the early 1990s.

The multi-carrier, interleaving patent solved the problem of making wireless LAN work in a confined space.

According to Australian patent attorney Mark Summerfield, it became part of the later 802.11a and 802.11g wifi standards “because no better solution was put forward to the committee.”

Ars Technica contributor Joe Mullin stopped short of outright labelling CSIRO a troll, but argued that it had failed to contribute to the world’s first wifi 802.11 standard.

CSIRO had also failed to commercialise the wifi chip through its spin-off, Radiata, which Cisco acquired in 2000, Mullin argued.

Other critics have noted that CSIRO chose to wage its campaign in the Eastern District courts of Texas, a location favoured by more notorious patent trolls.

Patent claimants flock to the the location because its judges are known for setting a trial date within 18 months of the initial filing. This gives trolls the “gun to the head” they need to execute their strategy, according to US patent attorney Craig Tyler. 

Summerfield argues that CSIRO's patent has “stood the test of time”, having been challenged by Intel, the company credited with popularising the term patent troll. 

“I don’t think any entity like a university or anyone’s national public funded research organisation falls into the category of a patent troll because they’re not in the business of making money by suing people,” Summerfield told iTnews.

“A patent troll to my mind is a company that really has no business model other than licensing patents that it probably acquired from somewhere else, rather than developed itself.” 

However, when it comes to branding trolls, a patent's validity often has little do with it and in many ways CSIRO does certainly qualify, mostly because it is a non-competing entity.  

In Tyler's view, a troll could just as easily be a shell company, a defunct company attempting to monetise its last assets, an investment firm that hordes patents, a patent-mining law firm, or a shell company established by a solo inventor who failed to commercialise or sell their invention.

“Or, of course, it can be a research organisation that invents, obtains patents and then collects license fees on the patent fruits of its inventive efforts,” Tyler said.

“CSIRO is a troll. But who cares? They have every right, and just as much right, to enforce a valid patent and collect a reasonable royalty under our current legal framework.

“And, as those from the South are fond of saying, ‘you make hay while the sun is shining.’ Net result: the huge swarm of patent troll litigation in the US over the last decade.”

FOSS Patents’s Florian Mueller, who fought the 2005 EU software patents directive, agrees. “CSIRO is a government-funded patent troll,” he told iTnews, pointing to its lawsuits and “business model”.  

CSIRO “gifted” $150 million of the $200 million it won in a related 2009 settlement to Australia’s Science and Industry Endowment Fund (SIEF), lending some weight to the idea that the funds were being used to stimulate innovation. 

What it does with its new $229 million win remains to be seen.

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