When I started covering technology in the '80s, the last thing I thought I'd need to learn about was intellectual property law. But as Nicolai Tesla learned in his fight with Thomas Edison in the electrical-current patent wars of the 1890s, wherever technology goes, IP law is sure to follow.
My moment of revelation came in 2003, when I started covering SCO's copyright assault on Linux. SCO never really had a case, but I was soon to find out that with software patents, you really don't need a good case to profit.
You see, defending yourself against a serious patent attack is expensive -- expensive enough to make not defending yourself against a serious patent attack very desirable.
According to the American Intellectual Property Law Association (AIPLA), companies sued last year for patent infringement by a non-practicing entity (that and its acronym, NPE, are lawyerspeak for "patent troll") for less than a million dollars that decided to fight all the way through a trial spent an average of $820,000.
Yow!
Legal costs of that magnitude are enough to kill many small companies or startups. And as the "damages" go up, so do the costs. If your corporation got sued for $25 million or more, the AIPLA estimates you'd end up paying $4.4 million for legal services -- win, lose or draw.
Don't think this can happen to your company? Think again.
Lex Machina, an IP analysis company, reported in its 2013 Patent Litigation Year in Review paper, that there were "6,092 new patent cases in U.S. District Courts in 2013, compared to 5,418 new cases filed in 2012." That's a 12.4% increase.
Would it surprise you to know that the 10 plaintiffs that filed the most new patent cases in 2013 were patent trolls? It shouldn't.
The consulting firm PriceWaterhouseCooper, in its 2014 Patent Litigation Study, found that the median patent damages award is $4.3 million, but that "Damages awards for NPEs averaged more than triple those for practicing entities over the last four years." In other words, it can be very profitable to be a patent troll.
Better still, for the trolls, these cases seldom go to court. Most patent trolls attempt to shake you down with a patent infringement demand letter. And, let's face it, with a median time to trial of two and a half years and an average cost of almost a million dollars, what would you do if you got such a letter? Pay off the troll for, say, a hundred grand, or fight it out?
Most companies pay off the troll. Who can blame them?
It's not just the trolls seeking to make a fast buck from honest companies that are abusing the broken American patent system. Microsoft has used its "Android" patents to profit from Android OEMs since 2010. Indeed, Microsoft's most profitable mobile operating system, to the tune of approximately $3.4 billion, was Android, not Windows Phone 8.
Now, thanks to China, we finally know what's in Microsoft's Android patent portfolio. And it appears that Samsung, at least, is saying, "Wait a minute!" about paying Microsoft for these patents.
Slowly, way too slowly, the Supreme Court is starting to rein in patent abuse. In Nautilus v. Biosig, the Court ruled that for a patent to be valid, its creators had to describe its essential elements of their invention clearly enough that an expert in in the field could understand it with "reasonable certainty."
Yes, that's right, before this decision, even if an expert couldn't figure out how the heck a patent was supposed to work, you could still patent an idea.
In Limelight v. Akamai, the Court ruled that a patent that covered a series of steps was not infringed if more than one person or business carried out all the steps.
Finally, and I suspect most significantly, in Alice v. CLS Bank, the Court found that an abstract idea is not patentable simply because it is tied to a computer system. Samsung is already using this decision to challenge two Apple patents.
In the short run, none of this will mean much for you. We're still a long, long way from having a fair and reasonable patent system. But when I see Apple and Samsung agreeing to stop their patent fights outside of the U.S., I begin to hope that maybe, just maybe, we'll see the big companies stop bludgeoning each other with patent lawsuits. Which, in turn, may mean we won't pay as much for devices from them.
Patent trolls, I'm annoyed to say, aren't going anywhere. So, if you do get a patent infringement demand letter, look it over carefully, consider your options, and be ready to either pay the patent troll off or pay hundreds of thousands in legal fees. We're going to be paying for bad patents for years and years to come.
It's very difficult to kill a troll.
Steven J. Vaughan-Nichols has been writing about technology and the business of technology since CP/M-80 was cutting-edge and 300bit/sec. was a fast Internet connection -- and we liked it! He can be reached at sjvn@vna1.com.
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