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Gary Shapiro Shilling A Massive Load Of Patent Tripe

Gary Shapiro, blogging over at Forbes.com, appears to have swallowed a load of patent tripe that he now wants the rest of us to swallow, but he’s got a lot to learn about patents. If you’ve accidentally swallowed some of Gary’s tripe, consider this post your heartburn medication.

From his article on reforming the patent system, Gary suggests that patenting and innovation are somehow mutually exclusive propositions:

On the one hand, innovators need the monetary incentives a patent provides to market their product, but on the other, innovators need to be able to build upon that product to make newer, better ones.

Except that the existence of a patent isn’t necessarily a barrier to making better products. In fact, if you could just copy products outright, that’s exactly what firms would do. Innovators can improve products specifically by developing ways to achieve the benefit of patented technology without actually infringing the patent. Every patent attorney knows this can be done in nearly every situation, so it sounds like the public needs a little education in how patents actually work.

Gary also engages in some pretty typical name calling:

A “patent troll” is person or company that acquires patents for the sole purpose of filing patent infringement claims against larger companies. They have no intention of ever using their patents; their aim is money.

First of all, “patent troll” is a pejorative term specifically used to attribute negative connotations to the labeled party. If people want to believe that the way some patent owners exercise their rights is immoral, or distasteful, then let them believe that. But appealing to biases to driver your readers toward a conclusion is a bush league move and I’m going to start getting outraged by it. It may not accomplish much more than just elevating my blood pressure, but there it is…

Patent trolls can abuse our patent system in a number of ways.

This ought to be good … reading on:

They can shake down an operating company for damages.

Also known as the legally mandated compensation adequate to compensate for the patent infringement.

They can seek an injunction on a company’s product, even when the troll has no product or customers.

Except that they won’t get it, and every litigator in the country knows it. Any lawyer who scares a client into funding a defense by telling the client a non-practicing patent owner is going to shut down their operations ought to be sanctioned.

And patent trolls can stifle competition within an industry, leading to higher prices for consumers.

A little evidence might be good if you want to make such a bold claim. The FTC report Gary cites offers no data to back up the claims that it boasts, and is little more than the same rhetoric wrapped under a government seal.

Patent owners that operate in spaces outside of the industry where their patents apply will have virtually no net effect on competition. Gary said it himself, up above: “their aim is money.” And they’ll get that money from every single industry participant that they can. At the end of the licensing campaign, every competitor in the space will have received a visit from the patent owner, and no company is worse off relative to the competition.

Also, getting patents into the hands of assertion entities may actually make the marketplace more efficient. These patent assertion companies are specialists at negotiating licensing deals and aren’t encumbered by other problems that industry patent owners have. It’s actually the industry player whose patents can upset the competitive balance and create potential for monopoly pricing since the industry player is 1) less willing to negotiate (perceived as helping the competition) and 2) is less skilled at it since its primary business focus is not licensing. In addition, unlike the non-practicing assertion entity, the competitor does actually stand to get an injunction (just look at TiVo v Echostar).

Among his suggestions are:

1) Eliminate forum shopping

Forum shopping is not unique to patent cases. Talk to any law professor who teaches torts or civil procedure. If we want to have a debate about forum shopping, fine. But it should be in the general context of litigation in the federal court system.

2) Apportion damages in patent cases

This has actually already happened. At the end of the day, a reasonable royalty sets the baseline for a patent owner’s minimum compensation and requires us to enter into a hypothetical fantasy land where everyone negotiates reasonably, so its fraught with speculation in the first instance. What we should do instead is look for policies that allow patent owners and operators to negotiate outside the umbrella of litigation.

3) “Change the law that encourages lawyers to sue for exorbitant damages in the event patent numbers are accidentally listed incorrectly on products”

Gary clearly doesn’t know what he’s talking about here because there is no such law. There is no penalty for “accidentally” listing incorrect patent numbers on products. There is, however, a penalty imposed on those who falsely claim their products to be patented with intent to deceive the public. No intent to deceive, no penalty.

And I just have to quote this last one because it’s so chock full of rhetoric that even I have trouble believing someone actually wrote this (emphasis mine):

*Proceed with pilot programs championed by House Committee on Oversight and Government Reform Chairman Darrell Issa that provide for special patent training for federal judges who will be handling patent cases. All too often the judges that decide patent cases are not patent experts and can be easily swayed by crafty patent trolls.

The pilot program is actually a decent idea, but what the heck is this nonsense about judges being easily swayed? Judges are just as likely to be swayed by a crafty lawyer representing a large, multinational corporation. But take a look at statistics from the Eastern District of Texas. Based on the anecdotal evidence, you might think patent owners win cases there as a matter of course, but proving otherwise might just require someone to actually look at data … and who has time for that when we can just repeat talking points and spew rhetoric.

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Discussion

5 thoughts on “Gary Shapiro Shilling A Massive Load Of Patent Tripe

  1. The recent Intellectual Ventures suits present just one example showing that the NPE (“patent troll”) business model has fast become dominant in the world of IP. Thomas Edison held over 1,000 patents, but practiced none of them. He invented, which is what he did best, and let others manufacture products from his inventions. If an inventor cannot sue for patent infringement and recover damages, they why should anyone invent anything? Only vigorous patent enforcement rewards inventors for their inventions and incentivizes others to invent.

    Posted by patent litigation | April 18, 2011, 4:25 am

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