16 October 2007

A Historic Idea: How to Deal with Patent Trolls

Do not miss this fascinating paper, which looks at spooky parallels between today's patent trolls, and what were called "patent sharks" in the 19th century - people who bought up (agricultural) patents purely with a view to extracting money from hapless and helpless victims. Even better than the historical parallels are the lessons to be learned:

The chief lesson that emerges from this comparison is that certain types of patents are more vulnerable to trolls than others. Opportunistic licensers flourish when there is a large gap between the cost of getting a patent and the value that can be captured with an infringement action. This sort of arbitrage is likely to occur when: (1) those being sued cannot easily substitute away from the disputed technology; (2) the average scope of improvements in the industry is incremental, which makes the outcome of infringement litigation hard to gauge; and (3) the cost of acquiring and retaining patents is low. Farm tools and modern tech patents share this set of traits, albeit for different reasons, and hence they suffer at the hands of trolls more than other types of patents.

The other lesson that can be drawn from the Gilded Age experience is that the flood of opportunistic litigation cannot be stemmed through substantive changes in patent rights. First, industries unaffected by trolls view these proposals as harmful to their rights and lobby hard against them. As a result, every effort to address the issue through a comprehensive solution has failed in Congress. Second, since trolls and sharks succeed as long as they reach settlements, a substantive solution will be ineffective because most of these cases never get to court. So long as there is some uncertain chance that an infringement suit will succeed, defendants will tend to settle. In the nineteenth century, Congress eliminated this risk by wiping out the patents that were fueling opportunistic litigation. This suggests that abolition may be the only solution for modern trolls, at least with respect to patents for business methods and software.

Yup: make business methods and software patents history.... (Via TechDirt.)

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