7 Examples of Patent Trolling: Legal and Regulatory Provisions to Combat Patent Trolling

Picture of Yasmin K. Brinkley, MBA, LLM

Yasmin K. Brinkley, MBA, LLM

Patent trolls, also known as non-practicing entities (NPEs) or patent assertion entities (PAEs), are companies that purchase patents not to produce products or services, but rather to enforce patent rights against alleged infringers in a manner considered unduly aggressive or opportunistic.

These entities often target companies with threats of patent litigation, compelling them to pay licensing fees or settle out of court, regardless of the patent’s validity or the alleged infringement’s legitimacy.

This practice can stifle innovation, burden genuine businesses with legal costs, and divert resources away from productive activities.

Below, we explore notable examples of patent trolling and their impact on industries and innovation.

1. Vague and Broad Patent Claims

Patent trolls have a knack for weaponising the ambiguity of the patent system, especially through vague and broad patent claims.

Imagine having a patent so ambiguously worded that it could apply to, say, any form of online shopping cart. That’s a gold mine for a troll!

Patent Trolls cast this super wide net, snagging anyone in their path, from tech giants to mom-and-pop online stores.

It is like fishing with dynamite in a pond. And here’s the kicker: even if their claims of infringement are as shaky as a three-legged table, the sheer cost and hassle of legal battles pressure many companies into settling.

It is not just about the money; it is about avoiding the courtroom drama that can drag on longer than a soap opera.

This tactic plays into the trolls’ hands due to the inherent complexities and sometimes subjective interpretations of patent law.

For example, the Alice Corp v CLS Bank International case highlighted issues with patents on abstract ideas, especially in software, underlining how crucial clear, specific claims are to prevent abuse.

Yet, the patent trolls continue their game, exploiting these ambiguities to their advantage, turning the patent system into a battleground where innovation risks being the casualty.

2. Preying on Small Businesses

Patent trolls have a rather notorious reputation for bullying small businesses and startups, almost like a schoolyard bully picking on the little guy.

It’s a classic David vs Goliath scenario, except David doesn’t have a slingshot this time, and Goliath has a team of lawyers.

Small businesses, with their dreams and tight budgets, often find themselves in the crosshairs of these patent trolls because, frankly, they’re seen as easy targets.

Imagine you’re running a small tech startup, and out of the blue, you receive a legal notice claiming you have infringed on some obscure patent.

The thought alone is enough to spill your morning coffee!

The cost of fighting these claims in court can be astronomical, often running into millions of dollars, which is no pocket change for a small venture.

This financial disparity forces many to settle out of court, even when the claims are as baseless as a house of cards.

It’s not just about the money; it’s a calculated disruption, diverting focus from innovation to litigation.

Legislation like the Innovation Act has been proposed in the U.S. to address such abuses by, among other things, requiring more detailed infringement pleadings, but the struggle continues.

For small businesses, it’s a harsh reminder that sometimes, in the patent world, innovation is not the only battlefield.

3. Purchasing Patents from Bankrupt Companies

Picture this: A company hits hard times and declares bankruptcy, putting its assets, including patents, up for grabs.

Patent trolls wait in the wings, ready to swoop in like vultures at a bargain sale. They snap up these patents at fire-sale prices, not to innovate or produce anything, but to turn these intellectual properties into weapons of litigation.

It is like buying an old map leading to buried treasure, except the treasure is the opportunity to sue companies actually using similar ideas to create real valuable products and services.

Once these patent trolls hold the patents, they start looking for targets—companies big and small that might be infringing on these newly acquired patents, even if the connection is as thin as tissue paper.

They then threaten or initiate lawsuits, banking on the fact that many companies would rather pay a licensing fee than engage in a costly and time-consuming legal battle.

There’s no real innovation here, just a strategic exploitation of the patent system.

The Leahy-Smith America Invents Act (AIA) of 2011 introduced measures like post-grant review to combat frivolous patents, giving a glimmer of hope to those fighting against patent troll practices.

Yet, the game of patent trolling continues, illustrating the ongoing cat-and-mouse dynamic between legislation and those looking to exploit the system’s loopholes.

4. Asserting Patents Against Non-Related Industries

Imagine you are an innovator in the tech world, creating the next big app, only to be blindsided by a patent lawsuit from a completely unrelated industry.

Sounds bizarre, right? Yet, this is the reality many face due to patent trolls.

These patent trolls have a knack for twisting patent claims into pretzels, stretching their applicability to cover as much ground as possible.

This tactic throws companies for a loop, especially those in industries far removed from the original patent’s intent.

For instance, a patent intended for automotive manufacturing might be asserted against a software company, leveraging the vague similarity of “processes.”

It is a cunning strategy, exploiting the target’s likely unfamiliarity with the intricacies of patent law and their aversion to legal battles.

The high cost and complexity of patent litigation often force these bewildered companies to settle, even if the claim seems as outlandish as claiming ownership of the concept of “clicking.”

The Supreme Court’s decision in Alice Corp v CLS Bank International has provided some defence against overly broad patent claims by invalidating patents that cover abstract ideas without “significantly more.”

Yet, the battle against patent trolls misapplying patents across industries persists, underscoring the need for continuous vigilance and legal reform to protect genuine innovation across all sectors.

5. Mass Mailing Infringement Notices

Imagine waking up to find an email in your inbox claiming you’ve infringed on a patent you’ve never heard of.

Some patent trolls engage in a strategy of sending infringement notices to hundreds or even thousands of companies simultaneously.

These notices often demand licensing fees and threaten legal action, creating a shotgun approach where even a small percentage of targets settling can be lucrative.

They send out infringement notices en masse, like throwing spaghetti at the wall to see what sticks. It’s less about the accuracy of the claim and more about playing the odds.

If even just a few companies decide to pay up to avoid legal headaches, it’s a payday for the patent troll.

It’s a numbers game, exploiting the fact that facing a patent lawsuit, no matter how baseless, can be terrifying and financially draining for companies.

The cost of defending against a patent lawsuit can easily run into the millions, so for many businesses, settling—even if they believe the claim is bogus—can seem like the lesser of two evils.

While the the Leahy-Smith America Invents Act (AIA) of 2011 and subsequent court decisions have attempted to curb abusive patent litigation, the system still allows for this kind of scattergun approach, highlighting the ongoing challenges in balancing the protection of genuine inventions with the need to prevent exploitation of the legal framework.

6. Submarine Patents

Picture a patent filed on a seemingly obscure technology or method that, due to the slow pace of patent approvals or strategic delays by the filer, doesn’t surface until years later.

By this time, the industry might have evolved in such a way that the once-obscure patent is now gold dust, covering technologies many companies have independently developed and widely adopted.

The patent trolls then emerge from the depths, wielding these patents like swords, to claim infringement against companies that had no idea they were supposedly navigating in treacherous waters.

This strategy leverages the element of surprise and the often significant investment companies have made in the relevant technology, making them more likely to pay up than abandon their progress.

The practice was more prevalent before the Leahy-Smith America Invents Act (AIA) of 2011, which shifted the U.S. from a “first-to-invent” to a “first-to-file” system, reducing the feasibility of keeping patents underwater.

Yet, the shadow of past submarine patents still looms, reminding us of the need for vigilance and ongoing reform in patent law to protect genuine innovation from opportunistic predation.

7. Creating Shell Companies

These patent trolls create a maze of companies, each owning just a sliver of the overall patent portfolio, turning what should be a straightforward legal battle into a complex labyrinth.

Imagine trying to solve a puzzle, but every piece you touch splits into two smaller pieces. Frustrating, right?

This tactic isn’t just about hiding; it’s about complication. By dispersing patents across a web of entities, patent trolls make it incredibly hard for companies to get a full picture of the patent landscape they are supposedly infringing upon.

It’s like trying to negotiate peace terms when you can’t even figure out who all the players are.

Moreover, if a company decides to fight back, this shell game complicates efforts to counter-sue or to recover legal costs, as you are never quite sure who you are actually fighting against.

The strategy is cunningly effective, leveraging the legal system’s complexities to the troll’s advantage.

It’s a shadowy dance, with patent trolls always staying one step ahead, making it challenging for genuine innovators to defend themselves without getting lost in the legal morass.

Conclusion: Examples of Patent Trolling

Patent trolling strategies exploit legal, financial, and technological loopholes, often leveraging the high costs and uncertainties of patent litigation to pressure settlements from actual innovators and creators.

These practices underscore the ongoing debates about patent law reforms and the balance between protecting intellectual property rights and fostering innovation.

References

Picture of Yasmin K. Brinkley, MBA, LLM

Yasmin K. Brinkley, MBA, LLM

Yasmin is an expert in Commercial Contracts, Securities Regulation, Corporate Governance, Intellectual Property and Media Law. Yasmin completed her LLB Degree and MBA in Toronto. She is a dual-qualified lawyer in Canada, and England & Wales, and an Adjunct Professor of Business Law. Yasmin helps small businesses and charitable bodies to navigate financial legalities.

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