The shakedown is on. In the aftermath of the dot-com bust, a new kind of business with a simple, yet potentially lethal, model has emerged.
Call them the "patent trolls."
These operators have no products or customers. Yet they wield the power to bring the companies that actually make and sell products to their knees. This makes them as threatening as the toughest competitor in the market.
In recent years, patent trolls have raised massive amounts of money. They seek to quietly acquire significant patent portfolios with the intent of threatening lengthy and costly patent infringement lawsuits against operating companies. A troll's strategy is simple: to acquire patents with the primary purpose of making patent infringement claims.
Trolls have an inherently unfair advantage in extracting value from operating companies due to the nature and uncertainty of the patent judicial system. For example, in a patent dispute between two operating companies, one can seek an injunction on the other's product shipments to avoid losing customers or market share of the product and IP in dispute.
It's time for the industry to deal with the trolls' threat.
Under current patent laws, trolls can seek an injunction on a company's product shipments even though the trolls have no customers or market share to lose. This unfair and ethically questionable advantage is rapidly emerging as one of the biggest threats corporations face today and could radically hamper the very nature of innovation.
Some patent trolls claim they are helping individual inventors seek the value they deserve for their invention. Let there be no argument: An inventor, whether an individual or a corporation, deserves the right to obtain fair compensation for an invention. Recognition and monetary rewards are powerful incentives that spark the innovations upon which our industry survives and thrives.
It's time for the industry to deal with the trolls' threat. But how can it fight this shakedown and protect its investment in innovation?
The first step is to create a standardized definition of a patent troll with guidelines to distinguish trolls from operating companies seeking fair value for their inventions. There is an ongoing debate in the intellectual property community about what constitutes a true patent troll. Perhaps the Intellectual Property Owners Association (IPO) is the right body to lead an effort to define a troll as "a company or business function whose primary business activity is to acquire patents for the purpose of offensively asserting them against other companies."
Secondly, the industry must band together to stop trolls by undermining the trolls' ability to obtain unfair value for their patents. Consider the power of pooling operating companies' resources to jointly acquire patents for a fair price from inventors--not with the intention of asserting them against other companies, but in a purely defensive move to simply maintain freedom to operate without threats from trolls. A consortium of this nature could effectively strip trolls of their weapons in what will inevitably become lengthy and expensive fights over patent infringement.
It is impractical and too expensive for any one company to do this independently. Few, if any, companies have the dedicated resources--human and financial--to aggressively search and acquire patents of interest. On the contrary, patent trolls have "war chests" of funds and teams of lawyers and technologists fully dedicated to finding and acquiring patent assets. Many trolls can and usually will outbid single operating companies in a patent acquisition process.
Any company that has suffered a troll attack knows how the menacing fear and uncertainty threaten the investment in innovation, customers' peace of mind, even the survival of a business. Every operating company is at risk, and it's up to us to work together to beat the trolls at their own game.
Biography Joe Beyers is vice president of intellectual-property licensing at Hewlett-Packard. He joined HP in 1975 as an engineer.
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