In Return of the Jedi, Yoda tells Luke “Once you start down the dark path, forever will it dominate your destiny, consume you it will.”
Luckily for me, this didn’t apply to the patent world. I spent seven years on the “dark side” working for patent trolls before coming back to the light. Patent trolls are companies that derive all or almost all of their revenue by asserting patents against other companies.
My experiences while on the “dark side” profoundly shaped my view on the role that Patent Assertion Entities (PAEs), or patent trolls, play in the tech industry. The struggle between PAEs and companies that produce and sell products is not as stark or binary as “light and dark,” or “good and evil,” but the fact remains that PAE litigation does more harm than good.
The tech industry is fertile ground for PAE litigation, with its many patents, plentiful companies and an increasing global reliance on technology. PAEs have no incentive to stop unless we in tech work together to stand up against them.
The grass is not always greener
When I first started out in law firms, I represented clients on all sides of the patent ecosystem. Then at Intel, I spent seven years defending my company against patent claims from other operating companies and from trolls. When dealing with other product companies, Intel and other high-tech companies use their own patents to defend themselves and to balance any demands made by the aggressor.
One of the big issues with trolls is that there is no reciprocal liability and no vulnerability to patents, which allows trolls to be aggressive and operate with near impunity as there is nothing a product company can use to offset its exposure to the troll’s patents.
After seven exhausting years of dealing with aggressive threats of litigation, demands for fast payment and being the perpetual bearer of bad (and expensive) news to my senior management, I was ready for a change. I joined Rambus, a company with a reputation for aggressively asserting its patents on computer memory.
As the VP of Licensing at Rambus, I was on the front line of every patent assertion engagement the company ran for more than five years. After Rambus, I joined Intellectual Ventures (IV), the world’s largest patent-licensing company, as a Licensing Executive, where I was again on the front line of more than eight patent-licensing engagements. IV is considered by some to be Silicon Valley’s “most hated” troll or a patron saint of sorts for inventors.
Once you start down the dark path, forever will it dominate your destiny, consume you it will.
After a couple of years at IV I had had enough. Working for a PAE relieved me of the onslaught of patent licensing demands and constant threats of litigation I experienced at Intel. However, there were several new sources of stress on the troll side.
First, patent licensing is the income-generating engine for the whole company, and there was constant and tremendous pressure to bring in money as cheaply and quickly as possible. In a zero-sum game where PAEs are looking to maximize their revenue while the target company wants to minimize its costs, there’s no love lost for the troll side.
Although I felt I was able to maintain my professional integrity, the natural inclination of the target company is to avoid you as long as possible and get away from you as quickly as possible. After seven years of the troll life, I made the decision to return to the corporate world and work for a company that actually makes things and helps push the technology industry forward, so I joined Lenovo as the Vice President of Intellectual Property.
While I was eager to leave, my time on the “dark side” was valuable because it yielded insight and nuance into how PAEs operate, the negative impact they have and what can be done about them.
Harm versus good
The sad reality is that the patents used by trolls do not need to be good for IV, or any PAE, to make money. Quality is not an issue when it costs $2-$3 million to find out whether a patent claim has merit, whereas settling costs “just” $500,000-$1 million. Trolls often aggressively push for extortionate settlements that far surpass the value of the IP because they know many companies will choose to settle rather than get embroiled in an expensive and drawn-out lawsuit. Their actions can wreak havoc on tech companies of all sizes.
A study from Boston University estimates that patent litigation destroys more than $60 billion in firm wealth each year, and that doesn’t even factor in ancillary effects, such as curbed innovation due to decreased amounts of venture investing.
That said, working for PAEs did help me appreciate certain arguments in their favor. IV argues that if it didn’t buy patents, inventors would never get paid. By creating a capital market for invention, it claims to help revitalize inefficient companies, make innovation profitable and “turbocharge technological progress.”
In theory, there is some validity to this argument. It is true that individual inventors and smaller companies are not always well-compensated for their inventions. But in reality, the harm businesses suffer on this front is significantly outweighed by the harm caused by the exorbitant costs of patent litigation lawsuits. The settlements IV gains from tens of thousands of patents is vastly out of proportion with the value of the innovation being licensed.
From light to dark and back again
It is now abundantly clear to me that PAEs are, in net, detrimental to business and innovation. Despite what they say, trolls are not making the world a better place for anyone. It is time they lay down their arms and allow companies to use the patent system in the way in which it was intended.
Patent trolling is lucrative, however, and the chances that PAEs will forsake it for the greater good are slim. Legitimate businesses have a responsibility, both to themselves and to the tech industry as a whole, to try to minimize this activity. For larger, well-resourced corporations like Lenovo, this can mean purchasing strong patent portfolios when they become available. PAEs essentially use patents as weapons, so the fewer patents they have, the better.
A company can also set its own corporate policy that prohibits it from selling patents to trolls. This is important, as more than 80 percent of patents litigated by PAEs are acquired from operating companies.
Lenovo believes strongly in protecting innovation, and having seen the real threats that trolls can pose, I pushed to join LOT Network, a non-profit community of companies that work together to minimize their exposure to patents owned by trolls. With fellow members like Red Hat, Canon, Logitech and Subaru, we’re making a real dent in the pool of patents that would be useful to PAEs. At last count, nearly half a million patent assets were protected from being used as weapons in PAE litigation against members of LOT Network.
As someone who has spent time on both sides, I feel a call to speak out against frivolous and overpriced patent litigation. The work I did for both PAEs and corporations was certainly legal, but not the same: While I was always on the right side of the law, I prefer being on the right side of innovation.
Companies want to create technologies that matter five years from now and beyond, so patents continue to matter. Frivolous lawsuits and those demanding damages far in excess of the value of the allegedly infringed patent detract from our ability to push innovation and better products forward. I hope that many more voices in tech will join mine in decrying the harmful effects of needless patent litigation — our future depends on it.
Featured Image: Rottrollen by John Bauer (1917)