Other than the shifty eyes and faint smell of cheap aftershave, it’s often hard to identify a patent troll.
The derogatory term "patent troll" describes a company established as a legal entity solely to make cash through patent lawsuits -- stifling creativity and emptying the bank accounts of even the smartest Silicon Valley start-up. According to a 2011 report by the Boston University School of Law, patent trolls have cost U.S. companies about $500 billion in lost capital.
Drew Curtis, the founder of Fark.com, calls them terrorists to be avoided at all costs.
“It boils down to one thing: don’t negotiate with terrorists,” Curtis said during a talk at the TED 2012 conference in Long Beach, Calif. He explained how he won a patent dispute over e-mail newsletters by refusing to settle.
“I make things as difficult, tedious, and annoying for plaintiff's attorneys, who likely work on contingency and get paid for a percentage of settlements, not for their time,” he told FoxNews.com.
Patent claims are a pain in the neck. They are vague on purpose, covering for example “downloading video from a server” or “e-mailing a newsletter” -- vagueness that leads to endless legal wrangling. The classic example: SCO Group is still suing IBM over Linux patent infringements that date back decades, even though SCO lost a major patent infringement case against Novell about two years ago.
'There are a number of dotcom-era software patents of dubious validity.'
- Tim Bradley, patent attorney
“The amount of money spent on patent lawsuits each year is on an exponential curve upward,” Curtis told FoxNews.com. Sadly, most companies take the cheap way out. It’s often easier to pay a patent troll than it is to drag out a legal dispute and win, when a “win” might cost $2 million, he warned.
Curtis equated patent troll companies to the Abu Sayyaf terror group in the Philippines. That extremist sect kidnapped people for ransom initially, collected small sums, expanded with more personnel and equipment, then kidnapped more people for higher ransoms, Curtis explained.
Most patent disputes never make headlines, he says, because of non-disclosure agreements. That makes the problem even worse because there is not a lot of information about settlements.
A recent case shows how patent litigation works. EveryMD sued Facebook over an infringement on hosting a home page, posting comments and rating information.
The company has since decided to pursue patent suits against presidential candidates like Mitt Romney over their Facebook pages. (EveryMD did not immediately return FoxNews.com requests for clarification.)
“One reason these disputes exist is that there are a number of dotcom-era software patents of dubious validity, and these patents are often the ones being asserted in these cases,” said Tim Bradley, a patent attorney with Coats and Bennett in North Carolina.
Unfortunately, during patent disputes, tech companies often delay new development work to focus on the lawsuit. Jim Beesen, who helped write the report for the BU School of Law, told FoxNews.com that the problem is getting out of hand. Tech companies today even plan for the inevitable payout to patent trolls.
They expect lower profits for their business and anticipate a “patent troll tax.”
“There is some evidence that while troll suits are underway, defendant firms stop introducing new innovations in the form of product upgrades or new products,” Beesen told FoxNews.com.
Those who defend the rights of patent holders say they are justified in seeking injunctions.
“Some of the complaints about patent litigation come from companies who simply want to use the technology of others without paying. There is a tendency in some quarters to portray the legitimate assertion of valid patent rights as an evil, although it is an essential component of the protection for innovation we get from the patent system,” patent attorney Robert Freitas said.
“Some companies appear to be not so good at distinguishing the frivolous from the challenging. If one looks at every case as a ‘terrorist’ situation, a heavy price will be paid,” he said.
Bradley says there are better ways to stop patent trolls by making the patent troll business model less attractive. For example, a compulsory licensing system could be established, limitations could be placed on damages, or plaintiffs could be forced to shoulder some of their defendant’s discovery costs.
For his part, Curtis uses a unique way to fight trolls. He rarely engages with them at all.
In his e-mail newsletter case, Curtis offered to settle for nothing. In some cases, when a copyright holder hints at a new lawsuit, he reminds them that harassing a defendant can lead to a triple-reverse on the legal fees.
“I rarely see a follow-up email about it,” Curtis said.