Patent Trolls Are Preferable to “Practicing Entities”

by Stephan Kinsella on May 2, 2012

I don’t know anyone who says we don’t need patent reform. We need to address various problems, they say–junk or low-quality patents, patent trolls, and the like. But as I noted in Gigaom: Can big data fix a broken system for software patents?,

The problem is not trolls, overbroad patents, junk patents, inept patent examiners, software patents, etc. The problem is the very idea of patents.

Or as I observe in Slate’s Farhad Manjoo: Use Crowdsourcing to Improve Patents and Kill Patent Trolls:

bad patents versus good patents has nothing to do with the patent troll “problem”. This alleged “problem” is a result of the fact that there is no requirement to use the invention your patent covers, or even to produce a working model of it. There is no working, use, or reduction to practice requirement. The patent statute requires that the claimed invention be novel, and non-obvious, and also have “utility”–i.e., that it function. But the latter is just assumed, except in rare cases where it appears to the Examiner that something impossible like a perpetual motion machine is being claimed. Filing a written description of an invention substitutes for the requirement to reduce the invention to practice–it’s called a “constructive reduction to practice.” Given this: improving patent quality has nothing whatsoever to do with the “troll” problem. Even if you get rid of the 58% crap patents, the remaining 42% “high quality” patents will still be granted to patentees, some of which are not using the claimed invention. There is no reason a patent troll cannot own and use a “high quality” patent! So what is Manjoo talking about?

Or in The Patent Defense League and Defensive Patent Pooling:

patent trolls usually just want money. So they just serve as a kind of tax. But competitors often want to get an injunction to shut down the product lines of their competitors. Having to pay a “tax” to a troll is usually less of an existential threat to a company than is the patent injunction threat from a competitor.

In other words, the problem is not low-quality patents, or “bad” patents, or patents enforced by trolls–so-called non-practicing entities (NPEs). The real problem is good patents enforced by practicing entities. Even if you get rid of all “bad” patents, all software patents, all trolls, all business method patents–the fundamental problem remains: companies can acquire patents that they can use to squelch competition.

Yes, patent trolls (NPEs) are in several respects better than “practicing entities.” As noted in CE-Oh no he didn’t!: Tony Fadell calls Honeywell out on patent claims:

Smart thermostats might not be the cut-throat world of litigation like, say, mobile phones, but that doesn’t mean the odd feather doesn’t get ruffled from time to time. Nest CEO, Tony Fadell, is understandably protective of his company’s product, so when competitor Honeywell laid a stack of patent infringement claims at his door, unsurprisingly he was none too pleased. How displeased? Well, enough for him to drop this clanger: “Honeywell is worse than a patent troll.” Then going on to quantify with “They’re trying to strangle us, and we’re not going to allow that to happen.” We think that makes his feelings on the matter pretty clear. Well, when you’ve been SVP of Apple’s iPod division, it’s easy to see how patience with such things might wear thin.

A patent troll would merely ask Nest for a fee–like a polite mafia extorter, or Lysander Spooner’s highwayman, who does not pretend he is helping you and, after taking his cut, largely leaves you alone. But Honeywell, a Nest competitor, will do what they can to obliterate the competition posed by Nest. We see examples of this kind of patent-extortion every day. (And copyright too: Stupidity Of Licensing Demands Means The Wrecking Crew Can’t Help Sell More Music With Documentary.) So: Trolls are not the problem.¹ Complaints about trolls² are confused. The problem is the patent system itself.