“Defensive Patent License” created to protect innovators from trolls; probably won’t work

by Stephan Kinsella on June 12, 2012

Update: See the Rational Patent Exchange’s (RPX) Defensive Patent Aggregation Service.

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From Boingboing. For related ideas, see my posts The Patent Defense League and Defensive Patent Pooling and Twitter Heroically Promises Not to Use Patents Offensively. This is an admirable attempt to deal with the inevitable problems flowing from the invention-monopolies from the patent system favored by IP “libertarians” (interesting how many libertarian sci-fi novelists happen to favor copyright, such as Brad Linaweaver, J. Neil Schulman, L. Neil Smith, and I guess throw in Ayn Rand and John C. Wright; just like most of my fellow patent lawyers favor the patent system, and most public school teachers favor government schooling ….).

As heroic as this effort is, I see problems with it. At best, it’s a way to deter lawsuits, but at a huge cost (obtaining patents in the first place to contribute to the pool). What a waste. And it does nothing to deter patent trolls. And why not let some companies who have no patents buy into the pool for money? If 1 patent gets you in as much as 100 patents does, why can’t you pay some fee to get in? And once you start using the pool, what is your incentive to continue to acquire patents? After all you can just free-ride on the patents others put in the pool, to use in countersuits defensively against possible patent aggressors. So these pooling arrangements can do nothing against patent trolls. At best, they stave off some lawsuits, and only cost tons of money to obtain patents whose only purpose is to ward off other patent suits, and giving rise to oligopolies in the meantime. It’s a horrible system. This idea only puts a little bandaid on it.

The boingboing post says: “It’s a license pool that companies opt into, and members of the pool pledge not to sue one another for infringement. If you’re ever being sued for patent infringement, you can get an automatic license to a conflicting patent just by throwing your patents into the pool. The more patent trolls threaten people, the more incentive there is to join the league of Internet patent freedom fighters.”

I don’t get this. Patent trolls usually don’t make any products, so they are usually not infringing any patents of their victims, or of anyone else. So how can the patent pool give you a “conflicting patent” (presumably, by this term they mean a patent that can be asserted in a countersuit against a patent plaintiff) against a troll–how can the threat of patent trolls give you more incentive to join the league, if the huge pool of patents can’t be used defensively against trolls?

As I wrote in the previous post:

One problem is that the PDL’s pool would be useless against patent trolls. However, 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. So if the PDL deters this kind of patent injunction threat, that is a huge benefit.

Even if these challenges do not prove insurmountable, it’s possible the state would torpedo this as some kind of antitrust violation, or some kind of patent “policy” grounds. Sounds absurd, but then the state does absurd things. On the one had, use of patents seems to be contrary to the spirit of antitrust law. Indeed, as I’ve noted in the past, there is said to be a “tension” between the federal antitrust law (which penalizes the formation of “monopoly power”) and patent law⁵ (which grants monopolies).⁶ And for this reason there has been talk of possible antitrust scrutiny of the Apple-Microsoft-RIM-et al. consortium’s $4.5 billion purchase of Nortel’s patents–the consortium beat out Google’s $3 billion bid, thus depriving Google of a defensive patent shield from patent suits against its Android smartphone platform by these and other competitors.

But one could imagine the state clamping down on the PDL scheme. After all, it’s unfair to let companies have too big of a defense against the patent threat. That would thwart the very purpose of the patent system, heavens to betsy! Or the FTC could jump in and claim that this pooling is anticompetitive, even though the purpose is obviously to permit competition to thrive, to block the anticompetitive effect of aggressive patent lawsuits. Who knows what the schizo feds would do.⁷

Now, as noted above, even if this scheme worked, it would be a huge waste, but maybe a necessary one, given the patent system. Still, it could reduce the barriers to entry and anticompetitive threats posed by patents. Maybe if there were millions of patents held by the PDL and other patent pools and by larger companies, but no one was using them for fear of retaliation, people would wake up and say, hey, why don’t we just get rid of this hundreds-billion-dollar deadweight loss on the economy? If we are not suing each other, why not just do that for free?

The subtitle to the ars technica post says: “The first rule of Patent Club is you do not sue members of Patent Club.” Exactly. But patent trolls won’t join any such defensive club. So how is this supposed to fend them off? Granted, patent trolls cost the economy a lot of money (see Patent Trolls Cost The Economy Half A Trillion Dollars since 1990). But patent trolls are not the real problem. As I note in Washington Post on Patent Trolls, Software Patents, and Patent Reform and Patent Trolls Are Preferable to “Practicing Entities”, the problem is not software patents, or patent trolls (“non-practicing entities”), or even “bad” or junk or low-quality patents. The problem is not incompetent patent examiners. The problem is not ambiguous or arbitrary nonobviousness standards, or inadequate prior art databases or searching capabilities. The solution is not patent reform, or reducing the term of or even getting rid of “software patents.” The problem is the good patents—”legitimate,” hiqh-quality, unassailable patents granted not to patent trolls but to practicing entities who use these patents and the force of law to squelch competition. 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.

In any case, here’s the Boingboing post:

Defensive Patent License: judo for patent-trolls

By Cory Doctorow at 2:57 pm Tuesday, Jun 12

Ars Technica’s Jon Brodkin has an in-depth look at the “Defensive Patent License,” a kind of judo for the patent system created by my former EFF colleague Jason Schultz (who started EFF’s Patent Busting Project) and my former USC colleague Jen Urban (who co-created the ChillingEffects clearinghouse). As you’d expect from two such killer legal freedom fighters, the DPL is audacious, exciting, and wicked cool. It’s a license pool that companies opt into, and members of the pool pledge not to sue one another for infringement. If you’re ever being sued for patent infringement, you can get an automatic license to a conflicting patent just by throwing your patents into the pool. The more patent trolls threaten people, the more incentive there is to join the league of Internet patent freedom fighters.

“The idea is if you want to be part of this network of defensive patent people, you are committing that all of your patents, every single thing you’ve done, will be available royalty-free to anyone who wants to take a license, if they commit to only practice defensive patent licensing,” Schultz said today in Boston at the Usenix conference on cyberlaw issues. “As long as they don’t offensively sue anyone else in that network, everything’s cool.”

The commitment is both daunting in that it requires submitting all of a member company’s patents to the pool, and forgiving in that members can still sue the pants off non-members. Schultz said his team thought long and hard about the exact implementation of the Defensive Patent License.

The “all-in” provision was put in place to prevent companies from joining the network while only providing their lamest patents. The ability of DPL members to sue non-members, meanwhile, preserves the right to monetize inventions. It also keeps members on a level playing field with non-members.

“Defensive Patent License” created to protect innovators from trolls