Patent trolls as mafioso (and that’s a compliment)

There is no denying that patent trolls—or “non-practicing entities”, companies that assert patents that do not cover any products they sell—impose large costs on the economy. See “Patent Trolls” Cost Productive Companies $29 Billion in 2011, Stall Innovation, and Hurt Small Businesses and Patent Trolls Cost The Economy Half A Trillion Dollars since 1990. But as bad as trolls are, they are not as bad as “practicing entities”—companies whose patents do cover their products. (See Patent Trolls Are Preferable to “Practicing Entities”.) You see, patent trolls don’t want to stop competition, unlike, say, Apple in the smartphone wars trying to quash Samsung’s competing products. They only want to “take a taste,” as mafioso might say, or “wet their beak” a little. Patent trolls are analogous to 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 practicing entities are more like the state: just as the state outlaws all geographic competitors, so companies holding patents on their products try to use them to outlaw their competitors: they seek court injunctions that literally prevent their competitors from competing, unlike trolls, who just demand a small toll.

Jeff Tucker used the “wet my beak” analogy in his recent article The Patent Bubble and Its End, where he says:

the trolls may not be as bad as conventional patent practice. At least the trolls don’t try to shut you down and cartelize the economy. They just want to get their beak wet. Once that happens, you are free to go about your business. This is one reason they have been so successful.

This is a nod to The Godfather II:

Don Fanucci: Young man, I hear you and your friends are stealing goods. But you don’t even send a dress to my house. No respect! You know I’ve got three daughters. This is my neighborhood. You and your friends should show me some respect. You should let me wet my beak a little. I hear you and your friends cleared $600 each. Give me $200 each, for your own protection. And I’ll forget the insult. You young punks have to learn to respect a man like me! Otherwise the cops will come to your house. And your family will be ruined. Of course, if I’m wrong about how much you stole, I’ll take a little less. And by less, I only mean – a hundred bucks less. Now don’t refuse me. Understand, paisan? Understand, paisan?… Tell your friends I don’t want a lot. Just enough to wet my beak. Don’t be afraid to tell them!

See also Hsieh and Mossoff on IP and Sewing Machines:

the fact remains that lawsuits are often no more than an invitation to negotiation. “Oftentimes the way a party signals to another party in one’s industry, ‘I’m serious about this–you need to speak with me,’ is by filing a lawsuit,” says Mossoff.

An “invitation to negotiation”! How polite!

See also “Investment Grade Patents are not for Rent Seeking … They are for business negotiations”.

Make no mistake; I am all in favor of eliminating trolls. I would love to see a working model or working requirement added to patent law, as I suggested in How to Improve Patent, Copyright, and Trademark Law. But it would not get at the heart of the problem. Even if you get rid of trolls, software patents, even if you improve the “quality” of the prior art or PTO examination process—still, we would be left with: companies that have products covered by high-quality, unassailable patents. And guess what they would use these patents for? To squash competition. Worse: the larger companies that emerge and that have large product and patent portfolios would largely leave each other alone and/or sue and settle, resulting in increasingly oligopolized industries. Small companies and independent inventors are able to pay some modest fee to “wet the beak” of a patent troll—the patent troll does not want to kill his victims, only suck a bit of their blood, after all—but they would not have the defensive patent warchests needed to stave off patent lawsuits by competitors. They would have no patent countersuit to hit them back with, unlike, say, Apple vs. Samsung or Motorola or El Goog.

So, sure, get rid of patent trolls. Get rid of software patents. Get rid of “junk” patents. But then you are left with “high quality” patents that large companies can use to erect barriers to entry and quell competition. Hurrah. But give me mafioso and patent trolls, over the state and “practicing entities” any day.