It is well known that litigation costs the Technology Sector about
four times what the technology sector makes on licensing patents.
In short, a patent system that is disfunctional for the technology sector
becomes a tax on entrepreneurs whose only beneficiaries are the litigant
patent attorneys and the patent trolls.
This is particularly acute in the arena of Software and Business
Methods Patents, both of which were never authorized by Congress,
but whose proliferation has been possible due to a set of rulings by
the Court of Appeals of the Federal Circuit (CAFC).
The National Academy of Sciences has called for a restructuring
of the Patent System, and in particular, made recommendations
on how to repair the CAFC.
Mr. Curtis clarifies:
“…the problem with these patents
is that they are obscure
and the Patent System is Disfunctional,
as a result most of these patents end up in settlements
and because the settlements are under a non-disclosure agreement
no one knows what the terms were
and as a result the patent troll can claim that they won the case”.
Patent Trolls are non-practicing entities. That is, they don’t build anything
and they don’t commercialize any products. Instead, they acquire patents from
patent holders, and turn around and file lawsuits against companies that will
prefer to settle for hefty payments, rather than go through the long and
expensive process of going to court.
“…one of the major problems with patent law
is that when you are sued for patent infringement
the burden of proof that you don’t infringe on the patent
is on the defendant… and this can take quite a while…”
In his talk, Drew Curtis, describes that the typical defense of a patent
lawsuit will cost $2 million, and it will take 18 months… when you win.
What is fascinating about Drew Curtis’ talk is that as a good entrepreneur,
he took the time to understand the Business Model of the Patent Troll,
and knowing its weaknesses, he maneuvered them into a losing position.
Here is the key of his strategy
“Make clear from the beginning you do not have any money,
or that you would rather spend money with your attorney
fighting the patent troll,
rather than giving them the money…
The reason this work is because
Patent Trolls are paid a percentage of whatever
they are able to recover in the settlements.”
“If it becomes clear to them that they can not recover any money,
they become less interested in pursuing the case”
Finally, and here is the legal Jujutsu:
“Make sure to tell them that you will make this process as
annoying, and as painful, and as difficult as possible for them.
This is a tactic that patent trolls are supposed to use on people
to get their way. It turns out that because they are paid on
contingency, it works really, really well in reverse.”
Mr. Curtis says it comes down to one thing:
“Don’t negotiate with terrorists !”
To make emphasis on the economic cost,
Curtis points out:
“Patent trolls have made more damage to the US economy,
than any war or terrorist organization in history, every year”.
This is an estimated $500 Billion.
To put this cost in perspective, this is
- Twice as much as the revenue of the entire software for sale industry.
- More than three times the entire US Federal Research Budget.
- More than 70% of the US Defense Budget.
Ending on a humorous note, Curtis points out that he had
a clever idea and that he would like to be awarded a patent
on his invention:
“The business model of filing patent lawsuits on mobile computing”
Mr. Curtis promises that if the U.S. Patent Office
awards him this patent, he will
“Sue the Patent Trolls out of existence !”
One can only wish to reply as Captain Picard:
“Make it So!”