Pirating Your Patents

One of the most high-profile technology controversies of the past year was the dispute between Research in Motion, Ltd., makers of the BlackBerry handheld device, and Virginia-based New Technologies Products. Many observers were puzzled at how Research in Motion could be compelled by an out-of-court settlement to pay $612.5 million to a company with no assets, no products, and one employee. The answer? New Technologies is what some would call a patent troll.

That slightly slimy-sounding name—coined by former Intel assistant general counsel Peter Detkin in 2001—is becoming well known, particularly in the tech industry. Patent trolls are companies that obtain patents for no other purpose than licensing and enforcing those patents. The key difference between trolls and legitimate patent holders, lawyers say, is that trolls are not in the business of selling products.

Disputes that start with patent trolling differ from standard patent battles, which are typically waged between direct competitors, says F. Andrew Ubel, chief intellectual property (IP) counsel for Minneapolis’ Valspar Corporation, a coatings manufacturer.

Patent trolls are companies that obtain patents for no other purpose than licensing and enforcing those patents.

“Now a new type of battle has emerged,” Ubel says. “Usually, a major contributing factor behind these lawsuits is a contingent-fee lawyer. A business model that seems to drive these cases is targeting large numbers of end users rather than the companies that manufacture the product or service at issue. Consequently, a cereal manufacturer or a hotel chain might equally find themselves in a patent battle having to do with, for example, bar-coding technology. They don’t have any real connection to that invention other than being an end user.”

Some think patent trolls are nothing but parasites that take unfair advantage of innovative companies. Others insist that they are mostly people who were smart and quick enough to get a good idea to the United States Patent and Trademark Office—if not the marketplace—first, and deserve to be compensated as such.

In the case of Research in Motion, New Technologies had filed for a series of patents in the early ’90s that were based on the then-novel idea of wireless e-mail. As of May, the Patent Office has given a final rejection (that is, a rejection of all appeal claims) on two of New Technologies’ patents. Despite the decision, New Technologies will still receive Research in Motion’s full payout—which the latter had agreed to pay so that it could continue offering BlackBerry services and introduce new products to the market, rather than wait for the Patent Office to determine patentability and New Technologies to file for appeals.