How Patent Trolls Kill Innovation

"My statement to someone that is the victim of a patent troll lawsuit is that you are completely screwed," says Austin Meyer, who is himself the target of a so-called "patent troll" lawsuit. 

Meyer is a software developer and aviation enthusiast. His two passions intersected in the '90s when he created a flight simulator called X-Plane, which quickly grew in popularity, outlasting even the once-popular Microsoft Flight Simulator. As many software developers do, Meyer made his application available on mobile devices like the iPhone and Android. And this is where he first ran into trouble.

A company called Uniloc has sued Meyer for patent infringement over a patent called, "System and Method for Preventing Unauthorized Access to Electronic Data." When a computer runs a paid application, one way that developers can assure that a customer has actually purchased the application is by coding the application to match a license code with an encrypted database. This is a method that most paid applications on the Android market use. It's a method that Meyer argues has been in use since at least the late '80s. This is the idea that Uniloc claims to own.

"A patent troll is a company, a person... who owns patents, but doesn't make anything or sell anything," says Julie Samuels, an attorney and the Mark Cuban Chair to Eliminate Stupid Patents at the Electronic Frontier Foundation.

Samuels says that patent trolls are a huge tax on innovation and add nothing valuable to the marketplace. A study out of Boston University estimates the direct economic damage that patent trolls cause to be around $29 billion a year, and this doesn't account for hush-hush, off-the-record settlements. But the bigger problem, says Samuels, is the patent system itself.

"You can't separate the problem with the patent troll from the problem with software patents," says Samuels. "There are hundreds of thousands of software patents floating around that are really broad, that are really vague ... and a lot of them are bought up by patent trolls."

A Yale study found that the U.S. patent office is approving new software patents at an approximate rate of 40,000 a year. That's more than 100 new software patents every day. Tracking every software patent to make sure one is not in violation would be an utter impossibility without a full-time team of lawyers on staff.

Uniloc, which purchased the patent in question at a bankruptcy proceeding, declined an interview request for this piece. But on their website, they brag about a victory over software giant Microsoft resulting in $388 million in damages (though this amount was later lowered in an appeals court). Despite the enormous risk, and the enormous cost just to defend against a patent suit, Meyer is resolved to do so.

"I will not simply give somebody money that endorses the idea that they should sue people for doing something amazing," says Meyer. "It must be stopped at some point."

About 6 minutes.

Produced by Zach Weissmueller. Shot by Amanda Winkler, Tracy Oppenheimer, and Weissmueller. Music by Case Newsom, Broke for Free, and Pionir.

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  • db||

    I feel bad for Austin. It's hard not to like a geeky developer who created something of value and has a million dolar turboprop plane and at least one Ferrari to show for it.

    I love X-Plane and hope he is able to continue to develop it. These trolls sbould really fuck off and make something useful of their own. That said, if the shoe were on the other foot; i.e. Austin were suing someone for copying and selling the X-Plane code for their own profit, there seem to be those around here would say that's fair since there should be no such thing as IP.

  • Janine W. Chambliss||

    my co-worker's step-aunt makes $70/hr on the internet. She has been out of work for 6 months but last month her income was $20473 just working on the internet for a few hours. Here's the site to read more... http://www.ace60.com

  • Josua||

    The trolls are not intellectually capable of honest innovation. It's either this, personal injury law, or running for political office.

  • ||

    How Patent Trolls Kill Innovation

    Fixed.

    Pharmaceutical and complex device patents may actually do more good than harm. Software patents, on the other hand, are a clear and unmitigated disaster to innovation, entrepreneurship, and the economy as a whole.

  • Pro Libertate||

    Patent doesn't have to be the train-wreck it is. Perhaps if the PTO actually followed the rules on nonobviousness and prior art, patents wouldn't be such a mess.

  • ||

    Perhaps. But for now it's only getting worse.

    For instance, the change to first-to-file means that a start up with no revenue, funding, or salaries has to decide whether to spend money patenting something that may never ever sell. No start up will patent their new IP when faced with that massive opportunity cost. It can only be harmed by the patent system as some bigger company with a legal department -- or a patent troll itself -- files a patent when they happen to run across the business plan.

  • db||

    I met with several patent attoneys recently, and they say it (patent trolling) is going to get bad in the next 10 years absent real patent law reform. They were quite open about the fact that it represents big opportunities for patent attorneys to make money off of defending against trolls, but they weren't exactly happy about the prospects.

  • Pro Libertate||

    It's not going to get bad. It is bad.

  • buybuydandavis||

    Some patent attorneys make companies that sue people, and other patent attorneys defend those sued.

    It's Win Win!

  • DJK||

    Only if they do so within a year of the startup's invention. Prior art and all...

  • Bill||

    Nonobviousness is hard to define. The first time someone does something, no matter how simple, to improve a product - was it obvious or not? No one else had done it before.

    One of the original BGH (bovine growth hormone) patents (not sure if it held up years later or not), gave a patent to a company that added a single methionine amino acid to the beginning of a chain of several hundred amino acids that made up the protein. But, the reason the methionine was there was really an accident. In nature, ALL proteins start with methionine but this is sometimes removed by the cell. Since they made this in bacteria and the bacteria don't have the enzyme to remove the methionine, they had a "new" protein. I can't even remember if the methionine version was more active or if this just allowed them to patent the easiest one to obtain - directly from bacteria, which is the most obvious and cheapest way to do this, particularly back in the early 1980's. I have mixed feelings on patents and whether we should have them or not.

  • Raston Bot||

    Pharmaceutical and complex device patents may actually do more good than harm

    Do pharm patents cover the ingredients as well as the process?

  • DJK||

    What do you mean? If I use chemical precursors to synthesize a drug molecule, are those precursors subject to patent protection? Of course not! The only thing patentable is the useful drug molecule and the process. And even here there is some exception for generic manufacturers.

  • kinnath||

    System and method for preventing unauthorized access to electronic data

    1. A system for preventing unauthorized access to electronic data on an electronic device, the system comprising:
    a portable licensing medium configured to communicate with the electronic device and to store license data,
    the license data configured to be used by the electronic device to determine whether to allow access to the electronic data;
    and a registration authority configured to communicate with the electronic device,
    the registration authority having verification data for verifying the license data stored on the licensing medium,
    wherein the registration authority provides updated license data for the licensing medium.

    How the fuck did this approved with all the prior art in the field when it was filed?

  • DJK||

    Because a series of terrible decisions by the CAFC have made it so that trash is patentable.

  • DJK||

    Btw, CAFC is Court of Appeals for the Federal Circuit, which decides all matters of patent law and oversees the Patent and Trademark Office (subject to SCOTUS review).

  • Thane of Whiterun||

    DJK, are you an IP attorney or are you just interested in the subject?

  • Andrew S.||

    Note that Uniloc is terrible even for a patent troll. They've sued everyone. Including Mojang, which brought the fury of the internets upon them, which led to the company's founder whining across the internet and claiming that they aren't patent trolls.

    However, they once sued Microsoft, so they can't be all bad, right?

  • Andrew S.||

    erm, since I just realized everyone might know who Mojang is, they're the team behind the horribly addictive Minecraft.

  • Otisjay||

    WHY AM I STILL PLAYING!

  • db||

    JUST ONE MORE BLOCK!

  • DJK||

    Incidentally, what is this doing on Reason? Every point raised is some utilitarian complaint. Patent trolls "harm innovation", "hamper the economy", etc. Who cares? Do people have property rights in patents or not? If they do, then the secondary consequences don't matter. If they don't, it's moot.

  • Rasilio||

    "Do people have property rights in patents or not"

    No

    That said even if one answers yes it remains to be determined what types of "innovation" are patentable, how long that patent protection should last, and what remedies should exist for IP owners to protect their patents and since the explicitly stated purpose for the existance of patents is entirely utilitarian (that is there is general agreement that the only reason Patents exist is they offer a utilitarian value, without that value they never would have been created) pointing out that the current answers to the above questions (as well as others I didn't detail) actually directly harms those utilitarian goals is entirely appropriate.

    Meaning, even if you agree that patents should exist and IP is a valid property right that does not mean you cannot criticize the current implementation of said laws as being counterproductive.

  • Joao||

    It could be that people do not have property rights in the case of patents. However, people have the EQUIVALENCY to property rights in the case of patents.

    No, it does not "remain to be seen" who what when and why; they are all covered under patent law and precedent.

    Yes, patents exist as they offer utilitarian value. They are an artificial fixture that does reap huge dividends for the economy.

  • Rasilio||

    Did you miss the word Should in my post? Or do you just not know what it means.

    Just in case let me summarize and I'll try to use small words for you.

    See the entire intent of my post was that simply stating that you believe in Intellectual Property rights because it is not a binary proposition, one must also define what you mean by that belief. At no point was the issue of what current law says brought up, it was entirely directed at the reader indicating that they had to define what they personally believed the correct form of the law should be, then that could be compared to the current state of the law and it could be determined whether in their opinion changes were necessary.

  • DJK||

    Why the need for ad hominem attacks?

  • DJK||

    I ask that mainly because I've seen you post on here quite a bit and noted that you are usually pretty level-headed, rarely say things like "I'll use small words". Bad day at work?

  • Josua||

    Because software patents are scams perpetuated with the aid of government. Because of the scourge of a government-administered software patent system, the freedom of hard-working, innovative software developers to create and market useful products is restricted for the benefit of narrow interests.

  • Emmerson Biggins||

    If people justify them on utilitarian grounds, then attacking them on utilitarian grounds is more likely to change minds.

  • DJK||

    Fair enough. I tend to look past the utilitarian justification, but I guess it is there.

    To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

    I tend to focus on that last part, wholly overlooking the first. Thanks for reminding me.

  • Joao||

    1 Meyer should have hired a patent lawyer before producing his product.

    2 If the "Trolls" own it, they own it. No matter if they bought it or created it. They are apparently selling it at fair market value if folks are willing to pay for it.

    I agree it is not the most honorable way to make a living.

    IDK enough about software patents to comment on the latter part of this article.

  • Josua||

    Most of these patents cover things that are essentially obvious upon the shallowest analysis. These are not things dreamed up by super-geniuses of computer science that leave the tech world agape with awe at the sight of such previously unimaginable achievements.

    Rather, it is as if the toaster was recently invented and so some guy thinks, "Ya know, people will probably put butter on their toast - I'm gonna file for a patent on that!" And then he goes around suing everyone who butters toast. Essentially, that's about the gist of it.

    Your admonition that everyone who wants to create software should first hire a battery of patent lawyers to find out how many trolls he'll have to deal with is exactly what stifles innovation (title of the article) and drives up the cost of software. In other words, it fails to accomplish the constitutional purpose of promoting the progress of science and useful arts. It does quite the opposite.

  • DJK||

    Your critique seems to be most acutely directed against the software industry. I agree - software patents are, for the most part, bullshit. However, you'll always find people advocate strongly for them in, for instance, the pharmaceutical industry. The average drug costs about $4 billion to bring to market. Huge investment. It's an easy task of analytical chemistry to figure out the composition of the drug and pretty easy for any decent organic chemist to synthesize it, making reproduction very easy. Thus, the argument goes that the drug development wouldn't happen without a guarantee of patent protection for that $4 billion investment.

  • DJK||

    Of course, it's likely that those development costs wouldn't be so astronomical were it not for many levels of FDA-required testing. Would there be a need for pharmaceutical patents in a libertopia? No idea.

  • DJK||

    Also, obviousness is a very difficult thing to figure out post facto. Patent cases often get litigated many years after the invention and the ones that get litigated tend to be ones that are worth a lot of money. So everyone knows about the invention and how it works. They all smack their heads and say "I could have thought of that!". Does that make it obvious? Isn't that true of any technology?

  • DJK||

    For a good discussion of this, see:

    http://jolt.law.harvard.edu/ar.....ech227.pdf

  • buybuydandavis||

    "I agree it is not the most honorable way to make a living."

    If you agree with patents as property, I don't know why you'd say that. Patent "Trolls" buy and sell property.

    Is it so much better when nontrolls shake down companies for their patent claims?

  • prs130||

    The problem is how they are awarded. When government grants X a property right in land that X owns, improves, or possesses, that's good. If government grants X a property right in something that Y is using, that's bad. Very bad, because no Y has to stop improving their land (or product) and reallocate his resources toward settling the property dispute. PTO awards a lot of overlapping property rights, ie, for 'discoveries' that are no such thing.

  • coldguy||

    2 If the "Trolls" own it, they own it. No matter if they bought it or created it. They are apparently selling it at fair market value if folks are willing to pay for it.

    The troll's "ownership" of the patent was granted to them by government. If USPTO had done their job, they would have realized that the idea had existed in the public domain as prior art, or that the patent's claim was so vague that it would itself infringe on other patents or public domain works, and that the government then had no title of ownership to grant to the troll. That's what this is about.

  • Josua||

    Since we live in the era of cronyism, I don't see this being solved. Ever. I'd like to be surprised, but I won't be. Software patents are a great example of the kind of vile slime pumped out in mighty, putrid fountains by collaboration of lawyers, established businesses afraid of competition, and politicians.

  • Westmiller||

    The problem isn't patents or trolls, it is that government decides whether it should endorse a particular property claim. If it treated patents the same as copyright, they would simply be an official archivist of claims, with no implied judicial merit.

    Nearly all patents are proper claims, but there are many that have been "certified" as legitimate by the CFAC that don't deserve any unique property status. Just kick the "judges" out of the executive suites of the Patent and Trademark Office.

    As for this particular incident, Meyer knew full well that he was "stealing" security software that he didn't create. No matter how marvelous his programming, that is the only issue. Hang him.

  • MSimon||

    You can't steal unpatented prior art.

  • jecobjesan||

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  • Baal||

    Has anyone patented spambots ?

  • Warrior88||

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  • RobB||

    I dare to state that patent trolls are a blessing for private inventors (product developers) like me.
    I developed a new technology, filed a patent application and tried to get the big companies that could benefit from my technology interested.
    With those companies it is already a gigantic exercise to find out how you can get your proposal in front of the right person. If you succeed, you're likely not to hear anything from them for a few months.
    I got frustrated having to almost beg to find out where to send my proposal to and waiting for them to have the decency to reply.
    So, I contacted a smaller patent troll of which I read that they were also focusing on my field of technology.
    I got a first reply to an email to them within a few hours indicating where to send the information. After sending them the information they got back to me within three days and made me an offer that I could not refuse. In the meantime, they have already closed two licensing deals for my technology and basically I can stop working.
    If I, as a small inventor (however with a very good technology), had stayed on the road of trying to convince a fortune 500 company to license my tech I would never have succeeded.
    So, the attitude of such companies has driven me into the arms of a patent troll and I am very glad that this happened.
    The big boys are obscuring their contact info to make it almost impossible for us to find out how to contact them.

  • Faithful34||

    my neighbor's step-mother makes $64 hourly on the computer. She has been without work for seven months but last month her pay check was $17761 just working on the computer for a few hours. Read more on this site http://WWW.FLY38.COM

  • Stephan Kinsella||

    The problem is not patent trolls. It is the patent system itself. The problem is not low quality patents, junk patents, software patents, gene patents, or trolls. The problem is high-quality patents used by "practicing entities" like Apple to use the power of the state to quash competition.

    It is true 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. But as bad as trolls are, they are not as bad as “practicing entities”—companies whose patents do cover their products. Patent trolls don’t want to stop competition; they just want to “take a taste,” as mafioso might say, or “wet their beak” a little. Non-trolls want to literally exclude competition.

    I explain this further at Patent trolls as mafioso (and that’s a compliment)

    Libertarians ought to oppose patent, copyright, and trademark law in toto.

  • harrywelton||

    The problem lies in patenting any software, i mean only those software should be patented that are new and innovative. I feel sorry for Austin, he made something creative for users but it could not be reached till them. business method patents

  • OBD2 Scanner||

    It is true 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. But as bad as trolls are, they are not as bad as “practicing entities”—companies whose patents do cover their products.
    http://5054a.wordpress.com/

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