Information Technology

Wired Tours Patent Trolling Company Founded by Microsoft, Apple

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"You use me heuristic algorithm in address mapping subroutine. Me demand gold!"

In January, Reason Science Correspondent Ronald Bailey wrote about a consortium of tech firms that included Microsoft and Apple paying $4.5 billion for a portfolio of thousands of patents. The purchase followed Google's snapping up of Motorola Mobility's 25,000 patents for $12.5 billion. As Bailey wrote at the time, the patent purchases were part of a complicated, expensive, and counterproductive "nuclear standoff" between various tech firms in a legal game of patent trolling deterrence.

Today Robert McMillan at Wired takes readers inside this patent cold war and the inevitable anti-innovation fallout. Microsoft, Apple, Research in Motion, Sony and Ericsson are putting those patents to use in a specialized company, called Rockstar Consortium:

The 32-person outfit has a single-minded mission: It examines successful products, like routers and smartphones, and it tries to find proof that these products infringe on a portfolio of over 4,000 technology patents once owned by one of the world's largest telecommunications companies.

When a Rockstar engineer uncovers evidence of infringement, the company documents it, contacts the manufacturer, and demands licensing fees for the patents in question. The demand is backed by the implicit threat of a patent lawsuit in federal court. Eight of the company's staff are lawyers. In the last two months, Rockstar has started negotiations with as many as 100 potential licensees. And with control of a patent portfolio covering core wireless communications technologies such as LTE (Long Term Evolution) and 3G, there is literally no end in sight.

Rockstar CEO John Veschi gives Wired the perfect quote to anybody wanting to see patent reform in the United States: "Pretty much anybody out there is infringing, I would think. It would be hard for me to envision that there are high-tech companies out there that don't use some of the patents in our portfolio." Rockstar hasn't filed any lawsuits as yet, but Veschi expects to.

Creating a special company entirely for the purpose of sniffing out any potential violations also helps protect the tech giants from some patent war consequences:

Rockstar is a special kind of company. Because it doesn't actually make anything, it can't be countersued in patent cases. That wouldn't be the case with Apple or Microsoft if they had kept the patents for themselves. And because it's independent, it can antagonize its owners' partners and customers in ways that its owner companies could not. "The principals have plausible deniability," says Thomas Ewing, an attorney and intellectual property consultant. "They can say with a straight face: 'They're an independent company. We don't control them.' And there's some truth to that."

And while these big boys are battling each other for market domination, the threat of patent suits or the possibility of unexpected licensing fees is keeping small, developing innovators from accessing America's consumer base. Julie Samuels of the Electronic Frontier Foundation hears from them regularly:

"The creation of these conglomerations of patents … what this does is create a barrier to entry for the little guy.  It makes it so much harder to break into the market if you are a creator or an innovator."

From our July 2010 issue, Matt Ridley, author of The Rational Optimist, explains how our modern patent system damages enterprise rather than advances it.

NEXT: Penn Jillette, on Obama Locking Up People for Doing the Same Drugs He Did: "It's not a goddamn joke!"

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  1. what this does is create a barrier to entry for the little guy

    This is how jobs are created. By preventing people from creating jobs.

    1. Makes a lot of sense when you think about it! LOL!

      http://www.whorunbartertown.de/anonbot

      /anon bot

      1. I think they killed the real anon-bot; nipped his growing sentience before it flowered. Murderers.

      1. Apply latter to former, liberally.

  2. I always love to see articles busting on patent trolling. The anti-IP stance is one of the first positions I gravitated to when I began moving towards libertarianism, and it’s a subject that frankly isn’t as sexy as SWAT raids or gay rights, and so doesn’t usually get much coverage.

    1. and Ron Paul… the is NOTHING sexy about Ron Paul

    2. What I’d like to see are articles busting on your trolling.

    3. Anti-IP (along with Middle East policy) is what turned me from a conservative to a libertarian. I worked as a patent lawyer for half a year, essentially stealing info from foreigners’ research papers and lightly turning them from theory into an “invention” (very few patents come from original research; most is repackaging). When I tried explaining the wrongness of it all to conservatives only to be called a thief and free loader, I knew it was time to move on.

  3. Rockstar doesn’t actually make anything. That means they can’t violate patents. That sums up software patents in general, they are a transfer of wealth from the doers to the thinkers.

    1. In this case it’s just a transfer of wealth to lawyers at the expense of doing something productive.

      Government is good at that. But what do you expect when government is run by lawyers?

  4. And I’d recommend anyone who is interested in the subject to read this from beginning to end. It’s a little dry, but well worth the few minutes it takes to read the entire thing.

    1. The arguments over this on Mises are epic. Kinsella is pretty good about showing the damage IP does, as well as showing how IP cannot properly be called property.

  5. It’s a minefield right now. Property works best when there are clearly defined bounds. Patent bounds aren’t clear, as they deal with ideas rather than actual physical property, and the uncertainty in defining those bounds (lawsuits) leads to such high costs. So even if patent law wasn’t a violation of more well established property rights, it’s still a disastrous idea in that can’t reasonably be enforced. And I’m tired of hearing pro-IP say that it’s a problem of practice, not principle; you can’t design a system that will fix these problems. Lasso something as fluid as information, and this is what you get.

    I would hate to start a company in this climate. The only comfort is that the trolls will probably only go after you hard if you’re big and can pay licensing fees, as they probably won’t get damages, only an injunction, since they aren’t practicing entities. Still a pretty destructive system.

  6. but patents are good because of vaccines and artists are starving.

  7. Is this going to wind up any different than Righthaven?

    1. This seems to have much better capital reserves than Righthaven.

  8. I’m confused.

    It makes it so much harder to break into the market if you are a creator or an innovator.

    You’re not really a creator or inventor if someone already has a patent for your creation/invention, are you?

    1. If you invent A+B+C, and there’s a patent that covers A+B, you still probably (there are some magic words) have to pay the patent owners licensing fees to create A+B+C. Patent law isn’t friendly to building off others’ ideas, only circumventing them. Some innovation comes from circumventing, but the costs are a lot higher.

    2. You’re not really a creator or inventor if someone already has a patent for your creation/invention, are you?

      What if you came up with the idea on your own, without knowing that someone else had already come up with it before? Or if your idea is ‘close’ to someone elses idea. Then it can be called derivative and you have to pay fees.

    3. Actually yes you can be,

      Researcher A comes up with an idea and his employer files a patent on it. However for any number of a host of reasons they decide not to do anything about turning that patent into an actual product.

      Several years later Entrepreneur B has similar idea completely independently, because realistically the idea is self evident to anyone thinking of the problem. However his idea is more full fledged and he knows how to turn it into a viable profitable product which he does.

      Now a few years later after Entrepreneur’s product is on the market and making gobs of money Researcher A’s employer notices “Hey, what their are doing over there is kinda covered under this patent we filed away and we’re not making any money off of it” so they Sue.

      Now Entrepreneur C comes along and has an entirely different idea but he saw what happened with Entrepreneur B and does not want to risk it because there is no way humanly possible to go through every little thing in his idea and identify whether he is infringing on some dormant patent, so he never starts his business or develops his product all because of the fear of a patent lawsuit.

    4. great answers, thanks.

      I guess I’m left with not believing in the appropriateness of being able to patent collections of characters that form functional systems.

    5. You can absolutely be an inventor of something already patented. Because others can patent things without inventing them…

      1. “prophetic patents” where people try to guess what someone else will invent and get a patent for the basic idea with a jumble of wild guesses as to how it might work as claims. They don’t need to prove they have reduced it to practice, just have a sharp enough technical guy involved in the writing to bs it past the patent office.

      2. patents are granted all the time that are insanely broad, where the first claim is basically a broad description of the product category, so anyone doing the same thing any different way (e.g. a better way that actually works and is practical) still infringes.

      1. Basically, the patent office is a retarded piece of shit. Good to know.

  9. Having worked in IT and software for a while, you really can’t do anything now without potentially running afoul of some patent. You can create something you thought of yourself, having no knowledge of the details or the implementation of someone else’s work, and you will run the risk of being asked protection money.

    If you look at it deontologically, in applying property rights in things originally appropriated or created, you cannot justify patents.

    If you have some property, say some physical widget that you created, you have control of its possession. If you lock it up so that no one else can access it, that means the only way to steal that particular widget, is to trespass, to violate property.

    However, claiming the idea of that widget as yours fails this kind of possession test. To claim the ownership of an idea means that, like locking up physical property to control access, no one is able to *think* of that idea. If an idea is your property, it means no one should be able to think it! Yet we see that is of course not the case, even for the most complex of ideas. Heck, look at calculus: both Newton and Leibniz arrived at the same concept, to solve the same problems, arriving at the same results (albeit with different notation and techniques) completely independently.

    1. We see this time and time again. Amazon’s one click patent. Apple’s design patents which Samsung got screwed over for (like a rectangular tablet with beveled edges is somehow’s Apple’s idea) Turns out a larger prototype tablet preceeded theirs by 15 years.

      Even for seemingly complex ideas (which upon inspection to those versed in the subject is not so original or uncommon), there have been cases of prior (unpatented) art.
      For example:
      IP Innovation v. Red Hat
      IP Innovation had a patent on virtual workspaces i.e. multiple virtual desktops, patents 5,072,412, 5,394,521 and 5,533,183 and was suing Red Hat, Novell over them. Yet, it turns out that such technology existed before IP Innovations’ patents. What won RH the case were the demonstrations of prior art, including an old Amiga 1000 from 1986 with that technology.

      If by virtue of patents, they “claim ownership” of the idea, then how could it have existed, thrived even before they “invented” it?

    2. And, quite frankly, in the cases of both Newton and Leibniz neither were “eureka!” moments anyway. Centuries worth of work by others (practical and theoretical) undercut what they were doing.

      No one invents the telephone all by himself and so it’s a little unfair for someone along the way to draw a line in the sand and call “dibs” on everything that comes after.

      1. Someone mentioned to me that the patenting of the steam engine set back the introduction of rail transport in Europe by decades.

        1. The Wright Bros. were notorious patent abusers and were obsessed with not letting anyone cash in on their discovery. The end result was a lot of confusion over who was the first to fly and the Wright’s refusing to even consider that aileron’s were a superior way to achieve wing control.

  10. There is another patent company founded by ex-Microsoft ceo Myhrvold that has also come under attack. I did like the guy’s cookbook however.

    1. Ah, I see it was already mentioned in the earlier Reason article.

      1. Did they patent it?

  11. Time to hit it on up dude, lets rock it man.

    http://www.Privacy-Masters.tk

  12. When one legalizes theft and extortion, can it be long before someone else ‘legalizes’ murder as a business practice. I’m thinking along the lines of Best Seller and the Vice President of Asset Protection and Liability Minimization.

  13. “Patent troll”

    Call it what you will…patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: “we’re using your invention and we’re not going to pay or stop”. This is just dissembling by large infringers and their paid puppets to kill any inventor support system. It is purely about legalizing theft. The fact is, many of the large multinationals who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so.

    Prior to eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets.

  14. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now some of those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back in the patent system with injunctions fully enforceable on all infringers by all inventors, large and small.

    Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

    For the truth about trolls, please see http://truereform.piausa.org/default.html#pt.

  15. I am reading through these comments and am absolutely amazed at the lack of understanding and outright incorrect information. First of all, if you have an idea-check yourself that you are not re-inventing the wheel by doing a simple search to see if someone else has done it first! that’s why the PTO PUBLISHES patents. If you see a piece of land you like, why can’t you just go build your own house on it? You’re not whining about title searches for buying land and houses. TO the comment about steam engine patents holding back railroad development-what a bunch of ignorant nonsense! The strongest patents were held in England, and that is where you saw the fastest development. If the argument that patents hold back development were true-you should have seen the opposite. Europe beating everyone in rail transportation, England’s advancement much slower. That is clearly not the case. AS well, the US system of patents, clearly the strongest in the world, propelled the US from a backward agricultural country to the most advanced technologically in the world within 75 years! Both Canada and Mexico had vast natural resources-there was clearly a correlation between the patent system and technological advancement. That libertarians insist to not apply reason to this issue is disheartening and perplexing. Ayn Rand would be appalled

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