Intellectual Property

Patent Trolling in Court

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Independent Institute

William J. Watkins Jr., a research fellow at the Independent Institute, is the author of the August monograph Patent Trolls: Predatory Litigation and the Smothering of Innovation. Watkins' book argues that patent lawsuits from "nonpracticing entities"—"patent trolls" who accumulate intellectual property just to sue people using similar ideas—cost the U.S. economy billions and deter the diffusion of ideas. In September, Watkins described three important patent lawsuits:

  1. In NTP Inc. v. Research in Motion Ltd. (2005), patent troll NTP brought an infringement action to shut down the BlackBerry system and settled the case for $612.5 million. The U.S. Patent and Trademark Office ultimately reexamined NTP's patents and found they were invalid.
  2. In eBay Inc. v. MercExchange L.L.C. (2006), a unanimous Supreme Court held that a permanent injunction shouldn't be granted upon a mere finding of patent infringement. Prior to this decision, a prevailing party could easily shut down a competitor's business even if the competitor had not acted in bad faith.
  3. In VirnetX Inc. v. Apple Inc. (2012), a jury in the Eastern District of Texas (notoriously easy ground for patent trolls) ordered Apple to pay $368 million for infringement of a technology used in Apple's FaceTime function, despite strong evidence that the technology at issue was only tangentially related to the device's core functions.