Patent law is a very controversial topic in today's legal community.
There are those that say the system works and only need minor revisions.
Then there are those who point the increasing number of broad
and vague patents and the rise of patent trolls.
A "patent troll" is a term for a company
which makes a living off amassing massive amounts of IP and then suing
companies who have products that might be covered under the patents. Much
of their IP is bought from failing companies, universities, or other bargain
Much criticism has been leveled against these organizations, such
as NTP Inc., as they generally do not try to market or produce any useful
product and only show a perfunctory interest in courting corporate
partnerships. Their goal is merely to develop large vague patents and
then reap the rewards from lucrative lawsuits. Some argue that this is a
brilliantly clever capitalistic scheme, while others less favorably view the
companies as the business world equivalent of a leech.
In some cases, the settlements can nearly put legitimate companies with viable
products out of business. NTP Inc., a small Virginia firm labeled as a
"patent-monger", attacked the wildly successful Blackberry after it
successfully contended that they violated a series of vague wireless email
delivery patents, which it held. Though NTP had never produced a single
piece of hardware, it ended up settling for $612.5M USD, leaving Research In
Motion Ltd., makers of the Blackberry, to limp away and lick its wounds.
Now a coalition of the tech industry's largest players, tired of expensive
litigation and settlements has assembled to fight the so-called trolls.
Leading the way are Verizon Communications Inc., Google Inc.,
Cisco Systems Inc., Telefon AB L.M. Ericsson and Hewlett-Packard Co. Together with many other
companies, they form the Allied Security Trust (AST).
The AST team aims to buy patents that would be used against its members.
In essence, it aims to out-troll the patent trolls. Each company joining
it will contribute $250,000 and will put $5M USD in escrow to aid in
The group is not the only super-powered group looking to take down the patent
mongers. Also operating is the Coalition for Patent Fairness, which is
hard at work lobbying
for patent reform legislation in Washington D.C. According to the
group, the number of patent lawsuits increased from 921 in 1990 to 2,500 last
year. It points to NTP, and also blames companies like Qualcomm Inc. and Rambus
Inc., who produce legitimate products, but use patents as a means
of beating down would-be competitors.
Currently much of the reform
legislation is on ice.
The AST is not an entirely new idea. It is somewhat similar to
Intellectual Ventures LLC, a patent holder run by former Microsoft Corp.
executive Nathan Myhrvold. Various companies give Mr. Myhrvold money to
buy patents, and he in turn provides them with licenses to his portfolio.
Some, however, are growing fearful that IV will at some point turn on companies
and use its massive patent library to litigate against the major tech
players. Mr. Myhrvold has said that he currently has no plans to pursue
such an option, but, he darkly adds, he has not ruled it out for the future.
To prevent such developments in the new group, companies will sell patents they
acquire after being granted a nonexclusive license to the patent's underlying
technology. Brian Hinman, a former vice president of intellectual
property and licensing at IBM explains how AST is different stating, "It
will never be an enforcement vehicle. It isn't the intent of the
companies to make money on the transactions."
Currently, the identities of the team, aside from the major players are secret,
and Mr. Hinman's lips are sealed on the topic. Mr. Hinman says there
should be no antitrust problems for the group as it’s nonprofit and its members
don't own patents, merely grant themselves licenses.
Ron Epstein, CEO of patent brokerage IPotential LLC labeled by many as a patent
troll, offers perspective from the other side of the table. He states
patent hoarding companies are beneficial to small inventors, who might
otherwise be exploited. Mr. Epstein, who formerly worked as director of
licensing at Intel Corp., says that any company should be free to aggressively
litigate regardless if it produces or intends to produce the patent item.
Mr. Epstein sees attempts like the AST as an unfortunate effort to foil what he
sees as a useful business vehicle. He hopes that patent laws in
Washington continue to allow generously for litigation and patent collection.