By Noella Abraham
Abstract:
Patent trolls are Non-Practicing Entities (NPEs), who don’t produce anything of value, neither do they use or sell new products or technology. They merely acquire patents to obtain licensing rights, which they enforce against other companies by charging unreasonable licensing fees, the alternative being expensive litigation on grounds of infringement.
The menace of patent trolling is rampant worldwide, especially in the United States, however, India seems to be less susceptible to this problem. This article analyses the factors that make patent trolling a viable business model in the US, and elaborates on the preventative measures that other jurisdictions can adopt from the Indian system.
Introduction
According to Norwegian folklore, a troll is a hideous, greedy, and fearsome creature, who often lives in dark caves or under bridges. Travellers who wished to cross the bridge would have to appease the troll by coughing up a certain sum, as toll tax.
Similarly, in the world of Intellectual Property, there exists a certain breed of ‘Patent Trolls’.
Much like the bridge troll doesn’t really use the bridge himself, and only occupies it to prevent other people from trespassing, patent trolls acquire patents from third parties without intending to practice them, with the objective of suing other companies for infringement of the purchased patent.
Patent trolls don’t produce anything of value, neither do they use or sell new products or technology. They merely buy patents with the sole purpose of obtaining licensing rights, which they enforce against other companies by charging unreasonable licensing fees, the alternative being expensive litigation on grounds of infringement.
Patent trolls are a form of Non-Practicing Entities (NPEs). Many NPEs like universities, research organizations, and individual innovators can often be misunderstood as trolls, however, they not only intend to obtain patents but also to create a technology of value. Many small innovators do not have sufficient resources to practice the patent, even if they wish to.
In the United States, the Federal Trade Commission labels patent trolls as Patent Assertion Entities (PAEs), to distinguish them from other NPEs with different motives.
Patent trolling is dangerous, as it can be a cause of uncertainty for businesses, scare investors, add redundant costs, and even force businesses to shut down. It greatly undermines innovations and stalls the progress of science.
Some may argue that patent trolls are correct in exercising their rights against production companies, as they complied with the mandatory disclosure of the invention in order to obtain the patent, thus promoting future innovations and advancements. However, this isn’t the case, as the inventions disclosed by the trolls in their patents often lack innovation, are of questionable value and validity, and are rather vague.
The modus operandi of trolls is such that they remain dormant for a certain period, until another company develops the same technology, allowing them to sue for patent infringement. For this strategy to work, the patents held by them would need to be inherently weak, so that other companies could independently invent the same technology.
Why are patent trolls more rampant in the United States?
The menace of patent trolls has attracted attention from law enforcement agencies globally and is especially common in the IT sector of the United States.
In the US, nearly 80% of defendants in patent infringement cases are small or medium-sized businesses, making them an easy target for trolls.
The following are certain structural issues in the legal system of the US, which, as a result, incentivize patent troll-like activities:
The US is a hub for innovations of all kinds, which causes the patent office to be overwhelmed with a large number of patent applications. This often leads to patent examiners granting the patent when patentability is doubtful, allowing the courts to deal with any lawsuits that may arise. This provides the trolls with an opportunity to file broad, ambiguous patents, giving them room to intimidate other ‘infringing’ companies with legal consequences.
The fact that each party has to pay their own legal costs in litigation may encourage patent trolls in the United States. In other jurisdictions like the EU, where patent trolls are less prevalent, the losing party must contribute to the legal fees of the winning party.
The US grants punitive damages to the patentee in case of willful infringement, often amounting to thrice that of the initial damages claim. The trolls may also rely on permanent injunctions to prevent other parties from using the patented technology following an infringement, which not only proves costly to the infringing parties but to society as a whole.
The absence of provisions for compulsory licensing is one of the final factors that may promote the existence of trolls in the US. Compulsory licensing has been widely opposed in the United States because it not only reduces incidences of patent trolling but could also result in other patent holders receiving less than market value for their patented inventions.
Hence, these factors make the US legal system more susceptible to patent trolls. Many of these factors are in the process of being amended, due to recent interventions by the Supreme Court.
The introduction of compulsory licensing, regulations regarding the working of patents, strengthening the statutory requirements for injunctions, and increasing the quality of patent examinations at the patent office to reduce unnecessary patent authorizations would go a long way in safeguarding the US patent system against patent trolls.
India’s defense against patent trolls
India has been quite successful at curbing the menace of patent trolls since the promulgation of the Patent (Amendment) Act, 2005.
Prior to 2005, patent trolling was practiced across the Information Technology and Communications sector in India, as was seen in the case of Spice Mobiles & Samsung India v Somasundaram Ram Kumar. Here, the patent holder, Mr. Ram Kumar, was evidently a patent troll, as the patents held by him were not being worked and were inherently weak. Thus, the IPAB, recognizing the patentee’s exploitation of the legal system, revoked the patents in dispute.
After the Patent (Amendment) Act was implemented in 2005, there was a steep decline in cases of patent trolling, as patent protection was no longer provided to software, which was a hotspot for trolling activity in the IT sector.
It is important to note that India’s patent law does not explicitly prohibit the existence of trolls, but certainly threatens their existence.
One of the factors that discourage patent trolling in India is the provision for post-grant opposition, which ensures that even if a patent has been granted and sold to a patent troll, the patent can be challenged subsequently if any doubts regarding its non-working or validity rise.
The presence of a specialized administrative body like the Intellectual Property Appellate Board (IPAB), allows for quick resolution of disputes and lower litigation costs, empowering smaller companies with fewer funds to defend their patents when dealing with trolls.
The availability of compulsory licensing provisions is instrumental in disarming patent trolls in India. In case of non-working of the patent by the patent holder beyond a period of three years from granting of the patent, compulsory licensing can be invoked. However, it is up to the applicant to prove both the non-working of the patent and his capability to use the product for public benefit. Thus, compulsory licensing could reduce the time period available for trolls to come up with their claims, and also prevent other investor companies from buying insignificant patents which aren’t workable.
Moreover, India’s patent law requires the domestic working of the patent, indicating India’s intolerance for patent trolling, as the main methodology of patent trolls is to obtain patents without working them domestically. This intolerance is further made evident from Section 83, which states that Indian patents “are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article.” Hence, the non-working of the patent at the cost of public benefit can be grounds for compulsory licensing.
Conclusion
Thus, the Indian system seems largely resistant to the problem of patent trolling that has been plaguing many other countries around the world. While other jurisdictions like the US can certainly learn from India and adopt some of these measures, India isn’t completely resistant to this menace either, and there is definitely scope for improvement.
Re-evaluating the period for compulsory licensing is essential, as a period of three years is enough to make many technologies obsolete, and provides patent trolls with an unnecessarily long timeframe to exploit their targets.
Also, to avoid the authorization of ambiguous, insignificant patents, the quality of patent examinations must be improved, and clarity should be attained as to the standards and norms for granting patents.
Safeguarding innovations and protecting the rights and honest efforts of inventors is the need of the hour, for the progress of our nation as a whole. Thus, incentivizing the creation of such products is essential, so that trolls do not discourage innovators from investing in research and development, so that the general public, too, may benefit from such inventions.