“But if patents are non-conventional warfare, even these measures of “quality” become largely irrelevant. A “quality” patent is one that manages to frighten targets enough that they pay up. Nothing more, nothing less.”
PATENTS AS NON-CONVENTIONAL WARFARE
In a previous essay (Patents — conventional warfare?), Timo Tokkonen considered patents to be type of warfare between companies. By and large, this is probably the best way to think about patents. What Timo described is the “conventional warfare” aspect of patents: going to court, and getting a “real value” for the patent. Maybe it’s possible to extend to analogy:
What if the “non-conventional warfare” part is equally important?
By that, I mean value gained without ever going to court — by settlements and agreements that are made quietly outside the court system. Do we have any way of knowing how important this “hidden” side of the war is?
To put in another way: What if the “real” value of a patent is in how much money it can rake in without ever going to court? One way of quantifying the question is to ask: “How much are companies paying for patent license costs where the underlying patent is spurious, but cannot be invalidated without taking excessive legal risks?”
An economist would say that the question is nonsense, because a contract is a contract, and if someone agrees to pay, then nothing illegal has happened. Perfectly true, if the two sides are evenly matched. Not so true, if one of the parties has an unfair advantage. (Again a term that no economist accepts. But as we have discussed earlier, non-practicing entities do have an asymmetric advantage over companies that produce something. These contracts may be narrowly legally acceptable, but there is no reason to accept them ethically).
This is not a very comforting idea, because it would make it even more difficult to estimate the value/risk of a patent. Academics are making efforts to predict the “quality” of individual patents by looking at external parameters such as number of prior art references, a huge number of claims, a large number of later patents referencing the patent, and so on (see for example Shresta 2009, Allison et al 2010). The sole definition of “quality” here is “what wins in court”. These efforts are valuable, because if successful, they would make it at least slightly easier to estimate risk.
But if patents are non-conventional warfare, even these measures of “quality” become largely irrelevant. A “quality” patent is one that manages to frighten targets enough that they pay up. Nothing more, nothing less.
If one considers this non-conventional aspect, then some of the claims of the pro-NPE camp (for example McDonough 2006) become a little suspect. Those authors are looking at what happens in the courtrooms. But what if all the real action is happening outside the courtrooms?
Can this issue even be studied academically? Perhaps. Bessen and Meurer 2012 used surveys as well as public legal data to estimate the direct costs from NPE litigation. They came up with a ballpark minimum figure of 29 billlion USD in 2011. They estimated that about one third of this cost came from cases that never went to court (i.e. our “non-conventional warfare”). This is 10 billion USD, much of it from small and medium-sized companies.
Since there are indirect costs associated with legal assertions, Bessen and Meurer suggest that the real figures could be twice as large. To give some scale: the total R&D spending in 2011 was 247 billion USD. The non-conventional costs would then be in the ballpark of 5-10% of R&D spending. One has to remember, of course, that this is not money that is “robbed” as such; some of the cases may be completely valid. Nevertheless, this is real money.
We have been trying to look for credible first-hand material on the Internet about people or companies that would actually have been harassed by trolls. However, the material tends to be second-hand or generic.The EFF has collected material on cases that would seem to fall into this category, but it is still anecdotal. Even the various anonymous anti-troll web sites tend to focus on litigated cases. The unlitigated cases exist in a shadowland.
Anyone who is under active targeting will almost certainly remain quiet under his lawyer’s recommendation. And if a settlement is reached, non-disclosure tends to be required. Thus, it is likely that we will never hear of these cases through normal routes. Any information on anonymous web sites should be treated skeptically at best.
We think Project Troglodyte might actually provide a service in this direction. We already have a fundamentally unconventional view into these issues. We inhabit a kind of twilight zone: not quite hardcore IPR professionals (though hangaround members perhaps), not quite average “persons trained in the art”.
If a patent frightens and confuses us, it will certainly frighten and confuse an average person. A patent attorney can take away a lot of of the confusion by explaining what the patent (possibly) means. But the attorney cannot take away the fright part.
Unconventional warfare calls for unconventional methods perhaps?
Acknowledgements: This posting benefited heavily from arguments raised by Niko Porjo.
