How To Beat Patent Trolls: Fight

by Steve Wildstrom   |   April 5th, 2013

Troll image (© DM7 - Fotolia.com)

When faced with a lawsuit that has even a slim chance of success, lawyers almost always urge businesses to settle rather than fight. Litigation is extremely expensive, and unless the suit raises an issue of principle that is important to defend, the candle simply isn’t worth the game.

Unfortunately, in the world of patents, this attitude had led to a proliferation of patent trolls, companies that buy up unused and generally vague software patents and then claim infringement against businesses, often smaller companies without big legal budgets, that actually make things. The U.S. District Court for the Eastern District of Texas, which has been remarkably friendly to trolls, is the heart of the racket.

It would be nice if the U.S. Patent and Trademark Office would revoke the thousands of ill-considered patents it granted, especially in the early days after software patents were first allowed. It could be nice if Congress changed the laws to make it harder for so-called non-practicing entities to engage in a legal shakedown. But neither of these things is likely to happen any time soon.

So it is time for businesses to stand up and fight. Patent trolling will persist as long as it is a profitable activity. By raising the cost to the trolls, admittedly at some short-term cost to themselves, businesses can destroy the economics of the shakedown.

Rackspace Hosting, an infrastructure-as-a-service company beset by trolls, is leading the way. Last month it won a signal victory by obtaining summary judgment against a company that claimed a patent on rounding off floating-point numbers. (Rackspace was supported in the case by Red Hat Software, whose Linux implementation contained the allegedly infringing code.)

Now Rackspace has gone on the offensive filing a breach of contract suit against “patent assertion entities” Parallel Iron and IP Nav. The case, described in detail in this Rackspace blog post, is legally complicated. Parallel Iron is suing Rackspace for infringement of  a patent it claims covers the open-source Hadoop Distributed  File System. Rackspace argues the suit violates the terms of an earlier stand-off agreement it negotiated with Parallel Iron and IP Nav.

Rackspace, which says it has seen its legal bills rise 500% since 2010, explains why it has decided to fight:

Patent trolls like IP Nav are a serious threat to business and to innovation. Patent trolls brazenly use questionable tactics to force settlements from legitimate businesses that are merely using computers and software as they are intended. These defendants, including most of America’s most innovative companies, are not copying patents or stealing from the patent holders. They often have no knowledge of these patents until they are served with a lawsuit. This is unjust.

The rest of the tech industry shouldn’t leave this battle to the Rackspaces of the world. In particular, big companies with deep pockets should stop paying trolls to go away, a tactic that makes sense in the short run but is ruinous in the long. As independent software developer Joel Spolsky argues:

In the face of organized crime, civilized people don’t pay up. When you pay up, you’re funding the criminals, which makes you complicit in their next attacks. I know, you’re just trying to write a little app for the iPhone with in-app purchases, and you didn’t ask for this fight to be yours, but if you pay the trolls, giving them money and comfort to go after the next round of indie developers, you’re not just being “pragmatic,” you have actually gone over to the dark side. Sorry. Life is a bit hard sometimes, and sometimes you have to step up and fight fights that you never signed up for.

 

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • mhikl

    “The U.S. District Court for the Eastern District of Texas, which has been remarkably friendly to trolls, is the heart of the racket.”

    Curious. This District Court continuously comes up in Patent Troll discussions. There must be a reason why one district in one state seems to court such nebulous suits. One conclusion might be that there must be some fault in the core of the state’s legal system if one district can draw such repeated discussion yet nothing is done about it?

    • steve_wildstrom

      It’s a federal court, so it is governed by the same rules as all the other U.S. district courts. The Eastern District of Texas is a very strange beast. Typically, states are either a single judicial district or are divided into districts around their largest cities. For example, California is divided into four districts: Norther (San Francisco). Eastern (Sacramento), Central (Los Angeles), and Southern (San Diego.)

      Texas is also divided into four districts. The Southern, Northern, and Western districts, as you would expect, include Houston, Dallas, and San Antonio. But the Eastern District covers 35 mostly rural counties in the extreme northeastern corner of the state, I think the largest city in it is Beaumont. I have no idea why such a district exists.

      For whatever reason, the two judges in the Marshall Division of the Eastern district are extremely friendly to patent holders in infringement cases, and juries have earned a reputation for bing very generous to them. It’s something of a racket, but the district has made an industry of patent suits. The Federal Rules of Civil Procedure require certain specific reasons for filing a case in a particular jurisdiction. So most patent trolls have at least a token presence in Marshall so they can claim it as a place of business for purposes of establishing jurisdiction. What wilmington, DE, is to publicly traded corporations, Marshall, TX, is to patent trolls.

      • mhikl

        Thanks for the explanation, Steve. I’ve wondered about this conundrum for some time. So many of our world’s complications seem to come to “Follow the money”. In a perfect world the one’s being trolled would come together with an insurance fund of sorts and stand up to the trolls instead of just giving in, as you have suggested.

        • steve_wildstrom

          One thing that can help for little guys is if the bigger players indemnify them for suits that arise from the use of their products. For example, Uniloc sued Rackspace over mathematical routines included in Red Hat Linux libraries. Under its indemnification policy, Red hat defended Rackspace in the case. But indemnification doesn’t solve the problem, just pushes some of the cost to those better able to pay.

          One suggestion floating around is forcing unsuccessful plaintiffs to pay the legal costs of those they sue for infringement. But there is a strong bias in the american legal system against this practice, which is common in the UK.

          The biggest problem is that there is no legally satisfactory definition of a patent troll other than that judges ought to know one when they see one. There would be almost no support for a change in the law to reduce the rights of those who buy patents vs. the original grantee because that would destroy a lot of the economic value of patents.

          One thing that would help tremendous is if judges were more willing to exercise their powers and not let cases with no merit drag on through months and months of expensive discovery and sometimes even let them go through trial. But you cannot tell a judge with lifetime tenure what to do.