Time to Kill Patents, 2012 Told Me So

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by: Tom Hochstatter | May 16, 2017

I’m not a zombie show watcher, but I believe the premise of these shows is that there is a class of “people” that are undead, or cannot die; so, they keep coming around taunting the actual living and threatening to eat them, or convert them to the zombie-side.

Well, here in patent town USA, which appears wildly foreign and dystopian, perhaps zombie-like, to those that don’t dwell here regularly, there is a widely discredited patent report from 2012 by two academics (“hackacademics”) – that simply won’t die either. I will not justify the report with a link, but it is referenced over and over again when the anti-patent, anti-troll rhetoric machine marches on Congress for patent reform. Has there not been any patent litigation research since 2012 – pro or con? We all know that answer.

On May 1st an Op Ed article was published in The Hill on the eve of the annual NVCA event in Washington DC – with the headline: “Congress: Protect businesses like ours from abusive patent trolls”. The piece was written by three entrepreneurs that were all “viciously” attacked by some boundary-case patent-holder’s demand letter, causing one of them to, gasp, cash in his 401(k) to defend his business from extinction…

“We have seen firsthand how our broken patent system incentivizes patent trolls to target small businesses with frivolous and onerous litigation. Unlike entrepreneurs who strive to bring their innovations to better consumers’ lives – bringing jobs and other benefits to their local communities in the process – patent trolls do not contribute anything of value to society. Instead, they simply buy up vague, low-quality patents – many of which never should have been granted in the first place – and use them to launch patent infringement litigation against innovative businesses.”

They go on to finish with a vague request to Congress to “close the loopholes that patent trolls exploit to target American businesses” – providing Congress with no clear direction, empirical data from which to draw salient legislative conclusions that benefits the greater good, no international analogs to study or mimic.

What loophole(s)? Explain yourselves, please. Dear three authors, we need specifics, backed by a variety of research, and with forecasted (positive) outcomes for their legislative efforts to all.

I’ve have done a bit of research to render my opinion to share with Congress. My simple credentials: talking to (hundreds of) inventors, buying & selling tens of millions of dollars worth of their inventions, spending a decade of my career in the patent industry, starting-up 4 different tech companies, becoming a named inventor myself, reading thousands of patents (zzzzz), reading thousands of pages of research, legal cases, and, yes, taking patent infringers to court over valid patents (and winning).

So for our Congressmen and Congresswomen I provide the following unsolicited constituent advice:

“Do nothing!” (author note: I make this declaration without an ounce of irony.)

There is no patent troll problem, there is only an anti-patent problem perpetuated by the largest technology firms that wield the most lobby power attempting to squash individual and small business innovation in the patent office, with Congress and the Courts. Based upon that Op Ed piece it’s leaking into the once ambivalent VC community.

Let free market economics provide the equanimity necessary to smooth out the lumpiness that follows the patent business. We have the benefit of time and history now to see that the patent industry much like any other industry can find an equilibrium on its own. Do your own math: approximately 5,000 IP cases in 2016 and 27.9 Million businesses in the US.

One notable indicator of the Invisible Hand at work in IP is the era of the Publicly traded IP Company, or PIPCO is over. Wall Street has all but given up on their lack of revenue predictability and home run portfolio acquisition mentality. Look no farther than the pivots of Finjan, Acacia Research, Walker Innovation, WiLAN or the eminent deaths of Inventergy or Marathon Patent Group. As I write this Marathon lost another 10% of its value today and trades at its all time low.

To make it simple, I offer just one recent report by PwC that published here in May and I direct you to one single chart. (I will happily provide you with a dozen or more additional reports if you want learn more – post a comment and I’ll reply with a list).

I invite you to read the full report here. The F-A-C-T-S are in and patent litigation is on the decline, 9% in 2016 while patent grants are on the up tick. No hyperbole, no party bias, no junk economic science. No zombie-like statistics.

For a snapshot history lesson on patent lawsuits read this Slate-published article by Adam Mossoff from May 2014: two centuries of patent litigation distilled into one, excellent article. This helps you that think: a) you’re special, b) this particular activity is brand new get a sense of perspective on the industry of patents.

If there is irony anywhere it has to be with the anti-patent lobby: for were they not, each of them, once that small, struggling, start-up looking to tackle the Goliath they have each become?

I guess they got theirs and to hell with the rest of us.

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