In the light of the ongoing patent war – most prominently the series of Apple v. Samsung lawsuits – in the smartphone and tablet computer industry (see also “The Power of Patents“), the current patent system has garnered harsh criticism. In a lenghty piece in the New York Times, Charles Duhigg and Steve Lohr criticize that “[i]n the smartphone industry alone, according to a Stanford University analysis, as much as $20 billion was spent on patent litigation and patent purchases in the last two years” and summarize the situation as follows:
[M]any people argue that the nation’s patent rules, intended for a mechanical world, are inadequate in today’s digital marketplace. Unlike patents for new drug formulas, patents on software often effectively grant ownership of concepts, rather than tangible creations. Today, the patent office routinely approves patents that describe vague algorithms or business methods, like a software system for calculating online prices, without patent examiners demanding specifics about how those calculations occur or how the software operates.
On his blog, economist and US Court of Appeals judge Richard A. Posner takes the same line, expressing concerns that “both patent and copyright protection, though particularly the former, may be excessive”:
Software innovation tends to be piecemeal—not entire devices, but components, so that a software device (a cellphone, a tablet, a laptop, etc.) may have tens of thousands, even hundreds of thousands, of separate components (bits of software code or bits of hardware), each one arguably patentable. The result is huge patent thickets, creating rich opportunities for trying to hamstring competitors by suing for infringement—and also for infringing, and then challenging the validity of the patent when the patentee sues you.
Most such criticsm ends with calls for patent law reform or even leads to abolitionism, as in the recent piece of the intellectual property critics Michele Boldrin and David K. Levine entitled “The Case Against Patents” (see the Washington Post’s Wonk Blog for a summary of their line of argument). However, even if substantial legislative changes were to be put on the table it would take years for them to be implemented. Therefore, those actors most severely hit by the adverse effects of the current patent system such as small startup companies or open source software firms have to find other ways to fight established competitors with large patent portfolios or, even worse, “patent trolls“.
Wikipedia refers to a paper by Alexander Poltorak (2006) for its definition of patent trolls as companies that “enforce patents against one or more alleged infringers in a manner considered aggressive or opportunistic with no intention to manufacture or market the patented invention.” Not always is it obvious or entirely clear whether an actor is a patent troll or not. Intellectual Ventures, for example, is not only among the top-five owners of U.S. patents but also regularly accused of being a patent troll (see, for example, CNN Money).
The growing number of anti-competitive patent litigation both by industry incumbents and by patent trolls – which may be funded and instrumentalized by the former – have now led to the emergence of new types of defensive strategies and actors respectively. Examples of such new patent warriors fighting patent trolls are IP Checkups and the Open Invention Network.
Expanding on the military metaphor, IP Checkups could best be described as a recon-unit, trying to throw light on complex and diffuse patent holding entities such as Intellectual Ventures. In a recent crowdfunded project called “Case IV thicket” they want “to expose Intellectual Ventures’ hidden patent portfolio and make it freely available to the public.” IP Checkups explains the rationale for launching “Case IV thicket” on their website:
Intellectual Ventures, among the largest patent holders in the United States, with an estimated 40,000 patents, actively and intentionally hides its portfolio in more than 1,200 shell companies. This eliminates transparency and increases Intellectual Venture’s leverage with potential licensees. Even though worldwide patent offices record patent ownership, they do not record financial ownership in the shell companies. Intellectual Ventures develops and buys patents in bulk, and then makes money from these patents through various questionable schemes, including licensing, partnerships, and patent lawsuits filed by shell companies.
The main aim of recon-units such as IP Checkup is to reduce the potential of FUD (Fear, Uncertainty and Doubt) strategies put forward by patent holders.
Open Invention Network, in turn, is probably best described as a patent fiduciary, meant to protect small and medium-sized firms contributing to the free and open source software commons from anti-competitive software patent litigation. Since open source software is developed to a large degree by a dispersed community of volunteer contributors, many of which are individuals, it is particularly vulnerable to software patent litigation. The Open Invention Network tries to strategically acquire critical software patents for defensive purposes. Its mission as described on the website is “to promote the Linux system by using patents to create a collaborative ecosystem”:
Patents owned by Open Invention Network® are available royalty-free to any company, institution or individual that agrees not to assert its patents against the Linux System. [...] Open Invention Network® ensures the openness of the Linux source code, so that programmers, equipment vendors, ISVs and institutions can invest in and use Linux with less worry about intellectual property issues. Its licensees can use the company’s patents to innovate freely. This makes it economically attractive for companies that want to repackage, embed and use Linux to host specialized services or create complementary products.
Taken together, IP Checkups and the Open Invention Network are both a glimmer of hope in the current patent system and evidence of its bizarre deterioration.