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A potentially fatal blow against patent trolls

Evan Schuman | Jan. 4, 2017
Forcing law firms to pay defendants’ legal bills could undermine the business model of patent trolls

Frank Bruno, a colleague of Smith’s at White and Williams, said the comparatively low license amounts are typical of patent trolls. Typically, firms use elaborate mathematical calculations to determine the license fee, as a percentage of likely future revenue and/or profit.

“Under patent law, damages are calculated based on a reasonable royalty,” Bruno said, adding that patent trolls’ small license fees “bear no relationship” to projected revenue or profits. “When you see these small numbers, you know that the patent troll, that they simply wanted a quick get-out number. That’s illustrative of extortion.” 

Indeed it is. What the federal judge has done is attack the heart of the patent-troll system. Normally, patent trolls rely on large numbers. If they threaten a large number of companies, they’ll make more than enough to justify their efforts. Then, by suing a handful of other companies, they scare more innocent firms into paying or else. 

Often, when a judge slaps down one patent troll in one case, the penalties are less than the total of the other monies extorted. In short, the troll comes out ahead. By placing the fines on the lawyers personally — well, to be precise, on their law firms — it threatens to change the dynamics. If lawyers stop taking these cases, patent trolls will no longer have a viable way to threaten thousands of companies. 

What the judge specifically did was to tell Gust that it could retrieve the court’s ordered money from either the law firm or the patent troll. That is interesting, because the lawyers representing the patent troll, according to Bruno, had already told the firm that suing the patent troll was pointless because it had no money, making it judgment-proof. That statement helped convince the judge to go after the law firm’s funds, Bruno said. 

Patent trolls directly threaten the industry of ideas. They dilute the value of legitimate patents while making honorable companies suspicious of legitimate patent complaints. This was never what patents were all about. They were designed to protect inventors who came up with truly innovative ways of doing things.

Patents need to get back to protecting inventors, not opportunists who conclude that what business needs today is more extortion. Cote’s decision won’t finish off patent trolls, but it’s a step in the right direction.


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