What is a Troll

A popular tale involves a troll guarding a bridge, who demanded payment before a traveler could cross.

Defining a patent troll

Patent troll is a is a derogatory term , which is used for a person or company used to describe a unique type of patent enforcer - an entity that makes money from a patent solely through litigation or licensing and not from manufacturing or developing the patented invention.

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Activities of a patent troll

 A troll does not intend to actually practice a patent. Here intention is of primary importance as small inventors may have the intent to practice a patent, but do not do so due to lack of resources.  A patent troll does not produce any thing of value but merely acquires patents with a view to obtain licensing revenue.  They do not make use or sell new products and technologies but solely aim to force third parties to purchase licenses.

Causes - patent troll

 Patent trolls may buy patents cheaply from entities not actively seeking to enforce them. (For example, a company may purchase hundreds of patents from a technology
company forced by bankruptcy to auction its patents.)

 The cost of defending a patent troll cases by defendant companies are high. With the costs, risks are also high and high level of uncertainty prevails about the outcome of jury trials, which might force the defending companies to come to a settlement. Distortions in the patent market, such as those caused by long patent application pendency, promotes patent trolling. The Patent Troll strikes, demanding huge royalties to be paid or you risk a lengthy, nasty and very expensive legal battle - with the real danger of losing it.

Effects - patent troll

 They are in a position to negotiate licensing fees that are grossly out of alignment with their contribution to the alleged infringers product or service", not their non-practicing status or the possible weakness of their patent claims.  The risk of paying high prices for after-the-fact licensing of patents they were not aware of, and the costs for extra vigilance for competing patents that might have issued, in turn increases the costs and risks of manufacturing.  Patent licensing is also considered as pro-competitive because in a way it encourages investment in bringing new products in to market. Thus, by creating a secondary market for patents, patent trolls make the ownership of patents more easily available, thereby creating incentives to innovate and patent.  Giving patents in the hands more specialized licensing companies will facilitates access to technology by more efficiently organizing ownership of patent rights.

Mechanics of patent troll

Patent Trolls operate much like any other company that is aggressively exploiting a patent portfolio. Monitor the market for possible infringing technologies. Review published patent applications for signs that another company is developing infringing technology Target vulnerable company that has much to lose, or little money to defend itself, hoping that an early victory or settlement will establish a precedent to encourage other (or bigger) companies to acquiesce to licenses. Advantages : Uncertainty in patent judicial system. Uncertainty and unpredictability of the outcome of jury trials. High cost of legal defense.

Types of Patent Trolls

A well-known Silicon Valley patent litigator, Doug Lumish, has suggested there are four types of patent trolls:  True Blue Trolls : These are non-manufacturing holding companies which acquire patents from inventors.  Thinking Persons Trolls : These folks develop inventions for the purpose of licensing and enforcement, not to manufacture and sell products.  Incidental Trolls : These are failed manufacturing companies left with patent assets ready to be exploited, or patents left over from discontinued product lines.  Competitor Trolls : Often a company will acquire patents to target a competitor with lawsuit

Trolls Vs. Legitimate Actors

It is also essential to separate two classes of people who might act similarly to trolls : but are not trolls. They are 1) Innovators The goal of a patent troll is simply to obtain a patent that it can use to extract licensing revenues, but innovators develop a new technology that can be used by a producer.  An innovator seeks not just to obtain a patent, but also to create an underlying technology that has some value. (This point can be demonstrated by analogizing the patent to a piece of land. Both the innovator and the
patent troll can potentially own the land, thus having the right to exclude others from it. The innovator, however, uses the land to raise a crop but a patent troll merely aims at excluding people from the land)

Trolls Vs. Legitimate Actors

2) Producers Patent trolls do not include those who acquire patents as part of a defensive or offensive strategy related to their own product line. A producer need not actually practice the patent to avoid being called a patent troll. The critical question is whether it is enforcing its patent in a market in which it participates.
(For instance, a patentee might manufacture a product that can either use a widget or a gadget. The patentee has patents on both widgets and gadgets. However, the patentee decides to use only widgets in its product. While the patentee does not practice the gadget patent, it is not a patent troll. Indeed, even if the patentee chooses to license its gadget patent to competitors, the fact that the patent relates to a market that it participates in characterizes it as a producer, rather than a patent troll.)

Industry Perspectives
Patent Trolls are more an issue in the IT industry than other industries, including Biotech/Pharmaceutical industry. IT industry :  Easier to enter into business - Low cost of R/D.  Single product often has 100s of patented or patentable features. Thus, even if infringement was for only one element of the product, Patent Trolls often use the threat of a permanent injunction to shut down an entire product.  Cross licensing is common because it is difficult and expensive to evaluate the infringement of all related patents. However, Patent Trolls do not manufacture products and, therefore, do not respond to cross licensing offers.

Industry Perspectives
Biotech/Pharmaceutical Industry :  Difficult to enter into business - High cost of R/D  Single patent can be worth billions of USD with 10-15 years of R/D  Rely heavily on patents granted for a very few, highly important, discoveries. So, these companies do not license the patents but rather, use them more offensively. Therefore, if their patents are infringed, they want an injunction  License only for reasons, such as decide not to develop further in-house, market changes, priority changes, additional clinical studies, cost, resource constraints Careful with prior art searches because of enormous cost of R/D, and prior art searches may be easier to conduct.

Trolling- Incentives In The Legal System

The difficult process of patent troll avoidance is made harder due to the fact that Under many legal systems, especially that of the United States (U.S.), potential trolls have an incentive to remain hidden and have their patents infringed, rather than to enter into negotiations with developers of technology. Damages awarded through litigation have the potential to vastly overcompensate a patent holder whose patent has been infringed rather than a patent holder who grants a license.

Trolling- Incentives In The Legal System

Punitive Damages The U.S. grants punitive damages to patent holders in cases of willful infringement. These punitive damages can be treble the initial damages claim Permanent Injunctions Patent holders seeking to assert a troll-like strategy can also seek overcompensation by relying on the availability of permanent injunctions which prevent another party from using the patented technology once a finding of infringement has been made. This allows the patent holder to be overcompensated by pursuing a strategy of waiting for its patent to be infringed and for the product incorporating the infringing technology to be on the market

Future Viability of Patent Trolls

Patent Trolls will encounter a tougher environment due to the changes at the court and possible legislative measures. In summary, the following may all affect trolling behavior  More constrained venue  Higher incidence of invalidity rulings  Smaller settlements and lower damage awards  Fewer injunctions  Fewer pre-suit settlements  Fewer contingency fee arrangements due to above effects.

Possible solutions to the Patent Troll Problem

The reasons that the patent troll strategy has developed in the present patent system appears to result from judicial procedure and its adjudication in infringement cases. Some possible solutions are  Open Post-Grant Review - At the time of patent renewal; and - Any time a patent is sold.  Compulsory licensing  Granting of Injunctive Relief in Infringement Suits  Reformulation of Criteria for Indemnifying Patent Holder

Indian Law Dealing with Patent trolling

The laws related to following have made the Indian system fairly immune to the problem of patent trolls that have been plaguing many other countries.  Open Post-Grant Review  Compulsory licensing  Domestic working and reasonable period requirements  Pre-grant opposition regime  Post-grant opposition regime

Indian Law Dealing with Patent trolling

The Patent (Amendment) Act, 2005, has effectively reduced if not eliminated the problem of patent trolls. Most trolling activity occurs in the field of technology patents. This Act disallows patents on software (including embedded software) and excludes an area with huge scope for trolling. Trolling activity has been discouraged is through a strong pre- grant opposition regime with a time of six months being provided. There is also a provision for post grant opposition.  The Intellectual Property Appellate Board, which is an administrative body designed to dispose disputes quickly, reduces costs of litigation, such that small entities which are targeted by trolls need not worry about the high cost of litigation to defend their patents

Indian Law Dealing with Patent trolling

Compulsory License for Patents in India Compulsory licensing is a method which can be used to reduce patent troll activity. Indian Patent Act allows any interested person after expiry of 3 years from grant of patent even though if he is a license under the patent, may make an application to the Controller for grant of compulsory license. Accordingly, any interested person after expiry of 3 years from grant of patent even though if he is a license under the patent, may make an application to the Controller for grant of compulsory license The concept of reasonable period in relation to compulsory licensing in Section 84(6)(iv) has also been defined as less than six months

Indian Law Dealing with Patent trolling

In an application for compulsory licence, the Controller of Patents is required to consider, whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit. This balances interests and minimises the scope of trolling activity in India. The domestic working requirement is a pervasive theme of Indias patent laws. Indias disfavor of patented imports and its view that domestic working ought to be part of the basic quid pro quo for the grant of an Indian patent are further evidenced in the current Act by Section 83, on general principles, which provides that Indian patents are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article.

Indian Law Dealing with Patent trolling

Section 84(1)(c ) not worked in the territory of India ground for compulsory licensing also overlaps to a considerable extent with the Section 84(1)(a) ground, i.e ., that the reasonable requirements of the public with respect to the patented invention have not been satisfied. Section 84(7)(d) provides that the reasonable requirements of the public are deemed unsatisfied if the patented invention is not being worked in the territory of India on a commercial scale to an adequate extent or is not being so worked to the fullest extent that is reasonably practicable. Similarly, Section 84(7)(e) provides that the reasonable requirements of the public will be deemed unsatisfied if the working of the patented invention in the territory of India on a commercial scale is being prevented or hindered by the importation from abroad of the patented article by the patentee, his agents, or third parties against whom the patentee has not enforced the patent.

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