Sunday, September 11, 2011

Google, Patent Trolling, And Canada

Google has acquired Motorola Mobility for $12.5 billion dollars, giving Google its very own smartphone manufacturer (even if Motorola isn't the mobile device force it was a decade ago, having long been surpassed first by Nokia and Samsung, and then dropping to seventh place in worldwide mobile market share behind LG, RIM, Apple and Sony) and the potential for Google to at least, for their own phones, control the entire Android smartphone experience from beginning to end in the same manner that Apple does for the iPhone.

But Google's candidly admitted that their purchase of Motorola wasn't motivated purely by the opportunity to be a phone manufacturer:
We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to “protect competition and innovation in the open source software community” and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.
What Google discusses here is the problem with modern American patent law generally: using ownership of patents, it's easy to launch action against a company by asserting that they're violating the patents you own, particularly when a device engages with large numbers of patents; Google has suggested that a smartphone might engage as many as 250,000 patents.

The more patents you own, the more avenues for legal attack you have: this is why Microsoft and Apple combined to purchase Nortel's patents when those were auctioned off for a record $4.5 billion (beating Google's final bid of $4 billion - and Google claims that the pre-auction estimate of the value on those patents was about $1 billion). In fact, Microsoft has already successfully used patent litigation or the threat thereof to force a number of Android developers, including eighth-place HTC, to agree to deals wherein they pay Microsoft for every Android device they sell.

Of course, Apple and Microsoft's actions seem benevolent when compared against the likes of Intellectual Ventures, a patent holding company described as "the most massive patent troll on the planet." Intellectual Ventures' modus operandi is to purchase patents (since patents are intellectual property, their ownership can of course be transferred) and then find an inventor or developer making a product and claim, in general terms, that the product infringes upon one or more of their patents; Intellectual Ventures then either hopes to bully out a settlement or win a licensing arrangement in court (more typically the former). They can then use the proceeds of these arrangements to buy more patents, furthering their business model. (At present, Intellectual Ventures is estimated to own approximately 35,000 patents.)

Recently Drew Curtis of Fark.com related his experience when Fark was sued by a patent troll, and explained why even spurious patent suits are nervewracking for independent businesses:
The patent covered a method for inputting news releases into a web form, which would then compile the news release and email it to media outlets. Now, aside from the fact that a ton of prior art exists and that the patent should never have been awarded in the first place, Fark and all the other websites named in the lawsuit don't produce "news releases". In the world of journalism, the term "news release" is equivalent to "press release" - the patent itself equates the two in the opening description. Could a judge have ruled otherwise? Sure. They've been known to rule that the sky is green - which is why this lawsuit was dangerous.
Google has been agitating for patent reform for years now, largely as a result of patent trolling. Their position is that patent law in the United States is outdated - a position that has been articulated by Internet tycoons before, such as this open letter penned by Jeff Bezos of Amazon in 2000, which argues that software patent law must be distinguished from other types of patents in order to better reflect the marketplace in which software patents operate: a shorter patent lifespan, a public comment period before the patent is issued, and other laws that recognize that software patents operate in a different environment than hardware patents. Forbes has gone even further than Bezos, suggesting that software patents be abolished entirely.

However, in a bit of good news, last week the United States Federal Circuit Court of Appeals ruled against a patent troll, Eon-Net LP, in Eon-Net LP v. Flagstar Bancorp, stating that Eon-Net's pattern of filing patent lawsuits for the purpose of litigation - and swiftly following each lawsuit with a settlement offer - was "baseless litigation in bad faith" and that the case had "indicia of extortion," and then punished Eon-Net with a Rule 11 sanction for litigating without a proper purpose for over $600,000.

Could this happen in Canada? Giselle Chin at the Centre for Innovation Law and Policy notes that Canada's patent system is not as expansive as America's is, but also notes that there is room in Canada for patent trolls to grow; similarly, Jenna Smith suggests that Canada's patent system could end up being a "trial run" for trolls owning patents in both countries and targeting inventors who operate in both countries, in order to see how an American lawsuit would proceed after the Canadian suit resolves. And certainly the Patent Act does not differentiate software patents from other patents, similar to the American patent system. It would appear that, without remedial legislation, Canada is potentially fresh ground for patent trolls.

- Christopher Bird, Toronto
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