Congress killed patent reform last year, but big tech companies are taking the matter into their own hands.
Last week, Google wrapped up the Patent Purchase Promotion experiment, which opened in April. Under the program, Google offered to buy patents "relevant" to Google, from both individual inventors and operating companies.
The Patent Purchase Promotion could defuse hypothetical pressure on startups to sit on patents in order to increase their company valuation, and by acquiring those patents, prevent them from falling into what Google perceives as the wrong hands.
There is no small irony in "fighting" patent abuse by consolidating a huge portfolio of patents, as the blog IP Watchdog has noted. Julie Samuels, the executive director of Engine, who sits on the advisory boards of both LOT and DPL, acknowledges the contradiction. "We're glad to see that Google's bought them because Google has made many public commitments to reforming the patent system. But to be fair we always feel uncomfortable when any one entity owns so many patents. That's just not good for the world."
"Google didn't spend more than $250,000 on any patent, which is pretty much pocket change in the patent litigation world"
Google told IEEE Spectrum that it had bought 28 percent of the "thousands" of submissions the company had received. The figures disclosed were vague, but the company may have staved off huge litigation costs for comparatively small sums. The median price tag on each submission was about $150,000; Google paid between $3,000 and $250,000 for the patents they did buy. (Presumably Google didn't spring for one patent that the rights-holders priced at $3.5 billion.) Given the vagueness of the figures that Google disclosed, the company could be spending anywhere between hundreds of thousands and hundreds of millions of dollars on buying up patents.
"Google didn't spend more than $250,000 on any patent, which is pretty much pocket change in the patent litigation world," said Jason Schultz, director of Technology & Policy Clinic at NYU Law. "To win a patent case, it would probably cost you $2–5 million in legal fees alone, so your patents need to be worth about $10 million or more to make it worthwhile."
Google—along with Canon, Dropbox, Newegg, and many other companies—belongs to the LOT ("License of Transfer") Network. One of the conditions of participating in the Patent Purchase Promotion is that the participant must also join LOT.
LOT is an agreement between companies meant to combat the effects of patent trolling: patent litigation brought by "non-practicing entities"—companies that exist primarily for the purposes of owning and suing with a portfolio of patents for inventions created by other people or companies. Under LOT, member companies may do what they wish with their patents, right up until they sell the patent to a non-participant. At that point, other LOT members can get involved in the sale or take a license in the patent. The LOT network is a form of preemptive harm reduction, an attempt to keep patents from landing in the hands of trolls to begin with.
And because LOT in particular is aimed at disarming potential patent trolls, there is some skepticism as to LOT's efficacy, since the idea behind it is to prevent patents from falling into the hands of trolls whose business models center around buying up patents from failed companies. But some scholars believe that this narrative doesn't reflect the reality of the industry, and the popular narrative around "patent trolls" might not be supported by actual facts. Legal scholar Michael Risch's empirical research from 2011 found, for instance, that "non-practicing entity" patents usually weren't "castoffs from failed startups." (Note, however, that there have been more recent studies that suggest trolling is a big problem).
LOT isn't the only private solution to patent trolling that tech companies have come up with. There's also the DPL (Defensive Patent License), which goes much further than LOT. The DPL prevents members from suing each other for patent infringement, unless they are attacked by another member who breaches the DPL first.
"As someone who believes the current patent system is broken, I wish everyone would join the DPL," said Samuels. "But I'm glad that there's LOT as well. The DPL isn't going to be the right fit for every company, and that's okay."
Samuels also cited Open Invention Network (focused on Linux) and Twitter's Innovator's Patent Agreement as examples of defensive patent agreements. "I think the most important takeaway is that there are options out there now, so that as far as I can tell, a company has almost no excuse not to join one of these programs," she said.
For patent reformists, the hope is that the expansion of networks like LOT through programs like Google's Patent Purchase Promotion could do something to slow down the flurry of "troll" litigation like the "shopping cart" patent lawsuit against Newegg.
"Google has a lot invested in its fight against patent abuse, and given how slowly patent reform legislation is currently moving through Congress, it's not surprising that the company is looking for ways to take matters into its own hands," said Charles Duan, director of the Patent Reform Project at Public Knowledge. "Of course, they are only half-measures, since no private program can stop the worst of the worst, and so hopefully these programs don't affect Google's resolve to keep pushing for comprehensive patent reform laws through Congress."