Patent Sharks (Trolls?) – insightful or missing the point?

‘Patent Sharks’ is an article by Joachim Henkel and Markus Reitzig in the June 2008 edition of the Harvard Business Review.

In the article, Henkel and Reitzig discuss the serious menace faced by technology firms from ‘patent sharks’ (which seems to be another term for the garden variety patent troll – but which are distinguished in the article from small time inventors).  These sharks collect patents through bankruptcies, licensing and their own R&D, hide their IP so that they can deliberately trap tech firms into inadvertent patent infringement – then they sue.

Henkel and Reitzig recommend shark-proofing your firm by: making your technology modular (the theory being that you can swap out any infringing modules), collaborating with competitors to spot potential patent problems, streamlining your patent portfolio and recognizing the limits of legal remedies.

Here are some comments:

1 – Considering non-legal remedies is a great idea – please do;

2 – A good freedom to operate strategy should uncover any ‘hidden’ patents – notwithstanding the large (and ever increasing) number of patent applications filed eached year;

3 – A well drafted patent won’t only claim the component (that you would like to swap), but will also cover interoperability with it and surrounding components.  So simply swapping out infringing components isn’t going to be as easy as the authors suggest;

4 – Unfortunately, the article is replete with sensationalist and emotive language, a bit  unnecessary for the calibre of these authors and HBR;

5 – I think it is only the US which has archaic damages rules which overly penalise infringers of patents for minor components;

6 – Most industries and their Standards setting organisations are acutely aware of the IP issues surrounding Standards and have a set of well drafted rules in place to cover this.  Rambus is a poor example of this, because the rules were not so good at all.  This is not a new ‘tactic’ by patent sharks.

7.  I completely agree that a large portfolio of patents will not work on non-practicing entities.  However, I think this is a poor reason (alone) to dramatically reduce the number of patents a company files.  There are other, much better reasons, and sometimes this is simply a bad idea.

8. Collaborating with competitors is a great idea – if they want to do the same and it fits your business model…

9.  I’m not sure that there is a direct correlation between the ‘flood’ of patent applications and a perceived lowering of the bar to patentability.  As I mentioned in a recent IAM-Magazine interview, I’m not even sure that the bar has actually lowered.

9 Comments on “Patent Sharks (Trolls?) – insightful or missing the point?

  1. Hello Duncan;
    Interesting observations, much of which I am in general agreement with.  I must however argue against your assertion (comment 2) that a well-drafted FTO strategy should uncover any “hidden” patents.  It has been my experience that wittingly or otherwise a number of patent drafters are shaping their patents to obstruct their discovery in FTO.  Terms are chosen to intentionally avoid discovery – case in point I recently came across a patent for a technology being applied to “milk” that used the term “mamalian maternal excretions” instead of the common term.  How’s your FTO search for your milk-man going to turn that one up?
    Beyond that your comment on the “black hole” of pending publication applications (generally an 18month “dark zone”) is agreed, but I think you substantially understate its impact particularly in the risk it brings to R&D under the assumption of FTO.  You can burn a heck of a lot of R&D dollars in 18 months, sufficient to potentially cripple a lean tech start-up if it develops that an emergant patent has the potential to totally obstruct your delivery.  Of course that is never assured as a published application has no immediate validity, nor even any confidence of being allowed in a manner that will obstruct the marketability of your intended market offer.  Quite apart from the prospective technology obstruction, there is the question of territorial reach, and whether the emergent patentee will elect to protect in territories of importance to your ambitions.  Sure you can approach the owner of the newly published patent and try to negotiate access rights, but in doing that you assure the realitythat your exploitation territories WILL be portected in due course.
    It’s never easy being an innovator!

  2. Thanks Allan – great comments, as always.I can see what you mean about ‘hidden’ patents and I think you’re right to say that it’s not easy and I have certainly observed that it has been getting harder to find patents as there has been a trend towards drafting them in ways to make it harder to find them.Having said that, in the end, the patent specification has to adequately describe the invention.  So its up to the patent searcher to think of all the ways that it could be described.  Mammalian maternal excretions fits this bill, I’m afraid.  Milk is one of the hallmarks of mammalia, and it is ‘excreted’ by tiny little glands in the mammary apparatus – so unfortunately, I think that a great searcher would think of searching on keywords associated with Mammals, their maternity, and excretions therefrom.  By really understanding the invention to be searched, a great searcher will, I think usually find all relevant patents.  If they don’t, then I suspect that the application will have an enablement / 112 / sufficiency problem (for not describing the invention adequately).A great patent searcher will also collaborate closely with the scientific team to make sure that the technology is fully understood and searched appropriately.Having said that, this is definitely a creative and iterative process and can not be 100% guarranteed – which is, I think your main point.On the 18 month black hole point, I think you’re right.  There’s little choice though, but to be as thorough as you can afford (in time and money), draft detailed specifications, keep going, and adjust as new information comes to light.

  3. Hmmm … Duncan, methinks you use the power of hindsight (which is always 20:20) in making your observation on the descriptor used for milk in this specific instance.  Once alerted it is easy to be diligent thereafter (as I am on that issue now).  I would be interested in you surveying your favourite patent searchers (or search thesaurus) for terms necessary for a FTO search intended to capture technologies related to milk to hear how many, unprompted, design a search strategy that would have found that term.  Incidentally, I did find it, or I would not be in a position to bring the instance into this discussion.  What troubles me is what other terms I am not finding, because the attorney drafting the patent doesn’t want me to find them so that they can ensnare me in future!  Strikes me that such is the new nature of the game in the somewhat seedy world of patent trolls (or sharks for those who would rather).  
    Do you think that an obscurely termed patent would be deemed by a troll to have more value than one that used conventional terms common in the art?  I suspect so, but then I’m that sort of cynical character!

  4. Thanks AllanIf the ‘shark’ or ‘troll’ aims to surprise potential infringers with a law suit after the patent has issued, then it must be right that a patent (application) which is more difficult to find will be more valuable.

  5. Duncan;
    On this we are agreed!  In that case Patent World, prepare thyself for a new era of obfuscation!

  6. Great comments, Duncan. I posted somewhat similar responses to the patent shark recommendations (although not nearly as concisely as you) on my blog here. My perspective was from someone in R&D and heads my company’s patent strategy. Really, the article was not well suited for HBR.

  7. I would be the first to admit that no search is comprehensive, but no two patent searches are the same and, to use the old adage, you get what you pay for.  So if you are serious about defending yourselves against patent trolls you can find these patents, you just need to look hard to find the right searcher who knows the subject area very well indeed.

  8. It is imperative for someone who seeks patent protection to understand the scope of the invention to be patented, whether it is new or known, whether it has some economical benefit in comparison to the available arts.

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