Paying the Toll
Patent Trolls and Our National Schizophrenia About Intellectual Property
In Scandinavian folklore, trolls are exceedingly ugly, dim-witted brutes, who harass, annoy, and frequently threaten travelers who wander off the beaten path. In the classic scenario, trolls will waylay travelers attempting to cross a bridge or traverse a mountain pass, and demand some payment in exchange for the passage. It’s a tough way to make a living, and certainly not one that makes you very popular.
Intellectual property folklore has its share of mythical evil creatures and dastardly deeds, such as patent suppression, the (fictional) practice of obtaining a patent for some invention in order to ensure that it’s never used (as in the so-called “free energy suppression” conspiracy theory). But in the various myths and legends about IP, no evil creatures are quite as reviled as patent trolls.
“Patent troll” is a pejorative term for non-practicing entities, or NPEs. An NPE is a firm that assembles a patent portfolio for the purposes of extracting licensing fees from those patents. The process is fairly straightforward: an NPE buys patents of various kinds. They then look around for companies that are doing something – using a particular industrial process, say, or manufacturing a particular cell phone component – that is similar to the protected subject matter of some of the NPEs patents. They hire top-notch lawyers, notify the other company that they are infringing on one of the NPEs patents, and threaten an infringement lawsuit. In the best-case scenario, the threatened firm will agree to a licensing deal in order to prevent the lawsuit. In effect, NPEs use the threat of litigation to extract “tolls” from other companies in exchange for leaving them alone to conduct their business – hence the nickname, patent troll (if you’re interested in a full account of the mechanics of “trolling”, see here).
As the nickname indicates, NPEs are wildly unpopular. In a speech last June, in which he called on Congress to enact patent reform legislation, President Obama said of NPEs “...they don’t actually produce anything themselves, they’re just trying to essentially leverage and hijack someone else’s idea and see if they can extort some money out of them” (the actual situation is far more complicated; for instance, this story). On a philosophical level, what’s interesting about patent trolls is that their existence is a perfect illustration of the fundamental schizophrenia about the nature of intellectual property embedded in our patent system. If we think of patents as simply one other kind of valuable resource that we can own – an asset, in other words – then there is nothing wrong or even unusual about what NPEs do. NPEs are just like real estate speculators; they buy potentially valuable assets (land, patents) and generate profit by selling or licensing the asset.
But if we think of patents as an instrument to encourage innovation and the development of new technologies, then NPEs are antithetical to the very purpose of the patent system, and their existence is an abomination. The problem is that, within both legal tradition and popular imagination, intellectual property rights are both. They are treated both as an instrument to encourage creative and innovative work, and a form of property. Many of the thornier normative (including ethical) problems about intellectual property are a result of this divided nature, and our failure to pry apart the confused intuitions that result.
Congress is currently considering patent reform legislation (which, to pass, will require miraculous bipartisan cooperation...so in short, don’t hold your breath) that could do away with NPEs for good. Unless and until that happens, though, NPEs will remain big business, and a growing part of the overall technology sector.
'Owning Ideas' is an occasional series about intellectual property and its effect on media, health care, and culture