The Troll Next Door, 6 J. Marshall Rev. Intell. Prop. L. 292 (2007)

THE JOHN MARSHALL REVIEW OF INTELLECTUAL PROPERTY LAW THE TROLL NEXT DOOR JENNIFER KAHAULELIO GREGORY ABSTRACT The term Patent Troll is increasingly permeating news headlines. This comment explains where the term came from and how the changing landscape of patent enforcement has contributed to the evolution of the Patent Troll. Some have suggested that segregating Patent Trolls from other patent enforcers will solve many of the patent system's woes. This comment analyzes proposed ways of distinguishing Patent Trolls and reveals them all as prejudicial and ineffective. The use of the term Patent Troll is a mask for underlying fears based on real shortcomings in the patent system, which need to be addressed. Copyright © 2007 The John Marshall Law School Cite as Jennifer Kahaulelio Gregory, The Troll Next Door, 6 J. MARSHALL REV. INTELL. PROP. L. 292 (2007). THE TROLL NEXT DOOR JENNIFER KAHAULELIO GREGORY* INTRODUCTION An alarming problem has surfaced in the headlines lately: "Patent Troll Menace," ' "Lawmakers want 'Patent Troll' Crackdown," 2 "Patent Troll Bites Google." 3 It sounds scary, but what does it really mean? Although it has no official definition, the label "Patent Troll" is used with increasing frequency in a vague and subjective manner. 4 Patent Troll is a derogatory term used to describe a unique type of patent enforcer that has emerged over the past decade. 5 Assistant general counsel for Intel, Peter Detkin, coined the term in 2001.6 He defined a Patent Troll as an entity that makes money from a patent solely through litigation or licensing and not from manufacturing or developing the patented invention.7 Recent definitions of the term Patent Troll have become sharply critical. Yahoo!, Inc. defined Patent Trolls as "entities whose primary purpose is to prey on innovators who actually produce societally valuable products - abuse the patent system by obtaining patents for the purpose of coercing settlements from such innovators. ' The term Patent Troll is used as a verb in some cases, but is most commonly used as a subversive and ugly label.9 Patent trolling, as a verb, is used to describe the action of hunting down and acquiring unused patents to enforce against any company using similar technology to * J.D. Candidate, May 2008, The John Marshall Law School. B.S. Chemical Engineering, Montana State University. 1 would like to thank my wonderful husband Mike for his support and my mom Nicki for her editorial assistance. Thank you to my grandfather, Leon B. Dorich, for inspiring me always. I would also like to specifically thank my editors, Kevin Gualano, Karen Simon, and Tara Stuart. Thank you to the staff of THE JOHN MARSHALL REVIEW OF INTELLECTUAL PROPERTY LAW for their invaluable editorial assistance. Any mistakes in this article are my own. 1Zachary Roth, Patent Troll Menace, WASH. MONTHLY, June 2005, at 12. 2 Erica Werner, Lawmakers Want "Patent Troll" Crackdown, USA TODAY.COM, June 9, 2005, http://www.usatoday.com/tech/news/techpolicy/2005-06-09-patent-troll x.htm?csp 34. 3 Francis Till, Patent Troll Bites Google, NAT'L Bus. REV., Dec. 29, 2005, http://www.nbr.co.nz/home/column article.asp?id= 13937&cid=3&cname=. 4 ANTITRUST MODERNIZATION COMMISSION, PATENT LAW REFORM 3 (2005). available at http://www.amc.gov/commission hearings/pdf/Statement Detkin.pdf (asserting that the phrase "patent troll" is now used as "a placeholder for all the ills perceived in the patent system"). 5 Brenda Sandburg, Trollingfor Dollars, RECORDER, July 30, 2001, at 1. Brenda Sandburg was speaking with Peter Detkin, assistant general counsel at Intel, who said he came up with the term "patent troll" because he was sued for libel after using the term "patent extortionists." Id. 6 ANTITRUST MODERNIZATION COMMISSION, supra note 4, at 3. Detkin recently stated that he was trying to garner attention when he gave the colorful name "patent trolls" to patent claimants who were "asserting patents of dubious value and seeking nuisance value settlements, often threatening injunctions along the way." Id. Interestingly, Peter Detkin is now the managing director of Intellectual Ventures, L.L.C. Id. Intellectual Ventures is a company whose stated mission is to "invent, and invest in invention." Id. 7 Sandburg. supra note 5, at 1. Detkin's definition is: "A patent troll is somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced." Id. Detkin spent much of his time at Intel fighting claims of patent infringement coming from companies outside of the semiconductor industry. Id. Detkin stated that in 1999 alone, Intel had received claims of patent infringement totaling over fifteen billion dollars. Id. 8 Brief of Amicus Curiae Yahoo! Inc. in Support of Petitioner at 2. eBay. Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837 (2006) (No. 05-130). 9See ANTITRUST MODERNIZATION COMMISSION, supra note 4, at 3. [6:292 2007] Troll Next Door the patent.1° Patent trolling is also used to describe situations where a patent holder accuses infringement and threatens injunctive action against many companies that might pay a licensing fee, then sits back and waits for a payoff.'' When used as a label, Patent Troll conjures images of an archaic ogre-like monster and vilifies a type of patent enforcer that threatens businesses with unfounded patent infringement litigation solely for the purpose of monetary gain. 12 The most disparaged type of Patent Troll is one who purchases a patent for a reduced price at a bankruptcy auction, while having no intention to manufacture a product or to innovate further with the invention. 13 This type of Patent Troll then seeks out corporations that appear to be infringing on their newly acquired patent and sends demand letters threatening the companies with 14 injunctions in order to extort licensing fees. Companies are compelled to pay the fees because injunctions can have extremely severe economic consequences and can significantly damage reputations." For instance, in Polaroid Corp. v. Eastman Kodak Co., Polaroid sued Kodak for infringement on its instant camera patents and obtained an injunction. 16 Kodak argued that the injunction would cause the loss of 4,500 jobs, 7 $200 million in plant and equipment costs, and would injure Kodak's customers and goodwill.' However, the court was not persuaded by these arguments, and it upheld the injunction against Kodak. i 10 Joe Beyers, Rise of the Patent Trolls, CNET NEWS, Oct. 12, 2005, http://news.com.com/Rise+of+the+patent+trolls/2010-1071 3-5892996.html?tag-nl ("[P]atent trolls .... seek to quietly acquire significant patent portfolios with the intent of threatening lengthy and costly patent infringement lawsuits against operating companies."). " Patent Law Reform: Injunctions and Damages: Hearingon H.R. 2 795 Before the Subcomm. on Intellectual Property of the S. Comm. on the Judiciary. 109th Cong. (2005) (statement (...truncated)