Removing The Troll From The Thicket: The Case For Enhancing Patent Maintenance Fees In Relation To The Size of A Patent Owner’s Patent Portfolio

Florida Law Review Volume 68 | Issue 2 Article 7 January 2017 Removing The Troll From The Thicket: The Case For Enhancing Patent Maintenance Fees In Relation To The Size of A Patent Owner’s Patent Portfolio David S. Olson Follow this and additional works at: http://scholarship.law.ufl.edu/flr Part of the Intellectual Property Law Commons Recommended Citation David S. Olson, Removing The Troll From The Thicket: The Case For Enhancing Patent Maintenance Fees In Relation To The Size of A Patent Owner’s Patent Portfolio, 68 Fla. L. Rev. 519 (2017). Available at: http://scholarship.law.ufl.edu/flr/vol68/iss2/7 This Article is brought to you for free and open access by UF Law Scholarship Repository. It has been accepted for inclusion in Florida Law Review by an authorized editor of UF Law Scholarship Repository. For more information, please contact , . Olson: Removing The Troll From The Thicket: The Case For Enhancing Paten REMOVING THE TROLL FROM THE THICKET: THE CASE FOR ENHANCING PATENT MAINTENANCE FEES IN RELATION TO THE SIZE OF A PATENT OWNER’S PATENT PORTFOLIO David S. Olson* Abstract This Article proposes a novel solution to part of the problem that large patent portfolios can cause. Both so-called “patent trolls” and firms that commercialize the patents that they own can accumulate and then abuse large patent portfolios, even if most of the patents in the portfolio are of little value. Instead of suggesting reforms to better determine the value and boundaries of individual patents, as many others have already done, this Article proposes that the U.S. Patent and Trademark Office (PTO) multiply the amount owed to keep a patent in force (patent maintenance fees) based on the size of a patent holder’s overall patent portfolio. Patent owners themselves will primarily benefit from this reform, as they will have an incentive to determine the value of their patents and to let lapse those patents that are of low value. A second benefit is that it will require patent owners to disclose their practiced and non-practiced patents. The reform proposed in this Article helps alleviate problems in software and high-technology patenting without significant negative effect in other industries, such as pharmaceuticals or biotechnology. It is simple, and the PTO can easily adopt it, or Congress can enact it. INTRODUCTION .....................................................................................521 I. CONTEMPORARY PROBLEMS IN PATENT LAW ........................523 A. Large Portfolios of Non-practiced Patents Can Be Problematic ...............................................................527 B. Necessary Conditions for a Well-Functioning Patent System Even in the Situation of Large Patent Portfolios ..................................................530 * © 2016 David S. Olson, Associate Professor, Boston College Law School. I thank the following people for helpful critiques and comments: Colleen Chien, Elisebeth Collins Cook, Sheila Findley, Stefania Fusco, Dimple Gupta, F. Scott Kieff, Mark Lemley, Joseph Liu, Zoe Olson, Kristen Osenga, Lee Petherbridge, Diane Ring, David Schwartz, Mark Taber, and Alfred Yen. I am grateful for the able research assistance of Paul Kalish, Alexandra Mansfield, and Michael Shinall. This research was made possible in part by a grant from the Boston College Law School Fund. 519 Published by UF Law Scholarship Repository, 2017 1 Florida Law Review, Vol. 68, Iss. 2 [2017], Art. 7 520 FLORIDA LAW REVIEW [Vol. 68 1. Failure of Condition One: The Patent’s Benefits of Innovation Do Not Outweigh the Costs of a Patent Monopoly ..............................531 2. Failure of Condition Two: The Property Rights Granted by the Patent Are Not Clear ...........534 3. Failure of Condition Three: Transaction Costs Are High ........................................................540 4. Failure of These Conditions Can Create an Environment Where Holders of Large Patent Portfolios Can Abuse Their Power .........................541 C. Characteristics of Large Patent Portfolio Holders ...........................................................................542 II. A PROPOSED SOLUTION: A MAINTENANCE FEE STRUCTURE THAT DISCOURAGES LARGE PORTFOLIOS OF NON-PRACTICED PATENTS ............................544 A. Proposal: Tie Maintenance Fees to the Number of Non-practiced Patents Held by the Patent Owner .............................................................................544 B. “Practiced” Versus “Non-practiced” Patents...............549 C. Required Disclosures .....................................................553 III. BENEFITS ................................................................................560 A. Decrease the Size of Patent Portfolios ...........................560 B. Avoid the Standard Inter-industry Loggerheads ...................................................................561 C. Increase Disclosure as to Patent Boundaries and Ownership ......................................................................563 D. More Funding for the PTO .............................................564 IV. COSTS, DISADVANTAGES, OBJECTIONS ..................................564 A. Objection: Just Increase Maintenance Fees Across the Board ........................................................................564 B. The Proposal Makes the Patent System More Expensive, Which Decreases Incentives to Innovate .....................................................565 C. The Proposal Burdens Patent Holders ...........................565 D. Participants Will Game the System ................................565 E. NPEs Will Collect Portfolios of Young Patents .............566 CONCLUSION .........................................................................................566 http://scholarship.law.ufl.edu/flr/vol68/iss2/7 2 Olson: Removing The Troll From The Thicket: The Case For Enhancing Paten 2016] REMOVING THE TROLL FROM THE THICKET 521 INTRODUCTION The legal literature is replete with discussions of the problems that large patent portfolios cause. While non-practicing entities, or “trolls,” suing in the software and high-tech industries generate the strongest complaints, large patent portfolios can cause competition and gridlock problems even when held by active industry participants. Many of these problems arise because patent boundaries and validity are often uncertain. Moreover, because patent holders need not register assignments of patents and because trolls often use multiple shell companies, it is difficult to know who owns which patent or how many patents a particular entity owns. Thus, not only must innovators and firms worry about the size of patent portfolios in the hands of their competitors and trolls, they must also be willing to spend substantial time and effort determining potential liability. And even with those efforts, they still may not be able to know all of the potential patent liability they may face an (...truncated)