There needs to be an anti-patent-troll membership organization. You pay a fee relative to some metric and the organization acts as insurance against parent trolls by fully defending any patent lawsuits that are obviously unjustified. And to keep costs low, membership in this organization would be public to deter patent trolls from even trying to sue a member in the first place.
Assuming you need a legal staff of 20 with avg cost 500k per. So that’s 10 million per year. Double it for rent, SGA, etc. we’re at 20 million per year.
Offer a protection package at 10k per year, you need 2000 paying customers. Since all the lawyers are on staff, you can have them invalidating patents when not defending case. If you structure it like a mutual insurance company, you could return a portion of premium based on expenses once a war chest is amassed.
I like it, although you left out the part where your other business arm researches potential troll lawsuits before they happen and goes after companies who don't pay you protection money. /s
It's true, it needs to be a social enterprise that ultimately makes itself redundant. What if a % of all revenue went into a warchest that built over time, and if it ever achieves the goal (of eliminating themselves) it got paid out to current shareholders
I'm establishing another organisation that provides mutual protection for companies that look to protect their valuable IP by actively fighting against dismantling of patents, and systematic shakedowns by anti-patent organisations .... oh wait
Lawyer here. I love this idea. I think you make this work even better with a lot of part-time lawyers forming an army. In a world of remote work, I think it would be an appealing proposition. 100k for 10 hours a week of part time work.
That's the key to it all - you have HR startups, insurance firms, cybersecurity firms etc. bundle the cost of patent troll insurance into their product, give them a commission, and have them sell it to small businesses - not just startups. Then you can keep the price much more affordable because you have an economy of scale!
I mean kind of. They have to go for people that have money to pay them off, but not enough to make fighting them worth it. Startup is kind of nebulous, but there is a difference between a 40+ million series B startup and a small business that would balk at $10k a year. I would guess the trolls go for more of the former than the latter.
You could do different levels of protection. Have a smaller tier for smaller companies (less than a million revenue a year) for maybe 500 or 1000 a year, then larger companies pay a more. If you get one of these lawsuits, do what cloud flare have "I'm under attack" style join.
Returning unused premium makes it a "mutual" insurance company, legally. This has specific legal and tax implications.
One of the big constraints of insurance companies is the differing laws in each state and province, so don't underestimate the corporate/legal/tax/accounting/operational/compliance reporting/etc costs in EACH jurisdiction.
As far as I understand, most US corporations legally reside in Delaware, and patent trolls like to file suit in East Texas, so the burden of this might be considerably less than for insurance sold to individuals.
Running the numbers is exactly what patent trolls do so yes it seems like a valid approach.
Reading down the Twitter feed from the troll in question shows a Tweet of a discovery by them and their lawyer that it's cheaper to deal with the court costs of trafficking 15 kg of cocaine than to legally assert a patent.
This of course can be read two ways like what a shame because it's a sin to use cocaine and not a sin to legally assert your intellectual property rights, however in context, it's so much more sinister scenario of shaking down legitimate businesses for illegitimate reasons.
Exactly. The costs of discovery are high and assymetric. A decent lawyer can legally cause a defendant to run up a monster bill long before this gets anywhere near a trial. It is legal extortion.
They could do a substack type of blog or Youtube channel documenting their battles and covering the issue. Become the industry expert that all the media sources from.
Content is always super valuable for companies with a social good angle.
It's like patent trolls are a parasitic industry acting against the betterment of society and they should be fought by public instances paid for by everyone
At 10k a year this is very unlikely to work. Few startups will pay that to protect against a threat that, practically speaking, is very rather unlikely. The fee needs to be an order of magnitude lower. Incidentally it will open up this service to a much wider range of companies, so it may actually be easier to pull off.
They don't really need to employ lawyers at all. It's just an insurance club. They need an actuary, an accountant and a clerk. They can pay law-firms to do the lawyering, and contract researchers to dig up prior art. That way, the main costs arise on a per-case basis - only the office staff are fixed costs.
True, but the goal is to fight patent trolls or non practicing entities. Not take on legitimate cases of patent infringement against Oracle or Intel or Apple
Winning an straightforward case in the American justice system can be quite expensive, especially when the plantiff goes judge shopping (which they all do, it's part of what makes a patent troll a patent troll).
The Japanese video game industry does this in an ad-hoc way.
Smaller game studios ask bigger companies, like Nintendo, to register some patents in their stead so the bigger companies can keep them safe with their elite team of lawyers. The bigger companies like Nintendo in turn gatekeep the patents from trolls and abusers, letting the industry at-large use the patents for a greater good while suing anyone who doesn't play nice into oblivion.
It's not perfect, and it certainly only works because businesses in Japanese society generally view each other as friendly rivals rather than outright enemies, but it's an ingenius solution to a legitimate social problem.
So basically because the official environment (laws and courts) doesn't do its job, large private entities end up taking over in what is essentially a protection racket. Sounds a bit too much like the Mafia IMHO.
The more you realize that for Japanese society, it's been the same as how it was since a long time. Zaibatus/Keiretsu is just a modern evolution of feudal era Daimyo/Samurai. As a rule of of thumb, they're trying to good for the masses but indeed they are (benevolent) dictator in some ways.
I think what mschuster91 is saying is that there are regulatory functions that, if an impartial government doesn't do it, will be done by big corporations in the space, or it's just a free-for-all where trolls roam free.
Exercise to the reader as to whether the EU, US or Japanese model is most effective.
Is that why Nintendo has a significant number of obvious patents despite prior art? For example, recently they patented "time manipulation of objects in game".
I think the problem is that most of the major companies are comfortable writing it off as a cost of doing business and don’t want to give up the possibility of using strategic patent suits themselves.
> don’t want to give up the possibility of using strategic patent suits themselves
This is a highly under-appreciated aspect of the patent world. Companies that buy and own lots of patents do so defensively. Big companies even enter into patent cross-licensing agreements with each other, where they basically say "I know you probably infringe on my patents and I probably infringe on yours, but we'll make a deal and indemnify each other". But they want to maintain those patents to harass upstart companies that would threaten their core business, so when the trolls come along, they just pay to license and move on.
Having beaten my head against the immovable mass of Quickbooks, I'm shocked to find myself cheering Intuit for anything. I'm not about to switch back, but that earns my grudging respect.
Yeah, but if such an insurance scheme can protect smaller member companies and prevent patent trolls from targeting them, I'd say that's mission accomplished. Let the patent trolls go after the companies that will pay them off, but make sure they're strongly deterred from going after the little guys.
The current patent regime does nothing to deter going after the little guys. Or even, really, the big guys. Newegg was essentially gutted by the same patent troll that Intuit beat, as the article notes. Also, Intuit's victory didn't invalidate the patent, they just were found to be not infringing.
I'm probably misunderstanding (not a law guy) but that seems like a strange mechanism - members of that group transfer legit patents to the patent troll, on the condition that the troll doesn't sue them. This seems to be arming the troll with the tools to attack outside groups - making it somebody else's problem is not the same as eliminating the problem.
I'd rather see the Cloudflare approach, beat the barbarians back from the gates then destroy the troll's IP inventory with examples of prior art.
The risk models for potential members would vary wildly. The fee structure would have to account for different levels of risk based on the activity of members. And then what if one member faces a lawsuit that could be an existential threat to that company, how much of a legal defense is the appropriate response? And then who determines the legal strategy (settle vs court)?
This sounds like ransomware insurance. Often you would expect the insurance to help you recover from losses but instead they just pay the ransoms since it's cheaper. Which in-turn makes the insurance holders even more of a juicy target.
I don't think it's quite analogous to ransomware insurance because a patent troll incurs its own costs from fighting out a lawsuit in court. So by credibly committing to bitterly fighting out each patent troll lawsuit, it can deter patent trolls from suing its members, and actually lower overall costs. Credible deterrence is important in an iterated game.
Such things definitely exist in the form of mutually assured destruction cartels. All the members license all their patents to everyone in the cartel. If anyone (external or not) sues anyone in the pact, it automatically cancels any patent licenses they have from members of the cartel, and the cartel launches a patent enforcement suit using their combined portfolio.
Of course, none of that helps with patent trolls, just like the ability to turn Russia to radioactive glass doesn't defend Washington DC from an independent actor with a suitcase nuke.
Litigation is notoriously risky; the cost of settling is usually orders of magnitude less than the gain of winning. In that respect, it resembles the kind of thing insurers specialize in. So this is simply a specialist insurer, whose USP is that if they think they can invalidate a patent, they go for it.
I'd have thought that deterring patent trolls is the opposite of what they ought to do; I imagine something more like a honeypot operation - every effort is taken to ensure members look just like ordinary marks and suckers.
It could cause strains if someone came after a member with a valid patent. The club would decline their claim, they'd have to settle and redesign their product, and they might go bust.
this makes sense to me - pay a premium each month, get protected from trolls. Up to the insurer whether to pay the "licence fee" or fight them in court, and they can make that decision on behalf of all their customers.
Lot is for patent holders to commit their patents to the group and everyone gets a license.
Rpx is probably the closest thing. They will try to kill a patent if it is being used against their members. But they don’t cover the cost of litigation.
There are also patent pools where everyone pools their money to buy a certain patent.
There may be some insurance you can seek out. But I don’t know if anyone in the space that is using that type of thing
I think that Intellectual Ventures started out as a defense against patent trolls, but after gathering enough of a patent portfolio, they started playing offense in a way that looks like patent trolling.
There are already insurance companies offering coverage for legal expenses. The interesting part here is maybe that by restricting it to patents the insurer has a very clear idea of the risk being covered, as all the patents are public.
Edit: on the other hand your potential customers will be difficult to convince. To pay insurance you must have risk aversion, something I don't expect to be abundant among startups
I worry that this would introduce cost disease[1] in legal fees.
In the case of healthcare and education, I believe that cost disease is caused partially by an excess of funding - subsidizing. In the case of healthcare, it's insurance. In the case of education, it's grants and student loans. These mechanics greatly reduce the pressure of service-providers to reduce prices - and so they increase prices because they want profit.
If legal fees, which are high enough as it is, were also subject to subsidization through this kind of organization, then even though members would be temporarily better-off, I would expect that as more people made use of these organizations, legal fees would start to rise even more - a tragedy of the commons.
Besides, aren't these lawsuits symptoms of a problem? We want to address the disease (overly complex legal system requiring an expensive education to understand, mechanics that allow for patent trolls), not the symptoms.
I think the main difficulty is in the "obviously unjustified" determination.
Member organisations would be trying to get the anti-patent-troll org to defend any and all IP claims against them. Not all IP claims are patent trolling, some are legitimate and you don't want there to be big arguments whether this is a troll attack that needs defending.
Perhaps the way to do it is by the type of claimant rather than any analysis of the merits of the case. For example, one standard would be "Anyone who brings a claim while not actually being a competitor of the defendant".
Spontaneously, my idea to protect against such a ligitation would be, put it in the contract that if the insurance rules that the client has no valid case, the client can take it up to a committee, for example the pool of all clients. And have it in the insurance contract that the decision of the committee is final. Obviously/hopefully it'd be in the interest of the other clients that their insurance payments won't being spent on the wrong type of cases.
If I'm purchasing litigation insurance, I'm not going to want a provision where the denial of my coverage is determined by a pool of individuals who have an interest in not granting the coverage. Insurance agreements are legally binding contracts and that's why they get litigated over. Your scheme essentially waives an insured's right to a breach of contract claim over non-coverage.
(Shrugs emoji) Well okay, sooooorry I can't convince you to buy this fictitious insurance to protect your fictitious self against fictitious patent lawsuits...
Insurance schemes pool the insureds' moneys together in case something bad happens to one of the insureds, of course it'd be in all the insureds' best interest that the money is used properly, if the company says "We won't fight this particular patent troll", it's also in the pool's interest to tell the company "Wait, we think this is a valid case, and you have to fight it!", because otherwise, when a similar patent troll shows up trolling one of them, the insurance company will also ignore it, leaving them exposed.
> Insurance agreements are legally binding contracts and that's why they get litigated over. Your scheme essentially waives an insured's right to a breach of contract claim over non-coverage.
If I drink and crash my car, my insurance won't pay me. I can sue them and the judge will tell me to fuck off. In a poor analogy of my fictitious example, I can ask the pool of other drivers to judge whether the insurance should pay or not, and if they say no, sure I can also go to the judge, and she'll say "Sorry, the contract says the pool's decision is final.".
>If I drink and crash my car, my insurance won't pay me. I can sue them and the judge will tell me to fuck off.
Because of the terms of your insurance agreement that will clearly disavow coverage in this circumstance.
> In a poor analogy of my fictitious example, I can ask the pool of other drivers to judge whether the insurance should pay or not, and if they say no, sure I can also go to the judge, and she'll say "Sorry, the contract says the pool's decision is final.".
The thing you don't get is that insurance agreements are already legally binding agreements which is why coverage decisions are made with respect to the facts of the matter and the terms of the insurance agreement. As an insurer, if you do not cover something that the agreement requires you to cover, the insured will win win in court and get the coverage.
>Insurance schemes pool the insureds' moneys together in case something bad happens to one of the insureds, of course it'd be in all the insureds' best interest that the money is used properly, if the company says "We won't fight this particular patent troll", it's also in the pool's interest to tell the company "Wait, we think this is a valid case, and you have to fight it!", because otherwise, when a similar patent troll shows up trolling one of them, the insurance company will also ignore it, leaving them exposed.
Insurers make the decision based upon the terms of the insurance agreement that they signed.
Most large corporations have a huge chest of patents they use to keep incumbents out. Their lobbyists would never allow a change to the current status quo.
Lobbying should be banned. Fix the root of the problem.
