As I've noted in other posts, the SXSW conference is generally an optimistic event, so it was no surprise to see a panel called How to Fix Patent: Trolls, Innovators & Reform. Unfortunately, actually attending the panel left me with a very different impression... more along the lines of "abandon hope all ye who enter here."
The panelists - Julie Hopkins, Intellectual Property Practice Chair & Partner at the law firm of Tydings & Rosenberg LLP; Google senior counsel Lee Dunn; Russ Merbeth, chief policy counsel for Intellectual Ventures (the patent house headlined by former Microsoftie Nathan Myrhvold); and moderator Reihan Salam, senior fellow at the R Street Institute think tank - came from such vastly different perspectives that it seemed impossible they could ever find common ground.
In fact, in about an hour, I was struck by seven separate issues that defy easy solutions, and a few rays of hope:
It goes all the way back to the cotton gin: While the furor over patent trolls may seem new, the U.S.'s first patent controversies date back to 1794 when Eli Whitney sued plantation owners for patent infringement.
The problem is getting worse, not better: There were some 100,000 patent infringement litigation threats in 2012, Hopkins said, and according to RPX Corporation, the percentage of patent suits filed by patent trolls, (Patent Assertion Entities, or PAEs), continues to rise.
There's too much money at stake: The median price for defending against such a suit is $2.6 million, with $600,000 the figure for small cases. That creates a huge incentive for defendants to settle, even though 9 out of 10 patent suits lose when "adjudicated on the merits." Google's Dunn said it costs $5 million to make it through an average patent trial, with $1.7 million typical for smaller cases.
Patent trolls have a strategic advantage: PAEs don't make anything, so they have fewer documents to produce during discovery, which leads to much smaller legal bills, Hopkins said. Just as important, by their very nature, patent trolls have no fear of counter claims or damage to their reputation in the marketplace. That lets PAEs hire lawyers on a contingency basis, an option not available for defendants.
Patents involve conflicts between legitimate needs: On the one hand, the goal of patent law is to protect inventors and spur innovation, but it also wants to protect the rights of patent holders. Worse, the players' needs can change over time. "Small entities have one set of interests," said Salam, "but when you become large entity, your interests change." Google's Dunn agreed: "Your perspective has to change when you're sued, as often as we are." Google started with many innovations that were open source, she added, but "we've been forced to become more defensive, as everyone has."
You can't tell the good guys from the bad guys: It might seem that it's easy to tell the bad actors from the innocent victims, but all the panelists agreed, for various reasons, that it isn't always the case. It can be difficult to tell a troll from a legitimate inventor, and most trolls claim that they're serving the inventor community in one way or another. Some PAE's might be nothing more than trolls, but Merbeth claimed that Innovation Ventures is different, and the other panelists seemed willing to cut him some slack on that.
Congress moves tooooo sloooooowwww: It took seven endless years to pass the America Invents Act. And even though there is already new legislation under consideration, there's no way that law-making bodies can keep up with technology and avoid a parade of unintended consequences.
To be fair, the panel did discuss a few ways that patent system could be improved, including setting a higher standard for obviousness and the inventor's actual contribution, more technical training for patent officers, and using crowdsourcing techniques to search for prior art on patent applications. And then there was the radical suggestion: have the Supreme Court come along and abolish all software patents. While Google expects "more and more innovation will happen without patents," Dunn said, "We have not embraced that movement at this time."