You can threaten 1000's of entities with legal action to extort money, since just defending against the allegation is very expensive. Then when a few of those threats don't stick, all you have to do is "settle for nothing" to avoid an actual trial. Nice.
The patent trolls are just a symptom, the legal system is the problem.
You leave a legal loophole and you'll find some parasitic scum that will exploit it. Personally I find it hard to believe that the people running these companies can sleep at night... But that is a different story.
Instead of Patent Trolls, you have an apathetic business environment, crumbling infrastructure and no copyright protection at all. You just traded one set of problems for another one
England has some useful things that the US should consider.
i) loser pays costs.
ii) if Ann is offered £X out of court, but declines it, and the case goes to court and she's awarded £Y then she has to pay costs if £Y is less than £X.
iii) Costs are controlled.
There are considerable problems with the English legal system, and many people are not able to seek justice through the court system. But this kind of thing would probably prevent some of the abuses of the US system.
ii) There was a case some years ago where two women (sisters?) were accused of swapping eggs. They were accused of taking cheap eggs out of the carton and putting expensive eggs in. They were offered a lot of money, but "wanted their day in court", and although the court said they didn't swap eggs the court offered a smaller amount in damages, which got wiped out by the costs they had to pay.
This is the kind of thing that I find tricky to web search for. It seems like it should be easy - ["legal case" "eggs"] and then various supermarket names. I should try limiting the date range to before 2005. But if anyone has any tips about how to better search for it I'd be grateful. (Of course, Usenet news probably has some discussion about it, but Google is sub-optimal for searching their Usenet archive. It's a great shame.)
What happens when Little Citizen Joe legitimately sues a huge company with lots of legal resources resulting in Citizen Joe getting out-lawyered? Is he burdened with the massive cost of that? Surely the company could drop XXXk in legal bills on him
You're missing the other half of the equation.
If Joe has legitimate grounds to win the lawsuit, high-dollar lawyers will flock to him, since their high fees will be fully paid by a huge company when they win.
You’re missing the part about costs being controlled. Their high fees won’t be paid — some portion of them will.
Similar system works where I live: there’s a well defined attorney hourly fee, which is what is used to calculate the reimbursement of attorney’s fees of the winning party. If you hired better lawyer, you still have to pay the difference from your pocket. Presumably the idea is to limit abusively large fees.
Perhaps. Fraud tends to require an extensive discovery process to establish the facts, but small claims court is optimized for cases where the facts are agreed upon but the application of law is in dispute.
Good. Small fraud doesn't really matter when you are talking about patents, because they are so expensive to get and litigate. Patents that aren't valuable shouldn't block innovation.
It can. Although my understanding is that if one side purposefully generates high costs then they can get in a lot of trouble for doing so.
It's also worth noting that the UK is lowering the amount of fees you can get back. There's an upper limit on the percentage of fees you can get paid by the other side. This is essentially to introduce a higher cost to litigation through the courts and encourage sides to settle or go through an arbitration process.
I wonder what would happen if parties to a civil suit were required to split their expenses with their opponent. That is, for every dollar you spend you pay a dollar of your opponent's legal expenses (and vice versa).
It would discourage using an army of lawyers against a small opponent (because it would allow them to hire an army as well), and might also help keep legal costs down in general.
I'm sure it's something that'd be a hard sell, and lawyers would probably hate it, but it's an interesting thought experiment.
This could work even if the split wasn't dollar for dollar. If the deep-pocket party had to give its opponent $1 for every $3 it spends, it would still prevent 10-to-1 spending on trials. I don't think there would be anything "unconstitutional" about this, as it's just a detail about how courts should function.
Well, most of the current system is zero to one, so at least this is more "fair" than that. In general, however, changes to the foundations of society should only be as radical as they have to be. So if we start out at $1 for $3, and that seems to work well, the ratio can be changed later as we learn more about how the new system works. If a reform is so big that it entails many "unintended" consequences (and all reforms entail some of these), the risk is great that the reform will be reversed completely.
I'm a big fan of loser pays their own expenses + min(their own expenses, winners expenses). That means that you're at worst on the hook for twice what you put into the legal action, making it harder for large companies to price people out of the legal market with high-priced teams.
Presumably in a loser-pays system you would be required to post a bond to sue if there was some question of your ability/willingness to pay.
Besides, the ability to offload your legal exposure (as opposed to the risk for ordinary debts, where the creditors should have known what they were dealing with) onto shell companies is exaggerated.
They already don't have access, they have to pay their half of the costs. We're talking about patent lawsuits here anyway, both parties are corporations so "poor" isn't really a meaningful concept.
As soon as stakeholders are personally responsible, you suddenly have no protection afforded by the corporation.
"That's Great!" you might say. "Now everyone will make more careful decisions."
Except what will actually happen is people will stop forming companies, since they will be completely liable for things outside their control, like the bad decisions of others or stock market crashes or the weather.
The US corporation system is by no means perfect, but the protection it allows people who are actually trying to create things (read: not patent trolls) really does foster innovation a lot of the time.
I've always thought the justification for corporate limited liability was even flimsier than the justification for patent protection. At least with the latter you can point to economic theory and say that patents address free rider problems. What economic theory justifies corporate limited liability? Why should anyone be insulated from any liability incurred by their profit-making activities?
Limited liability enables the sale of corporate equity. Without it, purchase of an ownership stake in a company incurs potentially unbounded downside risk. So, in addition to "encouraging entrepreneurship" (which I agree is a nebulous benefit), limited liability also helps distribute the benefits of industrial capitalism to e.g. pension funds.
Because without limited liability there is a MUCH smaller incentive to start a company. There are plenty of good intros as to how the invention of limited liability really was the beginning of modern economic takeoff. I recommend
Ascent of Money" by Niall Ferguson for a good intro.
Sure, but why is that smaller incentive not the right amount of incentive? You can create incentives for a lot of things, but generally those are distortionary. What economic justification is there for the idea that there needs to be a bigger incentive than the market provides?
That's an empirical question, and deserves an empirical treatment. I cannot do that in a comment. Luckily, this question has been thoroughly investigated for almost two centuries. If you want a serious treatment, you might look to:
But if you want a more casual treatment that explains it (and all the associated issues like why bonds and stocks and debt contracts even exist), I really recommend The Ascent of Money by Niall Ferguson.
Probably because it's unreasonable for me to lose my house to a patent troll like these guys. Taking risks is good for the economy in general. Without the LLC giving me some protection from patent trolls it'd be too risky for me to start my own business.
The pessimistic view is that not needing to worry about empathy is good for making money. The optimistic view is that having what amounts to a public insurance policy baked into your economic system is good for making money. Probably both are true.
Why should anyone be insulated from any liability incurred by their profit-making activities?
You do realize, that this is the primary reason that corporations are formed, at least in USA? There are good arguments for the fairly radical proposition that we should end the corporation and the role it plays in our economic system, but you should recognize the scope of the argument you're making.
There is plenty of precedent for laws which pierce the corporate veil in case of fraud or abuse. Such laws have yet to dissuade the formation of new corporations, and there is no reason to suspect that allowing it in the case of patent trolls would result in anything other than dissuading patent trolling.
"ii) if Ann is offered £X out of court, but declines it, and the case goes to court and she's awarded £Y then she has to pay costs if £Y is less than £X.
"
This does actually occurs in some parts of the US legal system.
See, for example, California's section 998.
It varies from state to state, and in some cases, claim type to claim type.
Fed. R. Civ. P. 68(d) Paying Costs After an Unaccepted Offer.
If the judgment that the offeree finally obtains
is not more favorable than the unaccepted offer,
the offeree must pay the costs incurred after the
offer was made.
*Joint* motion to settle (with) attorney fees are
to be borne by the party that incurred them.
Good for Kaspersky, but effectively Lodsys collected payments on this particular patent from 54 out of 55 companies and then Kaspersky let them keep the patent in exchange for leaving them alone. Not sure if this is worthy of celebration at all.
The patent in question could be invalidated, and in the future patent trolls might be a little more careful what suits to file lest they lose their patent.
If you live in the US, there is a lot of important patent reform legislation being drafted in committee right now, and reform has a lot of support (including from traditional archenemies like the MPAA). Somebody motivated me earlier today to write my congressman about it, and so should you. Remember, constituents who don't complain, don't exist.
The letter I'm drafting is sort of Texas-specific, but you are welcome to adapt it to your state. If so please post a link so others on HN can benefit.
I'd like to see a settlement negotiation swing the other way. Someone like Kaspersky Lab with solid footing insists that Lodsys pay them to avoid trial. How much is Lodsys willing to pay to prevent the public exposure and invalidation of their patents?
Often, that is the case, though there is a lot of scrutiny on the patent trolls these days. We're also seeing great shifts in transparency on the part of the people held up by these IP bandits. Witness The Oatmeal vs. FunnyJunk:
http://en.wikipedia.org/wiki/The_Oatmeal_and_FunnyJunk_legal...
"There are strategies I think would be really neat and effective that I literally can't execute. I can't make good law because I don't have any appellate cases left. They [the trolls] are dismissing cases against us before any dispositive motions." -Lee Cheng, Newegg's chief legal officer
So, the problem is that when you settle you give away your right to get your money back if the patent it later invalidated. This makes for a perverse incentive.
I wonder if there is some way of credibly signalling that you won't settle, even if you don't have the money for a lawsuit. Can you give away your right to settle?
IE, could we set up some organisation whereby you give them the right to veto any settlement you make to a patent troll? And that organisation then insists on a clause whereby any settlement can be undone if the patent is later invalidated.
Of course, the troll would probably insist on getting more money, but even if they do, if the patent is invalid you stand a good chance of get it back.
There's probably a flaw in the above scheme somewhere, but surely there's some way of doing this...
I wonder if at some point it makes sense for someone like Kaspersky to ask the judge to deny the motion to dismiss by Lodsys and force a trial on them. IANAL but I don't think a judge has to dismiss even if the prosecution asks for a motion to dismiss.
Linked from the original article is a case of a judge ruling patent exhaustion[1]:
Helferich's patents cover the delivery of content (alerts with a hyperlink) to a cell phone.
The issue is not with cases like this, the issue is with bullshit patent being granted in the first place. They need to get rid of software patents, and wishy washy crap about how X could do Y if only we had money to build it rather than just dream it up. Invent something, build it and then let it be patentable.
It sounds like if it's a matter of spending about $1mil to fight a troll in court and get the patent invalidated, the victims might do better by pooling the money they would have spent on settlement together on the first case to go to court and get the claims invalidated.
I doubt this really say as much about the merits of Lodsys' case as the EFF proclaims. This is simply an economic decision. As I'll explain below, I think they have a relatively strong case. But going to trial is expensive for both sides, and I think Lodsys simply sees insufficient margins in seeing it through. The problem, as the article says, is that even getting to the stage where you can call their bluff like this is extremely expensive, and statistically very few defendants will take it this far. So for the few folks who do stick it out this far, Lodsys can simply drop out and still stay way ahead of the game.
As to why I think their case is somewhat stronger than the usual troll: Firstly, it's patents partially survived Google's supposedly "devastating" re-examination request. Although the process is still ongoing, the claims that survived are golden. Those now have an "enhanced presumption of validity", which means if asserted at trial, the defendants would be wise to seek stronger alternate defenses besides invalidity.
Secondly, and speaking of alternate defenses: patent exhaustion. Exhaustion is triggered on first authorized sale [1]. I really cannot (and neither can the EFF) comment on this since all the relevant terms on which Apple, Google etc. have a license are secret. Further, since Apple was not allowed to intervene, it seems even less likely a defense.
Thirdly, the claims are "vague" only if you decide not to put much effort into understanding how they work. Much like non-lispers complaining about parentheses. I have seen vague claims, and these are downright straightforward in comparison, despite what the EFF's out of context snippets may imply. Also, mentioning fax machines is a non sequitur. If the main function of fax machines in this patent was to act as network components, by the Doctrine of Equivalents [2] they are functionally equivalent to the Internet of today. Heck, it could be carrier pigeons and still be valid. This is not an abuse of the system, and if you want to make it so, you'd need a lot more reform than is likely to happen.
I cannot comment on the quality (novelty, non-obviousness, etc.) of the claims since I have difficulty evaluating them in context of the state of the art in ~1992, to which these patents claim priority.
(IANAL. Which may also be why I think one solution to this problem is a drastic lowering of attorney fees :-P)
Right. Lodsys thought that it was too risky for them, so they chose to drop the case. The amount that Lodsys would have gotten from licensing fees would have been more than the amount that it cost to bring the case to trial. So the only reason they would have to dismiss the case would be that they were worried that their patents were at risk. (Note: the risk could have been small, but still enough to worry them.)
They have no incentive to drop a case this far into it. Future targets now know that they just have to keep the case going and eventually Lodsys could just drop it.
> They have no incentive to drop a case this far into it.
If you think of their model as an exercise in gambling, they do have an incentive. Jury trials for patent cases are notoriously hard to predict, and they risked a very real, non-zero chance of reaching a decision that, even if it didn't kill their patents, could cripple their campaign, say, something like "Patents are valid, but iOS apps don't infringe."
(Note that jury verdicts in patent cases seldom seem to have much to do with the technical merits of the case.)
So their potential outcomes were:
A. Drop case: continue settling with small entities for Y revenue going forward with estimated revenue R.
B. Favorable decision with X in damages: nice bonus to go along with contiuing revenue R.
C. Unfavorable decision: 0 damages as well as very likely loss of continuing revenue R.
Say the outcome has probabilities P(A), P(B) and P(C). They likely just assumed some values for these probabilities (actually, lots of empirical data out there these days, and P(B) is quite low)and X and R, and ran the numbers, and they got an expected result that wasn't too favorable. So they chose to minimize their risks, along with the associated rewards.
> Future targets now know that they just have to keep the case going and eventually Lodsys could just drop it.
Right, but the catch is that for most defendants it's too expensive to even just keep going on. And that's why they'll keep suing left and right and dismissing if anybody gets too close to trial. I don't know if there's any way to stop this campaign unless they slip up.
(PS, I was mistaken about the Apple situation. Apple could not intervene because Lodsys settled the cases it was trying to intervene on -- essentially a tactical retreat like this one -- so it doesn't really speak to the exhaustion defense as such.)
You can threaten 1000's of entities with legal action to extort money, since just defending against the allegation is very expensive. Then when a few of those threats don't stick, all you have to do is "settle for nothing" to avoid an actual trial. Nice.
The patent trolls are just a symptom, the legal system is the problem.
You leave a legal loophole and you'll find some parasitic scum that will exploit it. Personally I find it hard to believe that the people running these companies can sleep at night... But that is a different story.