I don't think it was that simple, considering that the Nortel portfolio covers a wide array of different technology areas and industries. What other feasible choice did they have? Transfer the patents to themselves? Six companies were involved, each infringing different subsets of the portfolio: who gets what patents? Even if they did divvy up the portfolio somehow, they certainly weren't going to keep them lying around, not after paying so much for them -- They had to be licensed. Splitting the portfolio would not only make it weaker, but it would mean multiple individual licensing efforts. Rockstar currently fulfills the same function that MPEG-LA does.

> And "operate autonomously" doesn't mean much when you first fill the subsidiary with nothing but litigators and patents that have already been licensed to everyone meaningful other than the parent's competitors.

If you read the document linked in the comment I cited, no, those patents were not licensed to anybody meaningful until the auction. But licensing efforts were on the way years when they were still owned by Nortel and before Rockstar was created, so pretty much everybody knew what was coming. That is why all these companies, including Google, were bidding for these patents in the billions.

> It's like setting loose a rabid animal near your competitor's business and then trying to disclaim responsibility because the animal was "operating autonomously." What did they expect to happen?

Well, they paid billions for these patents. Is it fair to them that other infringers get away scott free?

> Lawsuits against Google's customers instead of Google.

Google makes pretty much no money directly from Android. This inherently makes it difficult to extract damages from them. Not to mention that since Google bought Motorola, they do have lawsuits directly against Google as well.

> Suppose Apple files a suit against an Android manufacturer, then a year into the litigation they show up and say "oh hi, we just bought some new patents, so let's throw out all the work we did getting to this point in the trial and start over." That clearly stinks of harassment...

That's not how patent lawsuits work. Dozens or hundreds of patents are involved in a portfolio, but it's not feasible to sue over more than a handful of them, because court resources are extremely limited. If you see how past patent lawsuits have progressed, companies assert a small bunch of patents and over time winnow them down to an even smaller number that are mostly likely to prevail. It's actually rare to see new patents being asserted partway through a lawsuit because, as you said, it annoys judges -- typically a whole new lawsuit is filed instead, which is a whole lot of extra work.

This is intrinsically unfair to the patent-owners with large portfolios, because no matter how many patents are being infringed, they only get to assert a few, and even if they prevail, damages are limited to the patents asserted. This is why companies try to get injunctions -- that is the only way to get enough leverage to properly license an entire portfolio.

Multiple lawsuits seem like harassment only if you disregard the flip side of the coin, which is widespread infringement.

> By filing the litigation through Rockstar, they get a separate trial with two bites at the apple in front of two juries, the litigation costs more for the target because they have to defend two overlapping cases in different courts instead of having them consolidated, and they can do it again and again with different troll subsidiaries until their smaller competitors are destroyed.

If different patents and/or different products are involved, the cases are not overlapping, so it's not the same apple that they're getting bites at.

I agree with that. That is one of the symptoms of the disease. It is preposterous for every competitor to be infringing thousands of patents held by every other competitor. That is a pathological outcome that doesn't commonly occur in non-software industries. But we have to address the disease, not the symptom. How do we get to a world where the large majority of patent infringement in the software industry is a result of intentional infringement rather than independent invention or a need for compatibility with existing software? The easy solution is for software to be unpatentable. If you don't like that, what's your alternative? (And if the solution involves improving software patent quality, please explain how and also what to do about all the low quality patents already issued.)

> and even if they prevail, damages are limited to the patents asserted.

The other side of this coin is that juries are extremely arbitrary when evaluating the value of a patent, and in the case of software patents will often vastly overestimate their value. There are easily thousands of features the lack of which would materially reduce market demand for a device, and each of those features may be covered by multiple (perhaps hundreds or more) patents. The value of the individual patent is therefore necessarily quite small (and it has no value without being part of a device requiring a large conglomeration of such features) -- it can't possibly be right that the value of one of five hundred patents covering a specific feature is the full hold-up value of including that feature, because that would make the accumulated cost of all the patent licenses vastly in excess of what customers pay or are willing to pay for the device as a whole.

As I think about it, this feels close to the heart of the problem with software patents: The patents each cover a small, independent but complementary incremental improvement that all come together to build common software. The value of the average such patent, i.e. what a practitioner of the invention can reasonably afford and be willing to pay if they were all licensed ex ante, is so much lower than what a defendant has to risk a jury awarding, or the hold-up value of an injunction on a shipped product, that it creates a profitable patent trolling market for entities willing to be loathed in exchange for the significant difference between the market value of a patent when licensed or purchased ex ante and the hold-up value of the same patent to vendors who are unknowingly infringing.

The trouble is the reasonable value of the average software patent is less than the transaction cost of negotiating a license for it. So they either get [cross-]licensed in bulk or (generally obliviously) infringed. But bulk licensing patents is a huge fail because it makes the quality of the individual patents irrelevant, which creates demand for large quantities of low quality patents -- which makes the problem even worse, because the more patents have to be evaluated the less resources you can afford to dedicate to evaluating each one. Meanwhile it devalues and deincentivizes high quality patents that require significant R&D to receive because they go on the same stack with the junk patents.

But how can you fix it? The fundamental problem is that the transaction costs of licensing a typical software patent eat most or all of the value of the patent. Trolling with bad patents is profitable because it foists transaction costs and uncertainty onto the defendant in excess of the value of the patent, so that paying more than the patent is worth but less than it costs to prove that in court becomes cost effective. Recalibrating damage awards and making it more difficult for plaintiffs to unreasonably foist litigation costs onto defendants may reduce the trolling problem, but if effective it would eat a lot of the value of most software patents, often the entire value, because the consequence of the value of the patent not exceeding (or only barely exceeding) the cost of negotiating a license would be born by the patent holders rather than the prospective licensees.

Which seems like a necessary outcome in any event. If the perverse incentives created by bulk licensing are to be avoided then the absolute number of software patents in play has to go down significantly, so that those remaining are the few high quality patents that justify licensing individually. I don't see any obvious way around that.

[note: responding in two comments because it said "that comment is too long"]

They could have. But the most significant choice they had and chose against was to use the patents defensively rather than offensively.

> Even if they did divvy up the portfolio somehow, they certainly weren't going to keep them lying around, not after paying so much for them -- They had to be licensed.

The state of North Korea fails. China spends really quite a lot of money to secure all of their nuclear and chemical weapons. Do they then "have to" sell them to terrorists who promise only not to use them against China?

> Splitting the portfolio would not only make it weaker, but it would mean multiple individual licensing efforts.

Even if the courts don't allow them to assert every patent anyway? What good is it to have thousands of overlapping patents if you can only assert a small number in practice?

> If you read the document linked in the comment I cited, no, those patents were not licensed to anybody meaningful until the auction.

I'm not talking about before the auction.

When a set of patents goes up for sale, the incumbents in the industry have three primary options to buy patents to avoid them getting into the hands of a troll that will try to shake them all down:

1) All band together and buy the patents. This is asking for antitrust trouble, both because all the incumbents are colluding in a way that prevents upstart competitors from procuring defensive patents that would be usable against the incumbents, and because they're conspicuously forming an effective cartel to buy patents instead of bidding against one another. And on the other side of the coin, it's paying the Danegeld collectively, and the sum total paid to the troll by the collective has to be more than what any individual entity would otherwise pay else the seller could sell to that entity for use against its competitors. Which encourages more trolls to "offer" to sell you more patents and gives them more money to procure them with. This is really the patent "communism" option, and is likely to fail for the same reason: You're taking money from productive businesses to give to patent trolls, encouraging the proliferation of more patent trolls which suck more of the life out of productive businesses. That isn't sustainable. It also defeats any benefit of the patent system to actual practicing entities, because they need all their competitors to coordinate to buy the patents of failed businesses, which means you can't use your own patents against them or they'll not cooperate with you and instead buy the patents themselves for defensive purposes (or do (3) to your detriment in retaliation).

2) They can individually take turns placing a bid on patents only when the current high bid is a trolling entity, and then use them only defensively. This is the patent "cold war" option. Each incumbent has to place a bid periodically to maintain their respective arsenals as older patents expire and to make the arrangement stable, but they don't get into bidding wars with one another so nobody ever has to pay excessive amounts. If improvidently granted patents do fall into the hands of a troll who demands excessive royalties then everyone has the duty to fight the good fight to invalidate those patents to make sure that sort of parasitic enterprise is unprofitable. This also makes the patent system not useful for software because any patent assertion against an incumbent invokes mutually assured destruction, but it's probably the most effective way to mitigate the damage of large collections of patents falling into the hands of aggressive trolls.

3) They can buy the patents, immunize themselves, then let them loose to a troll to be used against competitors. Thermonuclear war. Every time patents come up for auction you now get a bidding war because nobody wants to have to fight a lawsuit against a troll funded with competitors' money, which means everybody will soon be overpaying for bad patents while continually fighting suits from patent trolls set up by competitors. Meanwhile building a defensive portfolio becomes next to useless because competitors attack collaterally through trolling entities that can't be asserted against, so instead of nominally wasteful cross-licensing you get monstrously expensive prolific patent litigation. This is the one they chose.

> Well, they paid billions for these patents. Is it fair to them that other infringers get away scott free?

Sure, you just let the competitors pick up the tab for the next round the next time a company full of patents goes bust.

> Google makes pretty much no money directly from Android. This inherently makes it difficult to extract damages from them.

So try to get an injunction. If you theoretically had a solid, valuable patent that Android infringed then Google would subsequently have the incentive to license or avoid it to prevent the injunction, and this would eliminate the duplicative litigation against every individual Android OEM, creating efficiencies for everyone.

It just proves their intent. It isn't to stop these "infringers" from doing something wrong in particular, it's to harass in general the competitors who do well in the market. Creating waste and mutual costs is a benefit to the larger entity that can better absorb the cost, and they know it.

> If different patents and/or different products are involved, the cases are not overlapping, so it's not the same apple that they're getting bites at.

It kind of is, because the thing they're getting more chances at is getting a judge or jury who will significantly over-value at least one of their large arsenal of patents. It's a game the defendants have to win every time but the plaintiffs only have to win once -- one billion dollar award will pay for years and years of unjustifiable patent trolling with low quality patents.

[note: responding in two comments because it said "that comment is too long"]