This article is written by Rishabh Gupta, a student from ICFAI Law School. In this article, the author explains about Patent Trollers.
Troll is a description for certain types of human-like supernatural beings in Nordic Folklore, the folklore of Northern Europe. They are an ugly creature or monsters with many heads which makes life difficult for travellers. In fantasies and legends about trolls, the plot is frequently that they are highly intelligent breeds, although they can be outsmarted if you employ clever tactics. In modern English usage, a troll is an individual who begins fights or disturbs individuals on the internet by posting fiery and digressive, off-point messages in an online network. In both the context it is clear that their purpose is to make others worried. The troll has likewise rethought himself in the world of intellectual as a purveyor of Intellectual Property. Just as an individual ‘trolls’ people who were posting unkind or offensive messages online without any genuine intention, the ‘IP Troll’ secure intellectual property without ever intending to develop products or services. An intellectual property right is an incentive for innovations and creation that enhance and improve our lives. From, protecting the rights of creator or inventor, to stimulating additional invention or creation for a fascinating society, serves to both social and economic aspects. But gradually with the collective benefit, the attention of the people started increasing towards its economic benefit. IP Trolling was one of them to reap financial benefits. The types of IP trolling will be the same as that the types of Intellectual Property. While the expression “patent troll” has entered regular speech in recent years, the expression “copyright troll” or “trademark troll” is less commonly used. However, these other IP Troll does exist and it threatens to disturb the delicate balance between fair use in the public domain and the protected rights of owners. As amongst them, Patent Trolling is the most practiced phenomenon across the world, it is necessary, for us to understand the ‘Patents Trolling’ in a very acute manner.
Meaning and Definition of Patent Trolling
A patent is an exclusive right that is acknowledged to an innovator for a predefined number of years to make, use, and sell an invention. Once the right is provided, no other individual can utilize innovation without proper permission from the patentee. This privilege is given to shield such innovators legitimately from any damage.
Later it is generally expected that the creator will place it in the customer showcase for use by authorizing it to different makers. But recently, many such inventors have been abusing such rights that are given to them. Their ambition is usually to get money by filing infringement suits against individuals or companies who are using products that are even casually similar to their patented products. This training is alluded to as ‘patent trolling’. These patent trollers are often called as Non- Performing Entities (NPEs), Patent Assertion Entities (PAEs) or Patent Holding Companies (PHCs). The object of these trollers is not to put the patent to practice but solely to compel third parties to purchase licenses or litigate for infringement cases.
Patent Trolls may loosely be defined as entities that own and enforce patents without practicing or making the underlying patented inventions. Defining a patent troll is not an easy task. Hence, identifying the activities of the troll would be a better approach:-
(A). A patent troll does not intend to practice a patent. Here the intention is of primary importance as small inventors may have the intent to practice a patent, but do not do so due to lack of resources.
(B). A patent troll does not produce anything of value but merely acquires patents intending to obtain licensing revenue.
(C). They do not make use or sell new products and technologies but solely aim to force third parties to purchase licenses or litigate.
However, to categories, such a scenario as a troll merely based on actual practice would not be wise as a small inventor may have a patent but may lack the resources to put it to use. On the other hand gradually, as time progresses, activities of the troll are also changing with it, due to which new ways are also coming. Thus, this is not an exhaustive list of activities by Patent Trollers.
Origin of Patent Trolling
American inventor George Selden is frequently cited as an early recognized case of a patent troll. From 1903 to 1911, Selden, who never built a car, used his patent on the automobile to collect royalties from other automobile companies. However, the Patent troll has its origin in the late 18th Century when the inventor Eli Whitney, in the North, got patent for his invention of ‘cotton gin’ in the year 1794. But in reality, he was not a troll, but his invention was so easy that people could copy him comfortably and during the time it took for his invention to get the patent; his invention was known to South. Where the planters were very quick in installing the same device. On the other hand, Whitney’s business in the North was unable to meet demand and went out of the market within 3 years of the grant of patent.
Whitney was subsequently reduced to suing plantation owners for infringement of his patented invention in the South over many years. As such, Whitney can be fairly identified as perhaps the first patent troll in history, even though he started as a manufacturer of his patented device.
Another example is Alexander Graham Bell who starts as trolls but becomes competitors when others refuse to pay a relatively small sum for patent rights. A little-known fact about him is that in 1877 he offered to sell his patent to Western Union. The response was, “What shall we do with a toy like that?” By the time Western Union realized its mistake and offered millions for the patent, Bell Telephone Company was in competition with Western Union and had sued Western Union for infringement.
Thus, the history demonstrates that patent trolls ought not to be summarily expelled as the individuals who don’t contribute anything to society. A few inventors are deflated to getting to be trolls (e.g., Whitney). A few inventors begin as trolls and become contenders when others will not pay a moderately little whole for patent rights (e.g., Bell ended up Western Union’s rival). But it is not that simple! For instance, Alexander Graham Bell who has got patents for the invention of the telephone device and saw someone else selling his invention, would probably not refer to Alexander as a troll for enforcing his patent right.
Thus, it is a matter of observation whether a specific offended party appears to be a troll or somebody who is authorizing his authentic IP rights. It’s presumably out of line to allude to all Non-Performing Entities (NPEs) as trolls. One another fundamental difference between trolls and NPEs could likewise conceivably be that trolls, for the most part, don’t participate in additional research, accelerating some field of innovation. Scientific Research Institute and Universities are other genuine cases of NPEs that individual may feel awkward naming “troll,” as they keep on participating in research and produce extra IP.
In this way, promptly we can refer that Patent Troll utilizes a Patent as a legal weapon, as opposed to making new items or advancing with new thoughts. They are actually in the business of litigation where high litigation costs provide a fertile environment for an exploitive business model that uses shotgun tactics to threaten patent infringement claims against numerous companies, many of which will make a purely financial decision to pay the patent troll rather than expend even more money in litigation.
Legal Framework in India vis-à-vis the USA
Patent Trolling and Their Regulation in India
While the practice of patent trolling poses a major threat to innovations in many nations, such practices are however not so profitable or viable in India. In contrast with different nations, India’s patent laws don’t explicitly prohibit the presence of patent trolls. However, provisions such as section 83 relate to the General principle applicable to working of a patented invention which somehow curbs the problem of patent troll in India. Section 83 (a) states as-
“that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay”
Section 84 further provides that-
“(a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
(b) that the patented invention is not available to the public at a reasonably affordable price, or
(c) that the patented invention is not worked in the territory of India.”
If any of the three grounds were not fulfilled compulsory licensing may be invoked against the patentee. The Act also gives the power to Controller to call such information as to check to which extent the patented invention has been commercially worked in India. In the view of the abovementioned provision of the Indian Patent Law, it turns out to be hard for the patent troll to continue in the Indian market. Thus, the term ‘patent troll’ can be used in India not in the sense of traditional ‘non-practicing entities’ but in the context of patentees who seek to exploit the weaknesses in the legal system. In this way, it winds up important to examine a portion of the cases chosen by the IP Appellate Board with respect to the act of patent trolling in India.
In two recent judgments, the Intellectual Property Appellate Board (IPAB) denied three patents, one belonging to Ram Kumar in the case of Spice and Samsung v Ramkumar(Dual Sim Case) and two belonging to Bharat Bhogilal Patel in the case of M/S Aditi Manufacturing Co. Vs. M/S Bharat Bhogilal Patel and Another. The two patentees can be viewed as great ‘patent trolls’, not just in the feeling of ‘non-practicing entities’ but with regards to patentees who look to abuse the shortcomings in the legitimate framework.
The form of imposition sought by both patentees, in this case, was the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. As per the facts, both patentees did not record any civil suits for patent infringement.
Rather, the two patentees had filed complaints with Customs Commissioners at different ports of section mentioning the Customs Department to seize ‘import consignments’ in light of the fact that the said consignments were infringing their patents right.
While Ramkumar had been granted a patent for dual SIM mobile phones that permitted simultaneous communications on both SIM cards, Bharat Bhogilal Patel was granted two patents: the first patent was for a ‘laser marking & engraving machine’ and the second patent was for ‘marking, etching & engraving by using laser beam on metals and non-metals’.
In the year 2009 after some underlying hiccups, the Customs Departments began to seize several imported consignment of double SIM cell phones in Chennai, Mumbai, and Delhi in light of the fact that these imports were infringing Ramkumar’s patent. The importers were some of the greatest names in the cell phone industry, for example, Samsung, Spice, Micromax, and so forth. While a few merchants chose to pay Ramkumar the royalties he claim, the rest of the companies kicked off a series of litigations across the length of the country, ranging from the District Court of Gurgaon to the High Courts of Punjab & Haryana, the High Court of Madras, the Customs Commissioners in Delhi, Mumbai & Chennai and the IPAB.
Eventually, the Customs Commissioners in all three cities released the consignments, after hearing both parties, on the grounds that most of the imports did not infringe Ramkumar’s patent. At that point, in any case, Ramkumar had made a remarkable amount from the importers who had just paid him.
However, Bharat Bhogilal Patel was not all that fortunate in authorizing his licenses in spite of the Bombay High Court once in a while nudging the Customs Commissioners to observe the IPR Import Rules. Patel anyway succeeded in being an incredible annoyance for a few expensive organizations. For example, the leader of Raymond’s was almost subject to criminal prosecution for patent infringement because of Patel’s petition before the Bombay High Court. A few different organizations, for example, L.G. and so forth were likewise given notice by the Customs in light of the fact that they were abusing Patel’s licenses.
The IPAB has deliberately recorded the majority of the evidence, including expert witness evidence. The gist of all this evidence was to build up that the invention asserted by the patentee was broadly known in the prior art and that the patents, however, conceded neglected to set up the enhancements over the prior art.
The decision ended with imposing costs on Ramkumar for filing a frivolous suit. Moreover, the Board directed the Controller General of Patents to remove the patents from the Register of Patents and prompted them to be increasingly wary particularly in the light of patent trolling rehearses.
These cases are exemplary instances of why India needs to have a significantly more productive IP adjudication mechanism to deal with patent trolling practices.
The most essential beginning stage to settle the present patent troll disorder is to control the general procedure and quality of patent examination, to keep away from the mass approval of patents. The IP Office/ Board will give out detailed and clear benchmarks and standards for patent assessment to maintain a strategic distance from the vagueness and misrepresentation of a patent claim. This eventually leads to the improvement of the professional standards of patents. In the light of abovementioned provisions incorporated in the Indian Patent Laws along with the efficient functioning of the Intellectual Property Appellate Board, it can be well observed that while the other countries are plagued with patent troll activities, the Indian system strived fairly to control the problem of patent trolls.
Patents Trolling and Their Regulation in the USA
It is deeply saddening that patent trolls are taking advantage of loopholes in the legal system to stifle innovations while contributing almost nothing in return. Patent trolling is by and large effectively drilled in the U.S. for more than two decades and the quantity of claims documented by NPEs keeps on ascending as time passes. For instance, according to patent consultancy firm RPX, an NPE named Acacia Research had filed as many as 239 lawsuits in the year 2013- that’s almost 20 per month. As the statistics of litigation cases increases, so does the sum to be paid upon settlement (or as a penalty for infringing).
In the U.S. there are many aspects of patent law that appear to be uncertain. This patent system does appear to be suffering from unique weaknesses that lead to the advantage of patent trolls. A significant element of the U.S. patent framework that may work to the advantage of patent trolls is the general inaccessibility of compulsory licensing.
It is in light of the uncertainty in the patent system that the Patent Reform Act of 2005 was presented in the U.S. Congress on June 8, 2005. It endeavors to take care of certain issues identified with the working of patent and furthermore issues like patent trolls. The major proposal was to amend the present patent system by incorporating some provisions such as introducing compulsory licensing, working of patents, and first to file provision. There are two recent instances which indicate how the patent trolling is practiced in the U.S. The two cases can be summarized as follows-
(I). Huawei is using the tactics of patent trolls to attack the U.S. companies- says Senator Marco Rubio-2019
The control of Huawei is such that any association using 5G in its current form is probably going to use the invention owned in terms of the patent by Huawei, This authorizes the company to make big monetary benefits out of the licensing of patents related to 5G technology. As a result, Huawei has been denied from seeking any sort of alleviation from the U.S. patent courts. The U.S. government also has made an acquisition that Huawei has been making Patent trolls through state laws of China. Perhaps, it’s fair to say that this isn’t a Patent Troll as Huawei makes lots of stuff using its patents and wants to sell it in the market. However we also cannot ignore that the meaning of patent trolls has changed over time, so this new technology of Huawei can also be termed as a Patent troll.
(II). Apple has been ordered to pay the troll toll after losing its appeal in a years-long patent dispute with renowned patent troll VirnetX– 2019
The U.S. Court of Appeals slapped with a $302.4 million fine for infringing VirnetX’s patents for secure communications in its VPN-on-Demand technology and FaceTime and iMessage services.
VirnetX is a Non-Performing Entities (NPEs) which means its whole plan of action lies exclusively on suing organizations that really create and sell items dependent on arcane patent encroachment laws and interpretations of intellectual property regulations. Apple isn’t the only company that the patent troll, VirnetX has taken aim at, even, Microsoft agreed to pay $200m to VirnetX in 2010 to obtain a license for two patents covering communicating over the internet. Again in 2013 VirnetX accused Microsoft of infringing its patents in its Skype service, where Microsoft has agreed to pay $23m to the patent troll to settle the dispute.
The U.S. patent framework appears to experience the ill effects of special shortcomings that leave it powerless to patent trolls. Furthermore, we can find that general compulsory license has never been adopted in the United State which is one of the notable reasons for a huge number of patent trolling in the U.S.
Effect of Patent Trolling
Patent trolls have generally been blamed for forcing limitations on innovators and undermining or impeding the enticement that patent law plans to make. The aftereffect of patent trolls is that investors are increasingly hesitant to put cash in new businesses because of the danger of patent trolls.
For small and medium companies, it is quite often evident that they will need to settle with patent trolls since they will most likely be unable to manage the cost of litigation. Studies have shown that 55% of the company’s patent trolls, targets have $10 million or less in revenue and 82% have revenues of less than $100 million. These organizations can be obvious targets since they quite often need to settle.
In any case, it isn’t just small organizations and new businesses that normally face dangers from patent trolls, even large innovator companies have to deal with the consequences of patent troll activities. Microsoft stated that it typically faces about 60 pending PAE infringement claims, costing it tens of millions of dollars every year to defend.Google, Blackberry, Earthlink and Red Hat submitted joint remarks detailing that their litigation defense costs have gone up by 400% owing to the fact that patent trolls are filing four times as many lawsuits today as compared to in 2005.
Analysis and Suggestion
It has turned out to be extremely important to direct such practices as they are hindering the process of innovation in a few different ways. The lawful expenses related to the case started by patent trolls also lower the funding accessible for innovation. Personnel who would otherwise be engaged in promoting innovation throughout the organization will have their attention diverted elsewhere by the litigation, which will consume the human resources of the technology developers in addition to the financial resources.
The legislative measures implemented by India as compared to those seen in the United States do indeed serve as unfavorable for the growth and sustenance of patent trolls in India. However, an application for compulsory licensing in India can only be made after a period of three years from the date of grant of a patent. This, in turn, gives patent trolls three years to purchase a patent and harass other targeted companies with lawsuits.
The most essential beginning stage to settle the present patent troll disorder is to control the general procedure and quality of patent examination, to keep away from the mass approval of patents. The IP Office/ Board will give out detailed and clear benchmarks and standards for patent assessment to maintain a strategic distance from the vagueness and misrepresentation of a patent claim. This will eventually lead to the improvement of the professional standards of patents.
While nuisance claims are not new, the significant monetary drag made by patent trolling makes these claims especially harming in an inexorably innovative society. The object of these trollers is not to put the patent to practice but solely to compel third parties to purchase licenses or litigate for infringement cases.
It is important to note that no jurisdiction is perfect in terms of protecting itself against patent trolls. In any case, India has effectively constrained the aggravation of such trolls and their development in the nation. While the country, such as the United States of America could gain from India and adopt some of the provisions; likewise, India itself could do with certain enhancements itself related to the adjudication system. Efforts with regard to patents should be maximized towards the protection of the interest and right of the creators of the invention and those who develop these creations further and introduce products in the market which benefit the public at large. The motivation for the making of such items must be centered in order to guarantee that trolling activities do not demoralize innovators from investing time, exertion and capital into the innovative work of new advances, without which the advancement of society is impeded.
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