Sunday, August 04, 2013

States wake up to patent troll problem (especially Vermont and Nebraska, and now Minnesota)

Timothy B. Lee has a very important story in the Business Section of the Sunday Washington Post, “How to beat patent trolls?  States step up with a plan”, link here, from his new "Switch Blog". 

Two of the most active states are Nebraska and Vermont.  The general idea is to pass consumer protection laws and structure them so as to penalize companies that file frivolous lawsuits, or suits in bad faith, against secondary customers (effectively consumers) who have already paid for licenses to some primary provider.

There will be legal complications with the idea that a state law could trump over federal patent law, which is normally administered by USPTO.

But an underlying problem is this.  If a company purchases a license to use some service or product (particularly software) from a major vendor, why should it be responsible for “embedded” patents?  Why isn’t it possible for the “top vendor” to account for all embedded patents and include these imputed licenses in its total fee?  Congress needs to change the system to fix the “embed” problem which attracts trolls.  Will Schumer’s Shield Act (May 3, 2013 here) address this problem?  It’s not clear that it would. 

Lee’s article reports that a major tech company in Vermont had lost business because at least two clients of the company said they were being harassed by trolls.  Defending against invalid claims can be very expensive for small companies.  It is true that a “loser pays” system (Shield) would help.  

It strikes me that the most important practical effect of patent trolling could apply to independent software developers, who may not know about "embedded" patents "downstream", and maybe other artists such as filmmakers or, in more extreme cases, musicians or bands.

Update: Aug. 22

EFF is reporting that Minnesota has also taken action to intervene against "scanner troll", MPHJ, regarding use of scanning for email content, by small businesses, story link here

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