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Patent Trolling, Money and Fun

Now this is the sort of thing we don’t need. Nature News reports on a court case that I missed, Classen Immunotherapies, Inc. v. Biogen IDEC et al.. This is yet another run at the “can you patent natural phenomena?” argument, which seems to be an ever-upwelling spring for patent litigation:

The court upheld a lawsuit filed by Classen Immunotherapies of Baltimore, Maryland, against four biotechnology companies and a medical group, for infringing on a patent that covered the idea of trying to link infant vaccination with later immune disorders. A district court had thrown out the lawsuit, finding that the concept at the heart of the case amounted to an abstract idea that could not be patented. The appeals court found otherwise.
Beyond its complex particulars, the case sets “a troubling precedent”, says James Bessen, a lawyer at the Boston University School of Law, Massachusetts, “because you’re patenting something that’s very broad”. (The patents include the act of reading the published scientific literature and using it to create vaccination schedules that minimize immune disorders.)

Oh, I particularly like that last part. I have to congratulate whoever thought of putting it it into a patent application, in sort of the same spirit that one has to congratulate the Mongol hordes on their horsemanship. The facts of the case are a bit more complicated, though, as it always the case in the law. Originally, a district court had indeed ruled (by summary judgment) that the Classen claims were unpatentable, and the CAFC had gone along with that. But the Supreme Court vacated the decision, in light of a 2010 case (Bilski v. Kappos, if you’re into this stuff), and remanded it back down to the CAFC. The guidance seems to have been to not make any broad statements about patentability, if possible, and to consider each case narrowly as. On reconsideration, they now find that two of the three claims under dispute are “patent eligible”, but they’re leaving the door wide open for them to be contested on other grounds:

We conclude that the claimed subject matter of two of the three Classen patents is eligible under §101 to be considered for patenting, although we recognize that the claims may not meet the substantive criteria of patentability as set forth in §102, §103, and §112 of Title 35. However, questions of patent validity are not before us on this appeal. . .

If you want more, there’s a detailed look at the decision over at Patent Baristas.
But the broader problem is still with us. Prof. Bessen has just recently published a study of “patent trolls”, the organizations that buy up as many (preferably broadly worded) patents as they can, and then go looking for people to sue. That business model (which seems to be more and more popular, damn it all, has always put me in mind of one of the characters in the old Pogo comic strip – when approached with a sure-fire way for him to make money in the advertising business, he responded with a panicked “No, no! I can always rob graves!”
Nature News is incorrect, though, when they imply that the biotech industry has been free of these things up until now. There may have been fewer of the real “non-producing entities”, the firms that have nothing but a pile of bought-up patents and some hungry lawyers, but we have had our share of people trying to get rich by enforcing crazily over-broad patents. In the earlier days of this blog, I spent a good amount of time chronicling Ariad’s attempt to sue everyone in sight over claims to the Nf-kappa-B pathway that basically covered everything out to the asteroid belt. That one only took about eight full years of lawyering and who knows how much money and effort to be disposed of. And back in the 1990s, I recall that there was some guy with a patent claiming huge swaths of space around the concept of cell-based assays, who was shaking everyone down that he could find.
Some other high-tech areas are infested with this sort of thing. I find that I cannot, for example, listen to any presentation by Nathan Myhrvold – who is otherwise an intelligent and interesting person – without thinking about how he runs Intellectual Ventures, a patent-trolling firm in its purest form. As it happens, the Nature News piece mentions that Myhrvold’s minions own hundreds of biotech patents. They claim that they have no plans to litigate in the field, but why on earth would they buy these things up, otherwise? And as a comment to the news article points out, that denial may be disingenuous, because IV’s usual procedure is to set up some other entity to do the suing, after first having sold it the rights to the patents at issue. As that extremely interesting NPR story goes on to detail, those other entities tend to be in Marshall, Texas:

The office was in a corridor where all the other doors looked exactly the same —locked, nameplates over the door, no light coming out. It was a corridor of silent, empty offices with names like “Software Rights Archive,” and “Bulletproof Technology of Texas.”
It turns out a lot of those companies in that corridor, maybe every single one of them, is doing exactly what Oasis Research is doing. They appear to have no employees. They are not coming up with new inventions. The companies are in Marshall, Texas because they are filing lawsuits for patent infringement.

So this is how people make money these days: not by inventing anything themselves, but by buying up other people’s work – dubious or valid, it doesn’t much matter – and suing people. From empty offices over in ArkLaTex country. And we biopharma people could well find ourselves spending more and more of our own time and money fighting this stuff off, because hey, why not?

35 comments on “Patent Trolling, Money and Fun”

  1. PharmaHeretic says:

    But isn’t that how a “free market” capitalist system with many rules and laws works? This is a feature, not a bug.
    See.. they want suckers who believe in things such as law, meritocracy and fairness. Then they get said suckers to educate themselves and slave away at poor to mediocre wages to invent something of value.
    Then these people take that invention, kick the suckers on the street and try to profit from it in as many ways as they possibly can. Meanwhile the suckers believe that they will get their reward some day, not unlike poor religious types who suffer so that they can enter heaven after they are dead.

  2. anon the II says:

    I’ve got to say that we (I mean the USA) are basically getting what we deserve, because we keep electing lawyers to run our country. Of course, that’s a step up from the MBA that ran things for a while.

  3. Innovorich says:

    This has to stop. Patents and the ability to profit from invention is the cornerstone of capitalism and western development. IP law has been the fundemental driver of technological development and increasing wealth per capita over the last 150 years. But a situation is being created where instead of promoting invention, patent law is actually discouraging invention. I’m actually becoming relatively cynical about high-tech companies that claim “we have x number of patents”. The kind of parasitic manipulation of system that you describe, and as perpetrated by IV and others, has to be curbed otherwise it only further undermines the US and Europe’s ability to compete in this global economy. Myhrvold = head parasite and director of parasites.

  4. HealthITFrank says:

    I think it’s absolutely absurd what these patent trolls are doing. They are not trying to better any of these businesses by suing them for not patenting a broad, or generally used concept. Instead, they are trying to find ways to make quick money and run.
    I’ve seen articles, and reports on how these trolls work. They have been known to buy office buildings in an attempt to create a faux work environment and as soon as they get their money, the entire building is emptied.
    It’s not good for the economy, it’s not good for business, and it’s a disgusting practice that grows in popularity because no bureaucrat wants to admit that there has to be something done to stop it.

  5. Curt F. says:

    People with over-broad patents that are not practicing their invention are suing people as a way to make money. The core problem, to me, is not that folks are trying to sue to make money, but that over-broad patents get issued in the first place.
    People respond to incentives. The poor job the PTO has done on ensuring that patents are only granted for discrete, novel inventions, are the core of the problem. The PTO is actively incentivizing patent trolls because it is issuing patents for inventions that aren’t novel, that aren’t really inventions, and that anyone could come up with.
    Reform that targets trolling specifically will miss the core of the problem. Further, it will dis-incentivize the “trolls” that hold valid, discrete, novel inventions (few though they may be) from protecting their IP rights.
    I worry that small inventors who do actually have something novel will be disadvantaged by the reforms currently underway. So many new technologies today require massive infrastructure today to even being to reduce them to practice. Reform that targets trolls would seem to give license to any large companies with the massive infrastructure to disregard any patents held by folks without access to that infrastructure because they can just call them “trolls” and demonize them in the court of public opinion.
    The single best thing that could happen to the patent system, in my opinon, would be a big increase in what is considered obvious to one skilled in the art.

  6. Hap says:

    I wonnder if there isn’t a role for a big pharma consortium – if they’re planning on making money from smaller pharma and their products, clearing the brush would seem to be a necessary first step. They have enough lawyers to go after IV, etc., and have a reasonable chance of success, and might be able to brand the output as a public benefit (they also are likely to have better ad people). They would then also have enough evidence to go to PTO or to Congress and say, “You know, really broad patents are doing bad things and wasting almost everyone’s time and money for the benefit of a few (who can’t pay you as much as we can).”
    I’m guessing patent trolls don’t taste good blackened to a crisp. Maybe they can at least feed the ecosystem.

  7. Anon says:

    “There may have been fewer of the real “non-producing entities”, the firms that have nothing but a pile of bought-up patents and some hungry lawyers, but we have had our share of people trying to get rich by enforcing crazily over-broad patents.”
    Actually, a fair number of our esteemed not-for-profit Universities might fit this description, no? Except that they haven’t had to buy the patents, of course.

  8. Will says:

    Curt hits the nail on the head. In an ideal world, non-practicing entities provide a way for small inventors to actually make some money on their patents. Let’s say a garage biotech guy invents some new PCR/assy/-what-have you. For whatever reason, he can’t commercialize it. If it turns out a giant pharma co. is using his invention, his only choice if they won’t license is to sue. But patent litigation is an uncertain and very expensive proposition to undertake. The poor inventor could go bankrupt trying to assert his rights.
    However, if he can sell his patent to a well-capitalized non-practicing entity, he can profit, and the NPE can take on the risk inherent with patent litigation
    Of course, the system doesn’t work at all when the PTO issues overly broad bogus patents.

  9. Will says:

    I should point out, the above situation is unlikely in Pharma, where the costs to invention generally exceed the resources of an individual inventor, but is more common in other areas

  10. The new patent legislation is expected to greatly reduce the ability of trolls to shakedown corporations. (We’ll have to wait and see of course). Instead of suing multiple corporations at the same time, they will have to do it one at a time.

  11. Big dinosaur says:

    Since we humans are so all-powerful that we can change the climate, let’s patent that too! Might as well make some money on melting ice caps and flooded coasts.
    Oh wait, we are already doing that. Al Gore calls it “carbon credits.”

  12. andrewD says:

    Has anyone run the activities of these trolls past a criminal law expert? It seems to me that there actions are tantamount to demanding money with menaces (I am in the UK), by waiting for companies to make money rather than sueing as soon as they are aware of a potential patent infringement. Arguably they are also guilty of outright fraud.

  13. patentgeek says:

    NPEs are a vile threat indeed, as Derek says and Bessen’s study accurately details. I suggest that the view that this case (Classen v. Biogen) is a victory for NPEs, though, is perhaps a bit simplistic. You would think, then, that everybody in the biotech community would be up in arms over this particular case. Not necessarily so. In fact, there are some biotechs who don’t like the decision because they think all three of the patents at issue should have been found to claim patent eligible subject matter (instead of only two of the three)!
    The Classen case was decided on issues of patent eligibility – 101 issues. CAFC did not opine on whether the claims should have issued in light of prior art (102) and obviousness (103) issues, and suggested they felt dubious in this regard. It is perhaps regrettable the defendants did not argue invalidity on these grounds. Many folks in the biotech community (including BIO itself) feel that limiting patent eligibility of diagnostic type claims is best avoided, as it may foreclose future inventions that are worthy of protection. Most of these latter folks also feel Classen’s patent should be shot down, but on the usual grounds (102/103), to which it is vulnerable.
    Bessen’s comment in the Nature News piece – “you’re patenting something that’s very broad” – unfortunately confuses things: overly broad patenting is addressed by issues of written description (112 para 1) and enablement (112 para 2), and has nothing to do with 101 issues. Ariad’s miserable NFkB patent, justly despised by Derek, was thrown out for lack of written description support for the rediculously broad claims. In the hands of CAFC, WD has become a sharp tool for eviscerating claims of overly broad scope. There’s no need to fix this particular problem by limiting patent eligibility.
    Addressing the serious problems with NPEs may be difficult in the current environment. Patents are property and can freely be sold to someone else to assert as they see fit. I’d like to see some restrictions on this sort of thing, but I wonder how likely such change is to be forthcoming any time soon. It is no surprise that Rick Perry’s Texas is the most hospitable place in the country for this sort of litigation.

  14. Lethe says:

    I don’t know what your objection is, here. Don’t your precious free market principles say that clever entrepenuers should be welcome to remorselessly maximize their profits without regard for the greater good of society? Or maybe you want the heavy hand of the federal government to intervene and deprive these trolls of their legally-obained rights to act like complete bastards?

  15. Anonymous says:

    I think the USA has something like 10x the number of lawyers per thousand citizens over other “developed nations”. Besides the jokes, this supports the argument that they drive such nonproductive complexity as to create “friction” on a society – loss of energy and value (GDP.)
    It also reminds me of a hunch that societies with less such “friction” will become more innovative and dynamic. While we fight over and parse out from a dwindling pie of our past aspirations and accomplishments.

  16. Derek Lowe says:

    Lethe, you may recall the other day, when I mentioned the downside of capitalism. I am indeed a free-market sort, but that doesn’t mean that everything a person can do in a free market is actually to the good of others.
    I think that there should be criminal penalties for fraud, for example, and that people shouldn’t be free to tell whatever lies come into their heads that might help to sell their products. (Of course, you can also mess things up too far in the other direction, and end up with a long, legalistic list of *exactly* what can be said and what can’t, which I think is also suboptimal).
    And in the case of patents, I think that their function is to provide an incentive to invent things that will improve the common welfare, by granting a temporary monopoly in exchange for disclosure. Any clever attempts to short-circuit that or to exploit it for other ends should be regarded with suspicion.

  17. bbooooooya says:

    “Then these people take that invention, kick the suckers on the street and try to profit from it in as many ways as they possibly can”
    Well when you put it like that…..
    This is nothing new, and I think is well known. People can base their own decisions on this.
    Per A Einstein, a while ago: “Science is a wonderful thing if one does not have to earn one’s living at it.”

  18. bbooooooya says:

    This whole business of patent trolling reminds me of lawyers who spend their lives trying to get people out of drunk driving charges on technicalities.

  19. bbooooooya says:

    “Don’t your precious free market principles say that clever entrepenuers should be welcome to remorselessly maximize their profits without regard for the greater good of society?”
    Even Adam Smith never believed that capitalism did not preclude adherence to justice.
    From WON “Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest in his own way, and to bring both his industry and capital into competition with those of any other man.”
    The flaw here is not in capitalism, but in the paucity of justice in our laws.

  20. Hap says:

    I thought that patents could be contested for a variety of reasons – if there is enough legal power in the conditions for granting (overly) broad patents, then contesting them earlier (before they are granted, or shortly after) might help.

  21. Anonymous says:

    Lethe,
    Marxism is so much better, right? I mean, if only we could take every resource and re-distribute it evenly, we would be hunky dory. If only reality could be made to match our perfect ideas.
    Let’s face it, most people are too stupid to know how to lead their lives without the smart people making decisions for them.
    Look, forget Marxism. The real answer is Eugenics. We only let the smart people, let’s say the PhD’s, breed. Everyone else gets sterilized. Then we create a single global government, run by us technocrats and scholars. Once all the stupid people are gone, we level most of the towns and cities (now empty) and return the Earth to its former natural state. With the human population controlled at around one billion, we will live at harmony with our planet.
    And we will have peace.
    Marxism is way too low a goal. You’ve got to think BIG.

  22. bbooooooya says:

    “Under capitalism, man exploits man. Under communism, it’s just the opposite.”
    John Kenneth Galbraith

  23. Ham says:

    “The problem with capitalism is capitalists.
    The problem with marxism is marxism.”
    William F. Buckley

  24. patentgeek says:

    @20
    Hap,
    The America Invents Act creates a new post-grant review procedure for third-parties to challenge the validity of a newly-granted patent. (A bit similar to the opposition proceedings in European practice.) We’ll see if it helps weed out the junk.

  25. FredB says:

    There is some hope. Righthaven, a copyright troll, is losing in court.
    http://blogs.wsj.com/law/2011/09/30/righthaven-runs-into-legal-wall/

  26. HK says:

    I take issue with comparing the Mongols to this scum.

  27. Anonymous says:

    At least the Mongols conserved water by never bathing.

  28. cliffy says:

    sed libera nos de ore leonis

  29. Curt F. says:

    All the usual bloviating about communism and capitalism makes no sense when it comes to IP. “Intellectual property” is a government policy. It was enacted to stimulate preferred policy outcomes (more inventions, etc.). Does anything think that patents are a fundamental human right? It’s an absurdity to even ask the question. Additionally, a patent is the ability the practice a monopoly — a government guarantee that certain markets will not be permitted to become competitive.
    The trolls are gaming a (poorly executed) government-imposed restriction on the free market. Economists call it “rent seeking”.
    Rent seeking always happens. The right response is to tailor public policy to minimize its impact and occurrence. For example, the PTO could stop issuing over-broad patents.

  30. Megan says:

    I find the ignorant banter here amusing. Most chemists have an extremely narrow world view. They are incapable of understanding the broader visions and trends of our society. Most of their brain cells are dedicated to solving abstract problems. It creates hatchet headed people.
    Intellectual property is real property. If you step on someone else s land you should expect to pay for it.
    There are are no trolls. How many patents are the result of pharmaceuticals that did not quite cut it in clinical trials?
    Should a pharma company dedicate these failed molecules to the public after years of development? No. If another company finds the molecule useful for another purpose, it can cross license with the existing patent holder.
    Another strategy is to sell the technology off to a patent holding company who will compensate the pharma company up front. Not every company has the resources to fight it out with people who wish to use their patented technology (even if they are no longer pursuing it).
    You might also realize that patents can be challenged – it called ‘reexaminatio’n at the USPTO. If the patent is shaky then it will be narrowed or canceled. This can be done by anyone, without the consent of the patent holder.
    Also, the patent itself can be shot down during litigation and the suing party liable to pay the defendant’s legal fees.
    The only thing amiss is the fact that there are a large vocal minority who wish to use other people’s patents free of charge.

  31. Richard Almon says:

    Go Megan.
    As a patent attorney, I quickly tire of seeing laypeople opine about “trolls” without a basic understanding of the patent system. As I don’t do Pharma patents, even I don’t feel qualified to comment on these complex issues beyond a very basic level.

  32. hibob says:

    @Megan: I won’t judge your ignorance, but your arrogance certainly comes across loud and clear. For one thing, how many of the comments that you are complaining about do you think were actually made by chemists? Were you perhaps referring to your friend Derek?
    “There are are no trolls.”
    The term “patent troll” was coined by Peter Detkin, at the time a lawyer at Intel and besieged by patent trolls. He’s now a partner at the aforementioned patent troll firm Intellectual Ventures. Just because you choose not to acknowledge rent-seeking doesn’t mean it doesn’t exist.
    On the matter of “failed” molecules:
    “Should a pharma company dedicate these failed molecules to the public after years of development? No. If another company finds the molecule useful for another purpose, it can cross license with the existing patent holder.”
    That’s not providing incentives for invention; that’s rewarding rent-seeking. A patent recognizes a creation that is both new and useful. If a pharma patented a “failed” molecule, i.e., the molecule cannot perform the claimed functions, they have failed to meet the required burden. Why should a government provide incentives for “failed” projects? Why should someone else who subsequently makes successful but unrelated “new use” claims for the molecule have to pay a licensing fee? You said it yourself, “it called ‘reexaminatio’n at the USPTO. If the patent is shaky then it will be narrowed or canceled.”
    But has a patent ever been revoked because the API failed to actually work as a drug? I.e., it failed phase II/III testing? Doubtful.
    So what’s the remedy?

  33. Curt F. says:

    In addition to the excellent points hibob (#32) made, I would also note several things. First, “reexamination” is not the panacea that Megan suggests. Wikipedia says that “A request for a reexamination can be filed by anyone at anytime during the period of enforceability of a patent. To request a reexamination, one must submit a “request for reexamination,” pay a substantial fee, and provide an explanation of the new reasons why the patent is invalid based on prior art.”
    So re-examination also introduces another major transaction cost, and also has an uncertain outcome. It is not a substitute for having accurate patent appraisals at the time of application.
    Second, intellectual property is not real property, by dint of nearly every major moral philosophy (save perhaps Ayn Rand’s), of our English common law heritage, and of the US Constitution.
    Third, can you explain how you became so capable of “understanding the broader visions and trends of our society”? I happen to agree with you that “trolls” are sometimes just a name that would-be infringers use to justify their actions. But without a better picture of how you came to recognize the cognitive deficiencies that “most chemists” suffer from, I will understand completely if most folks here don’t take you very seriously.

  34. Urwag of Moria says:

    As a cave troll, I am sick and tired of being used as derogotory term. Nowadays, we trolls mostly mind our own business, living in dank squalor, bothering no-one (anymore.)
    Yes, there was a time when us trolls were used for things like smashing down castle doors and helping out various groups of orcs (both from Mordor and the Uruk-Hai created by Saruman.) I believe a distant relative of mine even attempted to stab Frodo Baggins with a broken spear, but he didn’t actually kill the little hobbit. Anyway, that was way back at the end of the Third Age.
    Trolls today want mostly to be left alone as we live out our miserable lives in the darker, forgotten places of Earth.
    Put aside your bigoted views and call these people what they are… Neanderthals.

  35. #34
    +1 for the win.
    – pD

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