The Public Should Know Who Profits From Patent Troll Lawsuits

It’s often impossible to find out who owns a United States patent.

Even people who get sued over patents often can’t figure out who is demanding money from them. That’s even more true when the lawsuit comes from a patent troll wielding a vague software patent, something that is all too common.

That’s why we’re glad to see the issue of patent transparency come back to Congress, in the form of a recently introduced bill called the “Pride in Patent Ownership” Act, S. 2774, sponsored by Senators Patrick Leahy (D-VT) and Thom Tillis (R-NC). The Senate’s IP Subcommittee held a hearing on the bill last month.

Since 2013, EFF has supported efforts to make it clear to the public who owns patents. We’re pleased to see the issue come back to Congress, because it will once more bring attention to the lack of transparency in the patent system. We support the Pride in Patent Ownership Act as a modest step towards shining some light on the opaque operations of the U.S. patent system. However, because the bill lacks a strong enforcement mechanism, it falls short of being a bill that will truly shed the sunlight that the public needs.

Patents are a government-granted “right to exclude” competitors that typically last 20 years. During the life of the patent, a patent owner can file an infringement lawsuit against someone they believe is infringing the patent. The owner can request a court-ordered injunction, an ongoing royalty, and damages—including up to six years of retroactive damages.

Granted U.S. patents, along with many patent applications, can be looked up online, either at the U.S. Patent and Trademark Office (USPTO) website, or a third-party site that collects the public patent information, like Google Patents. While many parties choose to register their ownership at the USPTO’s Assignment Database—because it makes title and ownership clear—there’s no requirement that they do so.

Companies that have no business outside of making patent infringement threats against others often hide behind limited-liability companies (LLCs) from jurisdictions like Delaware that require little disclosure. That’s why, in the past, EFF has supported “real party in interest” language that would let the targets of bogus patent litigation, and the public at large, know who truly stands to benefit from problematic patent troll lawsuits.

The new bill, appropriately, requires that patent owners record their ownership at the USPTO. But the penalty it assesses for non-compliance is incredibly weak. Patent owners who don’t comply with the registration rules will only be barred from receiving triple infringement damages for “willfulness.” 

These special damages only come into play in especially egregious cases, such as infringement by a company that knows of a valid patent that it very likely infringes. Most importantly, patent trolls rarely have any interest whatsoever in getting triple damages for willfulness and generally would not be able to, since a defendant with a good invalidity defense is unlikely to be found to have infringed willfully, even if their defense fails. The majority of patent trolls simply ask for a settlement that’s less than the cost of litigation—perhaps $50,000 or $100,000, figures that are considered signs of a “nuisance value” settlement in the patent world. Even patent trolls that have the wherewithal to take a case to a jury trial are doing so because the prospect of regular damages makes the effort worthwhile. In other words, the threat of losing “triple damages” is no threat at all to patent trolls, and we’re concerned that even if this bill passes, they’ll simply choose not to comply with it. 

That’s too bad, because some patent trolls have gone to extreme lengths to sow confusion using shell companies. The notorious patent troll MPHJ Technologies created dozens of shell companies with names like AdzPro and GosNel, using them to send thousands of demand letters to small businesses around the country. Some of the most litigious patent trolls, such as “Shipping and Transit, LLC” (which acquired patents once owned by ArrivalStar) have changed their names and ownership structure more than once.

We’re glad these Senators are noticing that the patent system has become secretive and opaque, especially in the cases of patent troll lawsuits. We’d love to see this bill amended to have real consequences for noncompliance, and then see that stronger version passed. When it comes to 20-year government-granted monopolies, the public has a right to know who is benefiting.

Source: The Public Should Know Who Profits From Patent Troll Lawsuits

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