The Association of University Technology Managers is making it harder for patent trolls to find their next victim. Patent trolling has increased by 11 percent this year and accounted for more than half of all patent lawsuits, according to the Washington Post.
Patent trolling occurs when someone buys the rights to a patent for the sole purpose of collecting fees from others infringing upon his or her patent. The patent troll doesn’t even use the patent for a good or service, and instead makes money solely from licensing fees.
“When people are talking about patent trolls, what they are talking about is patent aggregators,” said Kelly Sexton, director of the Office of Technology Transfer. “These are companies that will go out and either license or purchase patent rights with no intention of ever commercializing the technology.”
Fortunately, universities are not targeted by patent trolls.
“Patent trolls don’t come after universities because we are not making or selling product,” Sexton said. “Patent trolls don’t really affect us since we do research, not develop products.”
However, companies that are licensing a product from universities are not as fortunate.
“The University licenses patents to companies,” Sexton said. “Any company, including our licensees and startups, have to be wary of these patent trolls. Patent trolling is a problem across all industries, especially among high tech industries.”
Currently, there have been no patent claims against N.C. State.
“Patent trolls would have to show damages,” Sexton said. “Since N.C. State doesn’t sell any products, there is nothing here for them.”
Universities also have taken measures to make sure a patent they are licensing will not be used for litigation purposes.
“N.C. State, for our part, fully supports the state mandate by AUTM, the Association of University Technology Managers,” Sexton said. “We are required to be mindful of working with a patent aggregator. We want to find a licensee that will use a technology.”
N.C. State only licenses to companies that will actually develop the technology, according to Sexton.
“There is also patent reform legislation,” Sexton said. “Certain aspects of the legislation are aimed at curbing incentives of the patent trolls. We are supporting some of the aspects of the legislation but it’s not perfect.”
One such patent reform legislation, known as the Innovation Act, requires plaintiffs to pay for discovery, which can sometimes cost millions of dollars.
An example of a patent troll is Asure Software, which in 2002 claimed that it owned the patent rights to the JPEG image compression standard.
“What they do plan to do instead is find companies that are infringing those patent rights and require them to license the patent rights at a handsome fee,” Sexton said. “There are times they can even block the selling of very successful commercial products.”
After claiming patent rights to the JPEG format, Asure collected more than $90 million in licensing fees from companies like Adobe and Research In Motion through 31 total lawsuits.
“Think of the smartphone—there are hundreds of patents embedded in these—and companies like Apple are often bombarded with requests and lawsuits from patent trolls,” Sexton said. “What patent trolls do is hold the product at ransom and require a fee from the company that’s selling product.”
Generally, victims of patent trolls settle for very large amounts rather than risk losing a court case, creating incentives for patent aggregators to continue with their litigation.
However, not all patent trolls get away with this practice forever.
One company, known as Soverain Software claimed in 2004 that it owned the rights to the online shopping cart, a feature used by nearly every retailer with a website. It sued more than 50 retail stores and received tens of millions of dollars in settlements. Like most patent troll companies, Soverain never sold a single product.
Every company that Soverain sued, including companies like Macy’s and Home Depot, settled rather than go to trial. Newegg was the only company to battle the case in court.
Although Newegg lost the court battle initially, after appealing the case to the U.S. Court of Appeals, patent claims by Soverain were invalidated. In 2014, Soverain tried to take the case to the Supreme Court but it was thrown out.
“Some aspects of this legislation are useful in blocking patent trolls,” Sexton said. “We are watching it as it goes through and our professional organization AUTM has issued statements regarding this.”
