Trolling Effects - EFF

Trolling Effects: Taking on Patent Trolls with Your Help

Adi Kamdar — Thu, 01 Aug 2013 01:00:26 +0000

In the midst of a tidal wave of momentum in the fight against patent trolls, we're proud to launch Trolling Effects (trollingeffects.org), a resource to empower would-be victims of patent trolls through a crowdsourced database of patent demand letters and a clearinghouse for information on the troll epidemic. The site allows demand letter recipients to post the documents online, find letters received by others, and research who is really behind such threats. The site also features comprehensive guides to the patent system and a blueprint for patent reform.

But in order for this tool to be successful, we need your help. We need you to spread the word and help us get as many letters into the database as possible. Each new demand letter is crucial to Trolling Effects, even if a nearly identical letter has already been posted. Each one provides key insights into the patent landscape: who the bad actors are, what patents are being asserted and how often, and who's being targeted.

If you have received a patent demand letter, submit it to Trolling Effects. The site has measures built in so particular items information can remain private.

Back in June, President Obama joined key members of Congress in calling for "demand letter transparency to help curb abusive suits." Trolling Effects can help provide that transparency, which currently is all but nonexistent. A combination of trolls who send demand letters but rarely sue, scheming businesses that transfer patent ownership to shell companies, and poor record-keeping infrastructure and practices has resulted in a hazy patent system where the lack of transparency has become a competitive tool.

We're joined by a great group of partners: App Developers Alliance; Ask Patents; Engelberg Center on Innovation Law & Policy at NYU School of Law; Engine Advocacy; Public Knowledge; PUBPAT; and the Samuelson Law, Technology & Public Policy Clinic at Berkeley Law. Together, we've created a simple tool that will take away one of the patent trolls favorite tools—secrecy.

The new site will gather information that's usually kept secret and put it to two important uses:

Give those facing troll threats information about the specific threats (including who is really sending them), along with general information about patent law and the system that might help them navigate the legal process and better understand their options.
Collect sorely needed data for journalists, academics, and policy makers, helping them better understand the scope of the patent troll problem and allowing them to make a better case for real reform.

Trolling Effects has the potential to be a powerful tool in the fight against patent trolls. With your participation, we can shine a light on the broken patent system.

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EFF

2013 in Review: What a Year for Patent Reform

Adi Kamdar — Wed, 19 Feb 2014 00:42:16 +0000

It was the best of times, it was the worst of times. In 2013, patent trolls continued to run rampant, suing everyone from app developers to small businesses to podcasters. But the trolls' abusive tactics finally caught up to them in the policy arena—to put it lightly, they had a miserable year. All three branches of government have set their sights on patent reform, and the fundamental question of the patentability of software has reentered the conversation.

This year, EFF and several tech policy organizations launched Trolling Effects, a database of demand letters that patent trolls use as perhaps their strongest—and stealthiest—weapon. Such efforts on the grassroots level, including excellent media coverage of trolls' extortionate practices and the hit on small businesses, created an opportunity for meaningful reform.

The biggest victory was the passage of the Innovation Act in the House of Representatives, an extremely promising bill that provides a number of fixes to the patent troll problem—from fee-shifting provisions to much-needed transparency reforms. The 325-91 bipartisan vote exemplifies how pressing of an issue this is in the minds of lawmakers—not to mention the introduction of nearly a dozen bills in the last year alone that tackle patent trolls. The White House—which, earlier this year, released its own report and recommendation on patent trolls—came out in support of the Innovation Act. 2014 will see the Senate take its place as the patent reform battleground to watch. We're hoping that, in addition to dealing with abusive litigation tactics, the key issue of patent quality is addressed.

The courts are also getting into the patent mix. After a chaotic opinion from the Federal Circuit Court of Appeals, the Supreme Court agreed to take up the case in Alice v. CLS Bank, which covers the patentability of abstract software patents. These low-quality patents arm a majority of trolls and are fueling the boom in patent litigation.

EFF also submitted an amicus brief in the Supreme Court case Octane Fitness v. Icon Health & Fitness, addressing the near-impossible potentiality for a defendant to get fees after winning a patent case. Not only is fee-shifting—which already exists in the Patent Act—good policy, but it would serve as a deterrent for bottom-feeding patent trolls who are more-than-likely to lose the cases they bring.

Lastly, the executive has its eye on patent reform on both the federal and state levels. The Federal Trade Commission, for example, is investigating the costs of patent trolls on competition. And several state attorneys general are using their consumer protection mandates to tackle the troll problem. (Vermont went a step further and passed an anti-troll law.) The Patent and Trademark Office has also been proactive about this issue; we applaud them for hosting several software patent roundtables across the nation, bringing lawyers, engineers, and businesspeople together to address underlying patent quality issues.

The momentum is there. Patents are on people's minds. Let's make sure 2014 not only brings the reform we want, but also the reform we need.

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EFF

Infamous Wi-Fi Patent Troll Settles For Peanuts

Adi Kamdar — Fri, 07 Feb 2014 08:00:00 +0000

Beginning in 2011, a patent troll named Innovatio IP Ventures, LLP, began a massive shakedown campaign. Armed with some patents purchased from Broadcom, Innovatio sent thousands of letters targeting hotels and cafes that provide Wi-Fi for customers. The troll demanded as much as $2,500 per location. Router manufacturer Cisco stepped in to defend its customers and yesterday settled with Innovatio for just 3.2 cents a unit. The settlement counts as a victory. But we still need reform to stop the next abusive troll.

The Innovatio story illustrates just about everything wrong with today’s patent system. It is a classic patent troll whose entire business model is to buy patents and sue. Even worse, rather than sue manufacturers, Innovatio targeted end-users that had simply purchased off-the-shelf routers. Many of these end-users, like mom and pop coffee shops, lack the resources to defend against an expensive patent suit. As a result, the cost of litigation, and not the value of the patents, drives settlement – a hallmark of lawsuit abuse.

If that sounds bad, it gets worse. Many of the largest chip makers (such as Broadcom) retained licenses to Innovatio’s patents. So a café with a router containing a Wi-Fi chip from one of those companies was already protected by a license (this is known as patent exhaustion). Of course, Innovatio did not tell its targets that they might already be protected. Frankly, that is deceptive conduct.

And if that sounds bad, it gets worse still. All of Innovatio’s patents were subject to FRAND promises. These are important promises companies make to license patents—usually patents relating to industry standards like Wi-Fi or Bluetooth—on “Fair, Reasonable, And Non-Discriminatory” terms. A judge recently ruled that even if its patents were valid and infringed, Innovatio would, at most, be entitled to a FRAND royalty of 9.56 cents per device. Recall that Innovatio was demanding as much as $2,500 per location (like a café with a Wi-Fi router). To give you an idea of just how extortionate this demand was, Innovatio’s markup was the equivalent of charging $120,000 for a Big Mac.

When it began fighting back, Cisco took the unusual step of bringing civil RICO (fraud and racketeering) claims against Innovatio. The judge rejected those claims. We believe that Cisco did plead facts establishing a campaign of fraud (such as Innovatio sending demand letters to targets protected by a license and failing to disclose that some of its patents had expired). Fortunately, Cisco continued to fight until it secured a settlement much lower than the billions Innovatio claimed to be entitled to.

Without seeing the Cisco settlement, it is difficult to know if Innovatio will continue its campaign against businesses using non-Cisco routers. If Innovatio continues to breach its FRAND commitments by demanding thousands of dollars per location, we hope that the Federal Trade Commission or state attorneys general will consider taking action against it.

Unfortunately, Innovatio is just one part of a disturbing trend of trolls targeting end-users. Each of these trolls is imposing a massive tax on productive businesses (Cisco spent $13 million on legal fees in just this case). Copycat trolls, such as Innovative Wireless Solutions, LLC, are adopting the same tactic of sending letters to businesses that provide Wi-Fi. We urgently need reform from Congress and the courts to slow down the trolls, protect end-users, and defend innovation.

Organizations:

EFF

It's a Bad Week to be a Patent Troll: Big Updates from New York and Newegg

Adi Kamdar — Tue, 14 Jan 2014 08:00:00 +0000

Patent trolls are having a bad week. Today the New York Attorney General announced it had reached a settlement with MPHJ, the so-called scanner troll. That deal, not entirely unlike the one already in place in Minnesota, is great news for New Yorkers who have found themselves facing the notorious patent troll as well as anyone planning to do business in the Empire State. The settlement itself requires that the scanner troll actually investigate before it sends threatening demand letters and prohibits it from bothering businesses it has already contacted. Even better, the settlement allows those who've already taken a license from MPHJ to get a refund.

The actual settlement document itself is quite an interesting read—it lays out in some detail just how shady MPHJ really is. For instance, MPHJ sent more than 1,000 demand letters to New Yorkers alone (which means it must have sent at least tens of thousands of letters nationwide!) and more than 300 draft complaints despite the fact that it has never sued anyone in that state.

New York's Attorney General deserves credit for protecting its state's businesses and creators by shutting down one of the worst patent trolls. It joins not only Minnesota, but Vermont and Nebraska in targeting this particularly bad actor.

Another anti-patent troll crusader, Newegg, is also having a good week. Yesterday, the Supreme Court refused to hear a case about the "shopping cart" patent, leaving undisturbed a lower court ruling invalidating that pernicious patent. The shopping cart patent is a good example of what happens when low-quality patents end up in the hands of bad actors—Soverain, the patent's owner, has reportedly made more than $70 million in settlements and lawsuits claiming it owns basic, obvious shopping cart technology. That's $70 million that is not hiring new employees, growing businesses (other than the troll's!), or engaging in important research and development.

News of New York's settlement and Newegg's victory put even more pressure on the patent troll business model. When taken with momentum on the Hill to pass legislation and increased attention from the Supreme Court, we're getting closer and closer to the days when patent trolls and poor-quality patents get out of the way of innovation. It can't come soon enough.

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EFF

MPHJ Exposed: The Real Dirt on the Notorious Scanner Troll

Adi Kamdar — Tue, 14 Jan 2014 08:00:00 +0000

To the extent there's a poster child for patent abuse, it's MPHJ, the infamous "scanner troll." This week's revelations show us for the first time just how much damage the patent troll has caused. Hint: it's a lot.

MPHJ owns a handful of patents, which it claims covers the basic technology for scanning documents to email. You read that right—simply scanning documents to email.

On Monday, MPJH sued the Federal Trade Commission (FTC) in federal court in Texas. Apparently, the FTC has been investigating MPJHJ since this summer, using its subpoena power, which allows it to get information that ordinary citizens cannot. In December, it presented MPHJ with a draft complaint and, according to MPHJ, threatened to file suit if MPHJ would not enter into a consent judgment (a kind of settlement agreement).

Notably, the MPHJ complaint and the FTC draft complaint provide many missing details surrounding MPHJ's shady dealings, and we've got some highlights for you:

MPHJ has sent letters to approximately 16,465 small businesses nationwide.
MPHJ sent more than 9,000 letters claiming that "most businesses, upon being informed that they are infringing someone's patent rights, are interested in operating lawfully and taking a license promptly" and that "[m]any companies have responded to this licensing program in such a manner." The letters also claimed that the price for a license—either $1,000 or $1,200 per employee—was reached through the responses of "many companies." However, when the first 7,366 of those letters were sent, MPHJ hadn't sold a single license though its "licensing program."
Of the 16,465 letters that MPHJ sent, it only received 17 (yes, 17!) licenses. Yet the price of these 17 licenses was thousands of small businesses going through the stress and expense of facing a threat of patent litigation.
MPHJ began sending letters in September 2012. It did not file an infringement suit until November 18, 2013—after it had been sued by the states of Nebraska and Vermont.

In other words, this is run-of-the-mill extortion, or an attempt to get a quick buck out of small businesses. And not just some small businesses—essentially every small business. MPHJ believes that as long as a business has at least 20 employees and works in certain fields, such as the vaguely defined "professional services," it "very likely" infringes. And if a business has at least 100 employees, no matter what kind of industry it's in? Then, according to MPHJ, it, too, "very likely" infringes. You read that right. Every. Business. In. America.

So what's going on here isn't just about MPHJ and its desire to squeeze money from wherever it can (there are some unsurprising and troubling hints that MPHJ is using the letters to pressure the scanner manufacturers to pay them to lay off their consumers—just another layer of mob-like behavior). Think, for a second, about the proposition that one party can claim that its patents (in this case five—four of which come from the same family) tie up every American business that uses basic scanning technology. Clearly, the patent system isn't working. The patents are too broad and vague, and there is no evidence that they somehow advanced scanning technology. And when these patents end up in the hands of parties like MPHJ, they become tools for abuse.

Congress is close to passing good legislation that would help curb the patent troll disaster, but would largely fail to address the underlying problem of patent quality. The good news is that the Supreme Court has at least two cases on its calendar this term that will get at the heart of the patent quality issue. We'll be filing briefs in those cases asking the Court to set the patent system back to its original moorings—one that is supposed to promote innovation and progress instead of squelching it.

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EFF

Minnesota: Patent Trolls Are Not Welcome Here

Julie Samuels — Thu, 22 Aug 2013 00:18:44 +0000

Minnesota is the latest state to join the fight against patent tolls. It announced yesterday that it reached a settlement with the "scanner troll," who claims to own the technology for scanning documents to email and has been demanding that companies large and small who use this widely available technology pay up. This settlement follows what appears to be an investigation by the state's attorney general.

Patent law is federal law, which means that state courts usually don't get to hear patent cases. But lately, patent trolls have hit a new low, targeting end users and consumers. This behavior has gotten the attention of state attorneys general, starting with Vermont, who filed a complaint in May against the same now infamous "scanner troll" (MPHJ Technology), alleging unfair and deceptive acts under Vermont's Consumer Protection Act (PDF of the complaint).

But Minnesota's settlement with the troll goes even further. Now, before it sends any letters to Minnesota businesses, MPHJ must give the attorney general's office 60 days' notice and obtain its consent.

The Minnesota attorney general's reasoning was pretty simple:

The Attorney General's Office began to investigate MPHJ Technology for violations of state consumer protection laws last spring, after receiving complaints from several Minnesota small businesses that were targeted by the company. MPHJ Technology, through its affiliates and law firm, sent a series of increasingly threatening letters to small businesses that alleged infringement of its patents for using basic office equipment to scan documents to e‑mail. The letters pressed businesses to pay a fee of $1,000 to $1,200 per employee for a license in order to avoid litigation. Many of the letters promised litigation -- and some even included a draft lawsuit to be filed in federal court -- if the business did not respond or purchase a license.

There are no two ways about it: this settlement makes Minnesota companies safer, not just from MPHJ, but by creating an environment hostile to patent trolls in general. In fact, MPHJ has publicly stated that it "welcomes" the review process that's part of the settlement agreement. We have a sneaky suspicion that MPHJ, who, as far as we know has never even filed a lawsuit, will not be using this review process; instead, it will likely take its "business" elsewhere.

Hats off to Minnesota.

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EFF

Judge Sticks Up for End Users, Rules Against Text Message Troll

Adi Kamdar — Wed, 21 Aug 2013 23:19:17 +0000

A Federal Judge in Illinois recently ruled (PDF) that the infringement claims asserted by Helferich Patent Licensing, LLC—the notorious troll who owns patents on sending links to cell phones—did not hold up, all thanks to a doctrine known as "patent exhaustion."

This is important for two reasons: One, the case is a big victory for end users—customers who buy products or utilize services—who increasingly find themselves targeted by patent trolls; two, patent exhaustion is an important legal doctrine that can and should be used more to protect those facing troll threats. In fact, Apple is currently arguing that exhaustion bars the infamous troll Lodsys' claims against iOS app developers because Apple already has a license to Lodsys' patents.

The Background

Helferich's patents cover the delivery of content (alerts with a hyperlink) to a cell phone. The patents included some claims directed to the device (i.e. the cell phone) and some directed to the delivery of the alerts (i.e. the content). Asserting that its license to mobile phone manufacturers only covers the cell phone claims in the patent and not the content claims, the troll proceeded to demand payment from hundreds of companies who utilized the everyday practice of sending text messages containing hyperlinks.

After sending a litany of demand letters resulting in over a hundred companies taking out a dubious content license, Helferich has finally been stopped in its tracks. The defendants in this latest case—The New York Times, G4 Media, CBS, Bravo Media, and J.C. Penney—refused to comply and fought back hard in court, winning summary judgment.

How'd they win? Because of "patent exhaustion."

Patent Exhaustion

Helferich licensed their patents to every mobile phone manufacturer, who, in turn, sell their devices to customers. The doctrine of patent exhaustion states that the sale of a product that practices a patent (even one that partially practices a patent) exhausts that patent in its entirety. In other words, the patentee doesn’t get two bites of the apple; it can't sue a product's downstream user if that user acquired it legally from a supplier that already licensed the patent.

In this case, Helferich argued that it had separately licensed its patents' cell phone claims and content claims. The Court found that Helferich's attempts to separately license its patents' various claims and then sue downstream content providers effectively and impermissibly turned one patent into multiple. Not only did Helferich receive licensing fees from cell phone manufacturers, but it was attempting to double dip by demanding an additional license from content providers like the New York Times and J.C. Penney.

Luckily, the court rightly found this to be totally bogus:

The doctrine of patent exhaustion is designed to avoid double recovery by a patentee, promote the orderly administration of patent rights, provide an efficient method for determining the termination of the patent monopoly, and promote fair competition. To permit HPL to recover multiple times on the same patent by selling licenses to the patents piece by piece (or claim by claim) is contradictory to these policies supporting the doctrine of patent exhaustion. Therefore, HPL's patents are exhausted.

The Big Idea: Protect End Users

Patent trolls are everybody's problem now.

They're no longer simply going after high tech companies. Increasingly, they are targeting end users for patent infringement.

Scan documents in your office? This troll wants you to pay up. Offer Wi-Fi at your café? This other troll might come knockin'. Send text messages with hyperlinks? Well, with this recent decision, there's now a glimmer of hope.

Patent exhaustion won't apply to all cases—only circumstances with prior licenses or sales. But end users must be protected from bad actors in the patent space. We've said it; the White House has called for empowering end users; Congress has proposed bills to fix it. Entities like Helferich make it clear just how necessary reform is—this time, patent exhaustion saved the day, but that won't always be the case.

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EFF

Momentum Continues on the Hill with Two New Patent Reform Bills

Julie Samuels — Mon, 22 Jul 2013 07:00:00 +0000

Traditionally, D.C. slows down over the summer months. This year, that is not the case with patent reform. Two new bills have already been introduced since Congress returned from its July 4th recess.

The first, a comprehensive bill called the Patent Litigation and Innovation Act, was introduced by Reps. Blake Farenthold (R-Texas) and Hakeem Jeffries (D-N.Y.). It includes many of the types of reforms we've been talking about, such as:

Heightened pleading: Requiring patent holders to explicitly make its case when it files by specifying which patents and claims are at issue, as well as exactly what products allegedly infringe and how. It also requires patent holders to remove the veil of secrecy and specifically identify who is behind the action—not just the patent's owner, but everyone who stands to financially benefit. This kind of transparency is long overdue, and we are encouraged to see it in the proposal.
Protection of end users: Allowing an "interested party"—such as the manufacturer or supplier of equipment—to intervene on behalf of its customers. More importantly, upon request, any underlying case against the consumer would be stayed, essentially put on hold, until the "interested party" finished its case. While this type of protection is good for consumers, we wish the bill would go further and create immunity for end users who use off-the-shelf technologies; there is no reason a consumer should find herself facing any kind of liability for using commonly available technology for its intended purpose.
Stay of discovery: Shutting down expensive and often harassing discovery until the court has ruled on certain motions, such as a motion to dismiss. This is important because it gives defendants a powerful tool to dispose of cases early before the legal fees and court costs really add up.
Sanctions for abusive litigation: Requiring courts to include a record of each party's compliance with the rules of litigation. Currently, Rule 11 of the Federal Rules of Civil Procedure requires that parties behave appropriately during litigation—the provision in this bill would require the court to make relevant findings even if neither party asserted a violation of that rule. Presumably, this is intended to limit bad-faith lawsuits; we think a fee-shifting provision like the SHIELD Act would be a more effective tool to do the same thing.

The second bill, The Stopping the Offensive Use of Patents (STOP) Act, is, in part, a companion to a bill introduced in the Senate by Sen. Chuck Schumer (D-N.Y.) earlier this summer. This proposal, introduced by Reps. Darrell Issa (R-Calif.) and Judy Chu (D-Calif.), would, like its Senate counterpart, expand an important avenue to challenge a patent's validity at the Patent Office. A couple of things make this type of challenge particularly helpful: 1) it gives parties additional arguments to show a patent's invalidity that couldn't be made at the Patent Office previously; and 2) when instituted, it stays any litigation proceeding between the same parties in court. (Currently, courts have discretion over whether to decide to stay cases—discretion that results in nconsistent results.)

The STOP Act also includes a provision requiring the Patent Office to expand access to pro bono legal services to "under-resourced re-sellers, users, implementers, distributors, or custormers of an allegedly infringing product or process." Of course, we would rather these parties not find themselves facing patent litigation at all; to the extent they are, the process should be as painless as possible. Increased access to pro bono legal services is an important element to make that happen.

The proposals in these two bills are largely litigation-based and, when taken together, would go a long way toward making life more difficult for patent trolls. But, as with all types of legislation, it appears we've now reached the sausage-making phase—lots of back-and-forth between members of Congress and haggling over small details. These bills join at least five others currently pending in the House and Senate, not to mention five executive actions the President has promised to take. We've distilled some of the most important themes—and what we think might actually work— on our new Legislative Solutions for Patent Reform page.

We don't think Congress alone can fix this problem. (Congress of course has the constitutional power to do it; we're less certain about the political will.) But Congress can make the patent system a lot better, and when coupled with President Obama's orders, the FTC's troll investigation, and (fingers crossed) the continued interest from the Supreme Court into what is and what isn't patentable, we just might be able to get somewhere. The time to fix this problem has long since passed. We're encouraged to see real momentum toward making that happen and remain cautiously optimistic.

Organizations:

EFF

The Times Profiles a Patent Troll

Julie Samuels — Mon, 15 Jul 2013 07:00:00 +0000

This weekend, the New York Times published a fascinating portrait of Erich Spangenberg of IPNav, who has been called one of "one of the most notorious patent trolls in America." In the past five years, IPNav has sued 1,638 companies.

While the Times' profile includes many colorful details (such as the time Spangenberg purchased so much wine at a Christie's auction that it had to be delivered by an 18 wheel truck), this is not the important part of the story. What is far more important is the evidence that IPNav's business, and patent trolling more generally, is a huge tax on innovation.

Thanks to trolls like IPNav, the Times explains, U.S. companies are forced to spend upwards of $30 billion every year on patent litigation. Most of that money goes to troll profits and legal expenses, with less than 25 percent flowing to inventors. Even Spangenberg concedes that his business uses “the courts as a marketplace, and the courts are horribly inefficient and horribly expensive as a market.” Patent trolls like IPNav are a symptom of a fundamentally broken system.

In a follow up article, the Times tells the story of Peter Braxton and his app Jump Rope. In an all too common tale, Braxton's promising start-up was devastated by a troll lawsuit (brought by a company not associated with IPNav). Even though Braxton won a clear victory at the district court, litigation costs were destroying his business. In exchange for a substantial equity stake in Braxton's company, IPNav agreed to handle the litigation. As the Times explained, this story suggests that “there is really only one way to deal with a patent bully: team up with a bigger bully.”

This is a terrible climate for innovation. We hope that media attention like this helps spur legislative reform. We should create a patent system that doesn't squelch start-ups solely to enrich patent trolls. Erich Spangenberg doesn't need a seventh Lamborghini.

Organizations:

EFF

Independent Game Developers: The Latest Targets of a Bad Patent Troll

Julie Samuels — Fri, 12 Jul 2013 07:00:00 +0000

A growing number of independent game developers have received demand letters from Treehouse Avatar Technologies for allegedly violating patent 8,180,858, a "Method and system for presenting data over a network based on network user choices and collecting real-time data related to said choices." Essentially, this patent covers creating a character online, and having the game log how many times a particular character trait was chosen.

In other words, an unbelievably basic data analytics method was somehow approved to become a patent.

The patent troll, Treehouse, has surfaced before. Back in October 2012, the company sued Turbine, developer of Dungeons and Dragons Online and Lord of the Rings Online.

This is a textbook patent troll case. Treehouse owns a very broad software patent but doesn't, it seems, make or manufacture anything itself. They simply send demands around or, in some cases, sue alleged infringers. And developers—most recently, independent game developers—lose out by being subject to lawyer fees, licensing fees, litigation costs, or the fear of implementing what seems to be a very basic, obvious feature to their product.

When trolls attack, innovation is stifled. For more on everything EFF is doing to change this reality, visit our patent issue page.

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EFF