When is a troll not a troll? When it's a business trying to assert its rights in an evolving technology market.
That may not sound like much of a riddle -- unless you follow the intellectual property industry. While the troll from the children's tale lived under a bridge and forced travellers to pay him in order to cross, so-called "patent trolls" send legal letters warning companies that their products are infringing on patents, and asking for millions of dollars in licensing fees.
The person widely credited with coining the term is Peter Detkin, former assistant general counsel at Intel Corp. He used the term to describe a company that unsuccessfully sued Intel for about $8-billion (U.S.) in licensing fees, based on a patent it bought for $50,000. (He actually called Chicago-based TechSearch "patent extortionists," but changed it to troll after the company sued him for libel.)
Ironically, Mr. Detkin now works for Intellectual Ventures LLC, a company co-founded by former Microsoft executive Nathan Myhrvold that has been spending millions to buy up patents. Mr. Myhrvold told a U.S. Senate hearing into patent reform that he started the company to help inventors commercialize their ideas, but some industry insiders say they are afraid that it will become a troll.
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Intellectual Ventures refers to its business as patent "mining," in that it tries to find overlooked patents that might apply to current technologies.
So when does a company with rights to a technology become a troll? That's something no one can seem to agree on. Some businesses complain they are being victimized by patent trolls, while the patent holders in question maintain they are simply protecting their legal rights to a technology.
Struggling companies with valuable patents have become acquisition targets, as has the intellectual property of failed tech firms, and patent lawyers are keeping busy.
The tech sector has seen a number of high-profile patent infringement cases recently, with giants such as Microsoft Corp. and eBay Inc. fighting cases launched by smaller technology companies. Research In Motion Ltd. was sued by U.S.-based NTP Inc., and RIM settled by agreeing to pay $450-million. At one point in the NTP/RIM case, a lawyer for the Canadian company dismissed the U.S. patent holder as nothing more than "a file drawer" in a lawyer's office -- in other words, a troll -- because NTP doesn't make or sell anything, and never has. It is simply a holding company that owns patents.
"The controversy that's out there right now is the definition of the term patent troll," said Jennifer Markey, a senior vice-president with Ottawa-based Semiconductor Insights Inc., which advises technology companies on how to protect and enhance their intellectual property. "No one wants to be known as a troll," she says.
But, Ms. Markey adds, "there has always been aggressive patent licensing."
In 1895, a U.S. lawyer named George Selden filed a patent for a "road engine" and then managed to get virtually every automobile maker to pay him a fee -- all except for Henry Ford, who fought the claim and won.
Jerome Lemelson, another patent lawyer, filed hundreds of technology patents in the 1950s, then launched claims decades later. His "machine vision" patent was filed in 1956 but not approved for more than 30 years, at which point he sued companies that made barcode scanners and other similar technologies, winning hundreds of millions of dollars in legal judgments. Was Mr. Lemelson (who died in 1997) a patent troll or just someone asserting his legal rights as an inventor? The jury may still be out on that one, but in a ruling last year, a court struck down his machine vision infringement case, saying the inventor had waited too long to press his claims against the companies involved.
Muddying the issue of trolls even further, some major companies are turning their patents into a revenue stream. A prime example is International Business Machines Corp., which makes close to $1.5-billion a year just licensing its patents. Others, Mr. Myhrvold says, only use their patents on a defensive basis, which "is a polite way to say that they use [them] to maintain their dominant market position."
The technology downturn may have fuelled the practice, Ms. Markey says, because companies whose businesses weren't doing well turned to their patents as a source of revenue.
"It kind of created a patent arms race," she says.
One example of how the "patent mining" process can turn around a company's fortunes is Ampex Corp., which developed technology for audio and video recording in the 1940s. But as technology progressed, its business went downhill and the stock fell to pennies a share.
Then Ampex noticed that its patents could be applied to newer products such as DVD players and digital cameras. It has settled with Sanyo, Canon and Sony for a total of $75-million and has other claims outstanding. Its share price shot from $3 in October to $56.75 in February of this year, and is currently trading in the $30 range.
Mosaid Technologies Inc. of Ottawa and U.S.-based Rambus Inc. have spent the past couple of years suing other memory makers for infringing on their technology, with mixed success. Rambus won a settlement with Infineon and has lawsuits against Hynix and Micron, while Mosaid has settled with both Samsung and Hynix but has had less success against Infineon.
While Mosaid is seen by many as pursuing legitimate claims, Rambus has come under fire. Critics say it was a member of the group that arrived at a standard for memory, but never mentioned that it held patents related to the standard.
"Would you call Mosaid a troll?" Ms. Markey asks. "They developed the technology. Shouldn't they get the benefit of that technology?"
