Irritating Patents, Trolls and the Like

A patent is a government-granted monopoly that awards an inventor control of all rights to a product for 20 years from the date of filing. Congress originally intended patent laws to encourage scientific progress by allowing an inventor operating out of his/her garage enough time to recover R&D expenses and to gain a competitive advantage over big companies.

Unfortunately, patent laws are often abused. In fact, enforcing them has spawned an entire industry of abusers known as patent trolls. A patent troll typically has no manufacturing or research base and so did not develop the invention involving the patent that it owns. Instead, patent trolls focus solely on enforcing patent rights by charging and collecting licensing fees after they have acquired the patent, oftentimes at a deep discount from a bankrupt firm. In particular, patent trolls like to acquire rather dubious patents on business methods, a practice which is about as close as you can get to patenting a raw idea, which by itself is not patentable.

For example, regarding the document management industry, the Millennium Group, a notorious patent troll outfit run by a reverend working out of Nigeria, secured the rights to the patent on forms processing, a method that can be summarized as: (1) scan the form; (2) locate predefined hand-printed and machine-printed data fields on the form; (3) classify the target data using recognition technology; and (4) export the results in a computer-usable format, such as ASCI, to a database. In actuality, this procedure resided in the public domain long before it was patented and could be overturned by spending over a million dollars in court costs. It is far cheaper, however, for the victim to pay the patent troll, say, a mere $250,000, to make the lawsuit go away. In the case of forms processing, the Nigerian troll has made millions from lawsuits enforcing its patent portfolio against corporate infringers and, no doubt, will continue to do so until certain laws are changed.

Another business method patent involves the practice of shipping an instructional CD with a product. Yes, absurd as it sounds, that procedure is patented, and anyone who packages a CD with their product (unless the product is the CD itself) and who does not pay royalties to the patent troll is an infringer.

Believe it or not, the latest patent on the obvious use of a document-based practice long assumed free is that of sending text messages with web links to mobile phones. The method was patented by inventor Richard J. Helferich, who in September of 1997 filed with the US Patent and Trademark Office (USPTO) an explanation of how technology could be used to text a website link to a mobile phone. Helferich Patent Licensing is a patent troll that offers companies the chance to settle by paying a one-time fee of $750,000. Usually, victims begrudgingly pay the fee instead of going through a court battle to overturn the patent that typically costs from one to five million dollars. Since 2008, HPL has settled infringement lawsuits with about 100 companies, including Apple, Best Buy, the NBA, McDonald's and Walt Disney.

The New York Times, which uses text links to alert readers by mobile phone of breaking news or severe weather, is currently heading up the effort to fight HPL's claims of patent infringement by combining resources with companies such as CBS, J.C. Penney and Comcast TV channels Bravo and G4, according to court filings. It is fighting its legal battle with HPL at the USPTO as well as in the courts, arguing to the USPTO that the method is covered by a prior patent from another company and in the courts that HPL is double-dipping by already collecting, from these companies, royalties derived from a different cell phone patent.

Clearly, patent trolls are a species the law should eliminate, largely because their business is superfluous and contributes no productivity to society. In fact, Times' general counsel, Kenneth Richieri, argues that their existence does more to inhibit scientific progress than to promote it. According to him, the Times' larger objective is to prevent Helferich's patents from overburdening activities that are routine in the digital age. As Richieri puts it, "In some ways, it's a tax for being on the Internet."

ARTHUR GINGRANDE is a partner of IMERGE Consulting in Lexington, MA and nationally recognized expert in ICR, forms processing and document automation. He is also a practicing attorney who specializes in electronic discovery, regulatory compliance and intellectual property law. For more information, visit www.imergeconsult.com or email gingrande@gmail.com.