The Nadir of “Patent Troll” Rhetoric

The venerable high-tech company IBM is no more a “patent troll” than any other legitimate company that engages in patent licensing. Yet, according to the very arguments of those who are using this ill-defined and misleading term, the shoe fits.

The case in point is the recent demand letter IBM sent to Twitter, asserting violation of several patents. In short, IBM claims that Twitter infringes three patents, one of which covers Internet advertising. Thus, IBM is insisting that Twitter license the patents. Setting aside the issue of whether these patents are valid or not, according to the terms of the current patent policy debates, this makes IBM a “patent troll” – also known as a “Non-Practicing Entity” (NPE) or “Patent Assertion Entity” (PAE). 

According to the frequently cited study on NPE/patent troll litigation by James Bessen & Michael Meurer, an NPE/patent troll is any entity that sues on a patent not currently being used to manufacture a product.  This study is an exemplar of everything wrong with the rhetoric and tone of the patent policy debates.  It has been cited in the patent policy debates hundreds of times, including by congresspersons, the President, reporters, policy activists and others. It was cited by a witness testifying at a November 7, 2013 Senate hearing on PAEs and demand letters. It is also deeply flawed, as recognized by both scholars and the GAO.

Among its many flaws is its expansive definition of an NPE/patent troll.  The problem for companies like IBM is that Bessen and Meurer expressly include in their definition any manufacturing companies that sue on patents deemed to be “well outside the area in which they make products” (p. 10). Well, the last time anyone looked, IBM’s main area of business wasn’t Internet advertising. So, according to Bessen, Meurer and many others attacking “patent trolls” today, IBM is a “patent troll.” QED.

This reveals the absurdities we’ve reached today in the patent policy debates, when, by the very terms of the critics of the patent licensing business model, we can no longer differentiate between 100-year-old firms who have long served an important commercial role in the innovation industries, such as IBM, and the companies that the critics are in fact complaining about, such as Personal Audio (podcasting patent) and Lodsys (online payment and feedback).

The result has been widely misleading arguments and unscientific statistical claims, and this is a problem when such arguments and claims are driving the enactment of real-world legislation and regulations that will negatively impact the innovation industries. As we have long suggested, it is past time to step back from such nonobjective rhetoric and to focus on a more constructive, fact-based discussion about licensing and litigation in the innovation industries.