This story is interesting. Twitter took an unusual step. They put an unusual clause in their employee agreement. That clause guarantees that none of Twitter’s patents can ever be used by a patent troll, even if Twitter goes bankrupt and sells them.
The correct answer is “Intellectual property is not property.” Patent lawsuits have become a huge drain on the productive sector of the economy. Almost any successful business will be ion the receiving end of a patent lawsuit.
A patent troll has a call option on any successful business. If the business fails, the patent troll won’t bother suing. If the business is successful, then the patent troll files a lawsuit. The “justice” system is unable to distinguish valid claims from frivolous ones. If you have a vague patent that might apply, go ahead and sue. Maybe you’ll win the lottery. Maybe the victim will settle instead of paying legal fees and risking losing.
Another problem is the way patent damages are calculated. The formula is “% of total sales” and not “% of total sales, adjusted for the importance of that feature”. If a feature is only 0.00001% of my product, I can face 10%-25%+ damages in a patent lawsuit.
A pro-State troll says “IP belongs to the inventor. It can be bought and sold just like any other property.” The fallacy is that it takes a lot of money to get a patent. In practice, all patents are owned by large corporations. Most employment contracts say “Anything you invent while working here belongs to us.”
How do patent trolls wind up with patents? Sometimes, the patent troll pays people to file for patents. One example is “Intellectual Ventures”. Failed startups sell their patents to patent trolls.
Here is an example, When a VC funds a startup, he gets “liquidation preference”. That means “If the startup is liquidated at a loss, the VC gets paid first before anyone else.” Suppose a startup has a patent, but fails. The VC has a practically worthless shell. The VC sells the shell and “worthless” patents to a patent troll, for $25k. The VC figures that getting $25k back is better than $0. The patent troll buys of a lot of “worthless” patents cheaply. After some clever lawyering, some of them are converted to patent lawsuits.
One VC funded startup X, which failed, and he sold the patent to a patent troll. That patent troll then sued startup Y, where Y was also funded by the same VC! Doh!
The patent troll files the lawsuit from a shell corporation, owning nothing but the single patent. Even if the defendant wins and is awarded legal fees, there’s no assets to seize except the patent.
Twitter’s clever idea is that the employee patent assignment isn’t absolute. The inventor retains the right to license the patent, even though Twitter owns the right to use the patent defensively. This guarantees that the patent can never be used by a patent troll. (However, the employee could sell that licensing right later.)
The patent office clerk is overworked. His performance review is based on “# of patents reviewed per hour”. If the patent clerk rejects a patent, the applicant will probably appeal, which is more work for the patent clerk. If the patent clerk improperly approves a patent, nobody complains. The patent office clerk thinks “If this patent was improperly approved, the legal system will throw it out later.” The judge thinks “This patent must be valid. Otherwise, the patent office would not have approved it.”
That’s a common State trick for shirking responsibility for evil. Each State actor assumes that, if he makes a mistake, someone else will correct him. Each State actor assumes that other people did their jobs properly, so that decisions of others are not carefully reviewed. “Checks and balances” degenerates into “Don’t bother, because other people are checking.”
The patent lawsuits are decided by non-experts. During “jury selection” in a software patent troll lawsuit, any juror who worked as a software engineer would be automatically disqualified.
The patent system is one big mess. It’s a huge tax on the productive sector of the economy. The “justice” system lacks the ability to tell the difference between a serious invention, and an obvious idea wrapped in a lot of fancy legal arguments. Most software patents are obvious ideas to any good software engineer. Unfortunately, judges are technically illiterate.