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January 20, 2008

Trolling

Academics from NERA, a self-proclaimed economic consulting hothouse, who spurt that they "understand how markets work," demonstrate to the contrary in a report on the mythical patent troll, scintillating to a degree that guarantees no loss of sleep.

Spending a page and half on delineating trollishness, they roll a dung ball, deciding: "Each of these definitions presents a series of tensions and grey areas."

The wonder is in grossly overwriting the obvious in an obfuscating way. Answering the question: "are trolls a drag on innovation?" -

[T]he activities of patent trolls can inhibit development activity of producing firms, while at the same time providing incentives for increased inventive activity. Accordingly, there is no simple, single answer to the question of patent trolls’ net effect on economic efficiency and economic growth. Instead, the answer involves a balancing of the two seemingly disparate effects. In the end, some parties win while others lose from patent troll enforcement activities, regardless of the overall social welfare considerations.

Perhaps a more entertaining question to explore would have been: "are trolls innovation in drag?"

The ivory tower turret dwellers then evaluate trolls via the Graham four-factor fandango for determining the merits of injunctive relief, when the more fundamental question, not tackled, is whether non-practicing patent holders ipso facto deserve second-class treatment, to which the Supreme Court in eBay gave a fudged "yes." But I digress.

If an injunction were not granted, would the plaintiff sustain irreparable harm?
If an injunction were not granted, would the plaintiff have an adequate remedy at law?
What is the balance of hardships between the parties?
Would an injunction further the public interest?

The deeply analyzed results most closely resemble porridge.

Their finding is that figuring irreparable harm hurts the head.

The question of irreparable harm is one that will require an economic evaluation of the parties, products and markets. Only through such a rigorous exercise can a determination of irreparable harm (or lack thereof) be conclusively made.

In addressing adequate remedy at law, not being lawyers, adequate remedy at law was not addressed. That, at least, conserved keystrokes.

On balance of hardships, there is a balance, but it has nothing to do with patent trolls.

[O]ne would expect the balance of the hardships to tip in favor of the defendant. However, it is important to note that this conclusion does not depend on the plaintiff being a non-producing entity. It would hold true if the plaintiff were a producing entity as well because whether this particular hardship is created depends entirely on the characteristics of the defendant (i.e., did the defendant have to sink costs?) rather than the characteristics of the plaintiff (i.e., does the plaintiff sell a product incorporating the patented technology?).

Thus, we conclude that the balance of the hardships issue -while an important factor that should be considered by courts in deciding whether to grant injunctions - has little to do with the debate over non-producing entities.

Naturally, the public interest makes for puzzleheaded cogitation.

Given the potential for harm to the public interest, it would seem to be in the best interest of all involved to reach a settlement that allows the defendants to continue to produce the product at interest.

[T]he question of whether liberal granting of injunctions would lead to more or less innovation is not easily answered. On the one hand, liberal granting of injunctions would tend to increase the value of patents, which would tend to lead to more patenting activity. On the other hand, the prospect of facing an injunction after sinking costs would tend to discourage development and commercialization activities.

One might think simplistically; the Supreme Court did: money was good enough if the patent holder didn't practice the claimed invention.

An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees... For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent... When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.

But, on the other hand, thinking simplistically would be decidedly unacademic, the paper concludes.

The only certainties in the study of patent trolls are that the debate will likely continue, and that thoughtful analysis is required with a focus on the specific issues relevant to the patents, products, industry, and parties involved in any dispute.

One can only hope no one paid money for this schlock. If this report is any indication, NERA is an acronym for Non-Economic Retards Association.

Posted by Patent Hawk at January 20, 2008 10:53 PM | Patents In Business

Comments

Probably yet another shill for Microsoft, BSA, Coalition for Patent "Fairness" (that includes "ethical" companies like Countrywide Financial) etc etc etc.
Patents are out of control
blah blah
same old same old
blah blah

Posted by: anonymousAgent at January 20, 2008 11:17 PM

Aha! Professor Irwin Corey is alive and kicking!

Posted by: bierbelly at January 21, 2008 6:53 AM

Economics, one of the "soft" sciences; aka "the study of the obvious".

Posted by: bierbelly at January 21, 2008 8:17 AM

NERA is a subsidiary of Marsh & McLennan, the giant insurance broker. It looks like their experts are hired guns in a variety of big-dollar litigation matters.

From the web site:
"We were Microsoft's economists in the US Department of Justice's antitrust challenge"
"When a stock's price crashes, we are frequently asked to explain why."

Here's some flavor on one of the authors: "In intellectual property, Dr. Johnson has worked on patent damages litigation, including reasonable royalties calculations. He has also written on the use of event studies in intellectual property and on the current state of empirical analysis in intellectual property."

The interesting question is whether this means that patent litigation is entering the big time civil litigation world where class-action shareholder suits and asbestos lawyers live.

Posted by: dvan at January 21, 2008 9:29 AM