Please Pardon The Ill-Fitting Suit

I saw a post the other day on the Electronic Freedom Foundation’s website. Despite facing a battle that’s not only uphill, it’s more like scaling the side of of Half Dome using Q-Tips, Personal Audio, LLC has decided to give it another go. If you’re not familiar with Personal Audio, that’s the company that went after Adam Carolla claiming he infringed on their podcasting patent. The fact that podcasting existed before the patent was granted (rendering the patent invalid under the prior art section of patent law), and the fact that the court has agreed there was prior art, doesn’t seem to faze Personal Audio in the slightest. Patent trolls’ optimism knows no bounds.

Or, possibly someone decided the upside is worth the risk. If they win, Personal Audio will collect fees and royalties from anyone using its patent, which presumably includes any and all podcasters. If you want any indication that podcasting has a rosy future, there it is. Trolls don’t target industries that aren’t going to generate money.  Those fees and royalties have to come from somewhere.

Troll Slayer

Recently, I interviewed Lee Cheng, chief legal officer of Newegg.com, for my Out Of My Mind podcast. Newegg is a $2 billion online retailer of electronic components, electronics and other durable goods. Since the company has been the target of any number of patent infringement suits, Cheng was a good person to seek out for a tutorial on patent trolls.

If you’re not familiar with the term, patent trolls are companies that buy mostly-worthless patents—patents that were improperly issued or have never been successfully used to build any kind of product—and then use loopholes in patent law to extort money from businesses. For example, Cheng described one troll that claimed to have a patent on computer scanners. Another claimed it held a patent on the online shopping cart. A third that asserted a patent on the search box. (Seriously. The search box.) The scanner troll, Cheng told me, was typical of the way many trolls operate. The troll would threaten small businesses with legal action that would run into millions, if not tens of millions, of dollars, then generously offer to settle for $1000 for each employee currently using a scanner.

Nice guys. They’re like Santa Clauses in Armani suits.

Toll of the Troll

Among the companies that do battle with patent trolls, the settlement fees the trolls extract have come to be known as the toll of the troll.

Several years ago, Cheng laid out a plan to stem the potential bleeding of cash these tolls could cost Newegg. He told the trolls, “Sue us.” So, the trolls did. And one by one, they lost their suits.

In one case, their Armani suits.

When Newegg and other defendants refused to pay, they shut down this particular troll’s cash flow and forced it into bankruptcy . In another action, the case was dismissed before trial. The troll was quite surprised when Cheng, instead of celebrating his victory, turned around and sued the troll to recoup Newegg’s legal fees (something rarely done in patent troll cases). In a third case, Newegg and its partners lost at trial but won on appeal, rendering the troll’s patents useless. When the troll took the case to the Supreme Court, the Court threw it back in its face, leaving the troll with patents that could never again be used as a threat.

Sue, Lose, Repeat

I’m somewhat surprised Personal Audio wants to go through this again, having spent money to lose in the first place.

Perhaps the troll prefers that podcasters spend their time and money on litigation rather than hiring talent, producers, editors, announcers and composers; paying for travel; and improving listening and distribution technology. Maybe, trolls are sore losers. (I sincerely apologize to any real trolls who may have been offended by my stereotyping.)

Let’s hope the Electronic Frontier Foundation puts this case to rest in short order and these trolls find another line of business more suited to their talents. I suggest ambulance chasing.

Answer the Call to be Troll-Free

Cheng told me there are two ways you can fight patent trolls. One, is by contacting your elected representatives and urging them to vote for patent reform measures that are currently under discussion on Capitol Hill. The other is by dragging your feet if a troll hits you up for money. Even if you eventually settle, make it as hard as possible for the troll to collect. As their profit margins drop, the trolls will gravitate to another easy street and leave podcasting alone.

If you want to hear Cheng’s excellent patent troll overview here are parts 1 and 2:

Part 1 begins at the 9:40 mark

Part 2 begins at the 10:55 mark

Listen to Cheng’s story while you’re sitting down, so when you get angry you don’t kick the furniture or the dog.