The patent trolls purchased those patents from their inventors. They didn’t create the patents. Apple could have purchased the company that created the original patent.
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Apple Must Pay Over $700 Million in Major Patent Damages Case
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They sued in the U.K. because the patent breach was in the U.K. Apple have lost plenty of court cases in the US courts.
No, that's not how it works. That's precisely why we have FRAND principles for standard-essential patents. And those principles allow a potential licensee to challenge an unfair, unreasonable, or discriminatory licensing fee.
Right. Apple challenged the licensing fee on the claimed basis that it allegedly failed to comply with FRAND principles. And it appears the court disagreed with Apple. You can disagree with the court's ruling (I haven't read it or read any of the studies supporting it), but I don't think you can presume right off the bat that the patent holder here had asked for a licensing fee that wasn't fair, reasonable, and non-discriminatory (in fact, if this was a standard-essential patent, it's very likely that others, like Samsung or Google, were paying that same fee Apple refused to pay). Your argument requires us to assume (or conclude based on evidence) that Apple was right (as opposed to just trying to get away with not paying).
I'm genuinely a little bit puzzled by the fact that your post is self-contradictory: on the one hand, you complain that patent holders can decide whatever they want to charge, even for a mandatory technology (i.e., standard-essential patent), and on the other hand you evidently recognize that potential licensees can challenge that pricing if it doesn't comply with FRAND principles. If you believe Apple was right—and that both the patent holder and the court were wrong—you're going to have to supply more evidence. Otherwise, this is literally a textbook example of the system working as intended.
No—this is nothing like a payday loan and it's not "taking advantage of people to profit". Your argument in fact assumes that inventors are too stupid to realize they're getting fleeced, when in reality many of these transactions are heavily negotiated contracts between sophisticated parties represented by counsel (very much unlike payday loans).
My guess is that you don't appreciate the resources and skills needed to properly manage intellectual property (including negotiating and managing licenses and monitoring for infringement) and you probably don't appreciate the cost and very real risk of bringing a patent infringement suit against someone like Apple. It's also something most people have no interest in being involved in. Inventors are busy doing what they're good at: conducting research and inventing.
Wait, they’re sophisticated enough to have counsel to negotiate a deal with some patent troll corporations but they can’t or don’t want to negotiate royalties with the actual company that could use their product?
In the case of inventions like that, I think what happens is people come up with an idea, but they have little or no sophistication when it comes to business or legal issues. It’s not that they’re stupid, but they just understand what they know and not legal and business negotiation. They can’t afford tens of thousands of dollars for a legal team to negotiate for them. Of course this is nothing new because the actual inventors of products have been getting screwed for probably centuries. In my opinion, these patent troll corporations just add another layer of scum to an already broken system.
What needs to happen is legislation requiring the majority of royalties to be paid to the actual inventor of a product. If some third-party company wants to negotiate and be a middleman, I’m not against that, but they should not reap the majority of the rewards for an invention. There should be reasonable limits to the percentage of money they can take from the inventor. I’d say a 30% cap is reasonable. Lawyers get bloody rich off of that and at least the actual inventor of the product would not get screwed.
Although I’m not sure if many of these patent trolls are buying inventions from individuals.
Hold on for a second. The purchaser of the patent is not always an NPE. Sometimes it's the "actual company that could use their product." It's not just patent trolls that go out and buy patents—Apple, Samsung, Google, and others buy them too. Do you think the inventors always extract the maximum value from their patents when that happens? What if an NPE is willing to pay more than any of the operating companies—should the inventor not be allowed to maximize their profits? Or do you think the inventors are turning down better offers from the companies that would use their patents in order to accept a worse deal with a patent troll?
The alternative to selling (often while maintaining some residual) is typically not negotiating royalties with a single company but with multiple different companies, and negotiating a one-time purchase is less burdensome than going out and negotiating licensing with every single potential user of the patent.
So basically, since the manufacturing company is going to screw the inventor, we might have will let this NPE do it. I think it’s funny that they’re called that. It sounds like they made a fancy name for themselves to make what they do seem more reasonable.
I’m not saying the inventors won’t get screwed, but I don’t think adding a completely useless middleman that’s only purpose is to take a cut off the top helps anyone. It would be like if you’re in a store and there was something on the shelf but when you try to buy it, there was a guy saying no I already bought that. If you want to buy that, you’re going to have to pay me five dollars on top of the $20 the item costs. The only positive in that scenario was he didn’t screw the store owner by buying the $20 item for $1.
If there was some sort of middleman negotiator that wasn’t incentivized to screw the inventor in order to make a bigger profit it might be a good thing. For example, if I invented a widget and someone says hey, I can negotiate the patient on that widget to Apple for 30%. Negotiation would work because that middleman could go to Samsung and get a counter offer. While it is still a bit scummy and sort of like a lawyer, the middleman is still providing negotiating service that benefits the inventor.
In the current system, the middleman says I’ll buy your widget for $5000. The poor inventor doesn’t realize the worth of his invention and probably needs money so he just takes it. The “NPE” then sues Apple for $50 million. How in that scenario did having the middleman benefit anyone but themselves? Apple got screwed because they had to pay more than they would have. The inventor got screwed because he got not even pennies on the dollar for his invention. No one benefits from that.
Nobody is forcing the inventors (or patent holders, as they are not always one and the same) to contract with the patent trolls. Nobody is preventing them from contracting directly with the companies that use the product. I don't see how the existence of more potential purchasers would drive down the price of patents (and the value inventors can extract from their inventions), but I'd be happy to hear your arguments.
You're also right that inventors aren't the best placed to handle legal and business negotiations, which is one reason a patent may be worth more to a patent troll than they are to the inventor who is unable to maximize its value.
Lastly, the inventors may not be legal or business experts, but they're also not desperate to put food on the table (another reason this is not like payday loans). For what it's worth, I would expect that the vast majority of patents are filed by attorneys or registered agents, and the cost of filing a patent can run into the tens of thousands of dollars for complicated inventions.
Right, they may be buying patents from other companies or research institutions (who tend to be represented by counsel in these types of negotiations).
This raises another interesting question, somewhat unrelated to our discussion. As you know, many patents are owned by companies or research institutions whose employees came up with the invention (the employee may be named as the inventor on the patent, but the company or university owns the patent and all legal and economic interest in it). Should a company/university be forced to grant the actual inventor an economic interest in the patent, even if it specifically hired the inventor to research a solution to a particular problem and provided all the resources for such research?
I don't know why you find it difficult to understand economics of how "free" trade can be coerced by heavy fines. The same principle as using Tariffs to change a countries behavior (good or bad) would also coerce a trade agreement. Apple is entitled to fair compensation, the court ruled that 30% was not fair. Now they will have to appeal and rework their compensation to a fair level and it will in the long run. If you think our courts are simply enforcing the laws, then why the myriad appeals courts (here's the answer for you: Not even a written law is interpreted by judges the same due to bias.)
To be clear, I'm not advocating for inventors to get screwed. Nor do I believe that every inventor selling their patent (to an NPE or an operating company) is actually getting screwed. Sure, the NPE is a middleman and is doing it for their own profit. That's true of every single middleman—yet almost every market that I know of has some form of middleman (brokers, distributors, etc.). I don't know of any middleman in any market providing that service for free. At the end of the day, if an inventor sold their patent to an NPE, it's probably because they decided they could get more money by selling to the NPE than by selling to Apple.
You seem to have decided that the NPE is a "useless" middleman. I'm not entirely unsympathetic to your perspective. I get why patent trolls seem bad. For similar reasons, I like to think that investment bankers are useless (and I deal with them on a near daily basis). It's easy to complain about how much money they make for just being a middleman—but the fact that companies are willing to pay them that much kind of underscores the fact that they're not useless. Some people think lawyers are "useless"—but I've dealt with enough transactions and litigations to know that I wouldn't want to do them without a good lawyer.
I have trouble seeing how a "useless" middleman could remain in business. If you're an inventor and you don't like NPEs, just don't deal with them.
I don’t think this should be the standard for saying something is acceptable. No one forces people to go to payday loan places to get taken advantage of. There’s a lot of horrible things that go on that. I probably can’t mention here that people aren’t forced to do but do so out of desperation. Just because people aren’t forced to do something doesn’t mean it’s OK.
Of course it’s worth more to the patent troll or NPE but does that translate to more money for the inventor?
That’s exactly my point and it’s a broken system. Basically your million dollar invention is worthless without spending tens of thousands of dollars. The NPE says will give you a few thousand dollars and it’s a few thousand dollars more than you had before. I know true free market capitalists feel that’s acceptable, but I just can’t make that seem right in my brain.
I don’t think so because you’re getting paid to do the research. if you had someone drilling for oil to find oil fields, should they get a cut of the reward if they find one? Maybe but I think that would be difficult. If I’m doing some sort of activity that requires support from my company then what percentage of the effort and risk am I putting in? If I’m some inventor working in a lab that’s worth $100 million and I invent something was my time worth more than the money the company spent on the lab that made it possible? I agree those are interesting questions though.
I think payday loans are not a valid comparison here. Payday loans are taken out by people who literally cannot afford to pay their bills or buy their groceries while they wait for their paycheck. I agree with you that payday loan providers are (often if not always) predatory and rapacious. But I doubt the vast majority of patent sales are done out of desperation. Again, nobody is forcing the patent holders to sell their patents.
If I had to guess, the existence of NPEs translates to more money for the inventor than the absence of NPEs, or else the NPE wouldn't be in business. Can we think of alternative systems that more "fairly" (however you define that word) reward inventors? I am sure that economists and law professors have written scores of papers on the topic. I would also expect that alternative systems (and there may be ones that are better than our current system) have their own trade-offs. I know that simply eliminating NPEs or restricting patents to inventors and actual users of the patents (as some have suggested in this very thread) is not a good solution and would hurt inventors more than help them.
I think you're making assumptions about NPEs—and the choices inventors face—that are not accurate. If your premise is "NPEs are bad because they make more money than the inventors", you may not be properly accounting for the risks that NPEs are taking or the fact that an inventor may prefer to take a certain payment today over an uncertain payment tomorrow (that also could require potentially very significant expense to obtain).
Can an inventor eschew the NPE and hire his own lawyers to enforce his patents? Sure. She may not be very good at it, and it will still cost her a lot. It may not be a risk she's willing to take. But unlike an NPE, it may not be a risk she's able to spread across multiple different patents.
Wouldn't it be great if we had a costless legal system that automatically resolved disputes to a ground truth without the need for lawyers? Sure, sign me up. Let me know when you find the genie that can grant you that wish!
In general, I agree with this take. There's one area where the question isn't as simple, and that's when employment contracts lay claim to any intellectual property you may come up with while you're employed. That's very common among tech companies. The company typically owns all IP created by the employee, regardless of whether it's created during work hours or on their own time if it's related to the company's business. I've always found that questionable.
I can’t even be bothered anymore to reply as you don’t even have a basic level of knowledge.
You can’t be bothered to learn anything. I believe your basic level of knowledge is lacking, but hey have a great day!
Doesn't make a difference. They own the patent, they can do whatever they want to with it.
To a point - once it becomes SEP by the owner's actions, it is required to license the patent per FRAND terms. I'm not sure this judgement is in keeping with that, but I am not a lawyer. I'm sure it will be appealed again if that opinion is shared by Apple's lawyers.
It’s a double-edge sword.
If we get rid of it, then anyone who spends 1-year designing and prototyping a plastic kitchen widget would release it to the market. Within 2 months, Chinese factories would start pumping out rip-off versions and selling them for $1 per piece.
There would be no patent system to protect anything. No-one would want to spend 1-year of their life inventing things for which there is no protection.
They have the same patent exposure if they sell their products in Europe and the US.
I think the problem can be solved by more forceful adjudication of RAND and FRAND. The R stands for Reasonable, and $700 million is not reasonable.
This is a massive problem for the entire Internet of Things industry. If you think it’s expensive for Apple, it’s a much bigger problem for smaller companies who lack large patent libraries. Companies implementing WiFi don’t have any way to know how many patents they’re implementing nor how much they need to pay. There are many reasonable patent polls, like VIA Licensing and HDMI Licensing, but the FRAND patent system is a mess right now, in my opinion.
I'm not sure whether your statement that $700 million is based on some rigorous analysis or just a reaction to what seems like a large number. If the former, I'd be interested in hearing your analysis supporting that statement.
If not based on some analysis (but rather a gut reaction to a large number), I will respectfully disagree on the basis that this is precisely the figure that the court determined was, in fact, reasonable—presumably after it heard sophisticated expert evidence from both sides (cross-examined by the other party). My guess is that it was based on the volume of devices sold by Apple (in other words, the number of times they used the patent) over that 14 year period from 2013 to 2027.
In the abstract, $700 million sounds like a huge number but, in context, it is actually a drop in the bucket for 14 years of product sales for one of the world's most valuable companies. Apple is a company with ~$140 billion dollars in annual EBITDA (on close to $400 billion of annual revenue). A smaller company selling fewer devices would presumably not be paying any more or any less per device than Apple is paying--that's the Non-Discriminatory part of F/RAND.
It appears that the $700 million largely reflects damages from refusing to pay.
But Apple’s got no problems compared to smaller tech companies trying to implement cellular or WiFi technologies into their products. We really should have government-enforced patent pools, and deadlines and the like. For instance, in the days of DVD, there was one patent pool, MPEG-LA. They were expensive, I think around $5 a unit. But everybody paid the same.