I've said before, and often repeated, that software patents are evil. Ask almost any experienced software product engineer -- especially in an open source project -- and they'll tell you software patents are a bug, not a feature. The worst problem they face is patent trolls appearing from nowhere and enaging in a legal shakedown. Even President Obama says, "They don't actually produce anything themselves. They are essentially trying to leverage and hijack somebody else’s idea and see if they can extort some money out of them."
Now a partial fix may be coming, in the shape of the SHIELD Act, an initiative in Congress that's intended to thwart patent trolls. You may be surprised who supports it.
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There are companies that benefit from their ability to interpose themselves in other people's innovation and defend software patents because of it. Microsoft, for example, is said to earn significant income from Android, a platform it has had no direct or indirect involvement whatsoever in developing, based on the likelihood there will be ideas within Android over which Microsoft can claim rights.
We're rarely talking wholesale copying here, like the original framers of the Constitution may have envisaged when they created the power for Congress to permit patents. Back in those days, patents were mostly about big ideas realized as manufactured goods; copying was as clearly discernible as it was wrong. Today, we're talking the equivalent of the spacing on the thread of the screw to hold the name plate on the plough. An idea that's merely a small, additional detail to a software project may be enough for a patent holder to claim fealty and demand tribute today.
What is the problem?
All the same, even Microsoft is worried. The same mechanism that lets it tax the innovation of others threatens their own business; those who live by the sword also need to watch out for other fencers. Microsoft suffers significant expense defending itself from companies that exist purely to extort money out of innovators over patents. Most of us call them "patent trolls," but those who use the same techniques in ways they consider legitimate prefer to use more obscure terms -- like "nonpracticing entity" or "patent-assertion entity" (PAE) -- to distinguish between themselves and patent trolls with no products.
In normal patent engagements, the two parties involved will normally both have products and patent portfolios. They will thus be able to meet privately, decide whose sword is biggest, and agree on a settlement that involves cross-licensing of each other's patents and a cash payment to balance the difference in weapon size. Both parties are incentivized to settle, as both could be sued by the other if the encounter failed. We hear little of these settlements; they rarely reach court and are almost always covered by draconian nondisclosure arrangements.
But a PAE has no products, just a patent portfolio. There's no scope for negotiation. There are only two options: Surrender to its blackmail early and secretly, or brace for a hugely expensive lawsuit. PAEs are able to build a self-sustaining campaign against the technology industry, using the (large) profits from each successful shakedown to fill a war chest and battle with the one or two victims willing to stand and fight. They're helped in this endeavor by the fact that patent suits do not involve the loser paying costs. Each victim knows they will have to pay their own costs, and even if they win, they still have to spend that money.
This knowledge encourages unjust early settlement, filling the PAE's war chest and posing little threat to its cash reserves beyond its own costs in pursing each court case. Victims know they will have to pay regardless, and the extensive and costly discovery process will paralyze their internal operations. The statistics show PAEs have a low success rate in court, but the fact their victims will be punished simply for choosing to go to court means they're rarely forced to do so.