Big trolls vs. small trolls: The real battle behind patent reform

Rogue software patent trolls are the scourge of the tech industry. But the larger, better-dressed trolls don't get a pass either

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Turns out patent trolling is not the invention of PAEs; they have just taken it out of its birth context. In 2006, an executive who had worked in the "IP Law" function at both IBM and Microsoft was admitted into the IP Hall of Fame (yes, it's real). As a vice president at both companies, Marshall Phelps was a pioneer in the monetization of patent portfolios. His Hall of Fame bio explains:

Marshall Phelps put IP on the corporate map. He forced senior managements (and Wall Street) to regard IP not as a legal overhead, but as a profit center. He took IBM from a few million dollars in IP-related annual revenues in the late 1980s to over a billion dollars in a little over a decade. He helped to popularize the notion that everything a company owns can be licensed at the right price and time.

The tactic he perfected was use of teams of patent analysts to take apart competing products and look for ways their inventors had unwittingly used the same techniques IBM had patented. They would then approach the company in question and invite them to purchase licenses -- especially royalty-based licenses -- for IBM's patents. It was easy money because anyone independently inventing technology in the markets IBM had helped create was almost certain to have solved the problems in similar ways.

No copying or "idea theft" was necessarily involved; there are just a limited number of ways of solving many problems, especially at the fine-grained level at which patents today are obtained. Some may imagine patent violators are copying whole products, but many patent infringements are for small, seemingly obvious ideas that arise from the problem-solving process.

As a result, Phelps' approach was wildly successful and much emulated by giant patent holders. As his bio goes on to say:

At the urging of Bill Gates, he came out of retirement to head Microsoft’s IP strategy and help establish the company as an emerging patent leader, and to expand upon its copyright and trademark successes.

There are huge profits available. IBM makes $1 billion each year from its patents, while Microsoft is making $2 billion per year just from Android. Yet both companies also complain of increased attacks from NPEs. This graph says it all:


Now you know the reason for the apparent inconsistency of IBM and Microsoft seeking patent reform to eliminate trolls while simultaneously opposing a full solution to the problem. It's not that they hate patent trolls; it's that they are giant, profitable patent trolls seeking to neutralize the irritating small trolls whose mosquito-like bloodsucking reduces their profits. In their support for changes, we're not seeing a call for reform to neutralize all patent abuse. Instead, we're seeing an attempt to neutralize the pipsqueak competition.

This article, "Big trolls vs. small trolls: The real battle behind patent reform," was originally published at Read more of the Open Sources blog and follow the latest developments in open source at For the latest business technology news, follow on Twitter.

Copyright © 2013 IDG Communications, Inc.

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