March of the Trolls

5:35 PM -- Think the patent wars ended with the settlement of BlackBerry v. NTP Software Inc. ? Think again.

A week from today the Supreme Court will hear arguments in a lawsuit filed by a patent holder MercExchange LLC against eBay Inc. (Nasdaq: EBAY). MercExchange claims that it holds the patent on eBay's popular "Buy It Now" feature, which lets users pay for online purchases using PayPal with a credit card or with other PayPal funds. A U.S. Appeals Court ruling last year found against eBay, and the Supreme Court decision could set a precedent in IP disputes involving so-called "patent trolls." (See Can't We All Just Get Along?)

Weighing in for the trolls, white-shoe law firm Susman Godfrey last week filed an amici curiae brief with the Court arguing that "the patent system has played a vital role in this country’s unparalleled tradition of innovation, and that the right to injunctive relief has been -- and remains -- necessary to protect a patent holder’s right to exclude." Signing on to the brief is a murderers' row of technology innovators, including Martin Cooper, inventor of the cell phone; James Fergason, who developed LCDs; MRI inventor Ray Damadian; and Leroy Hood, who came up with the DNA sequencer.

Also on the list is former Microsoft Corp. (Nasdaq: MSFT) CTO Nathan Myrhvold, who has started a sort of über-troll firm called Intellectual Ventures, which seeks to develop patentable ideas -- and has also been hoovering up existing patents by the hundreds. Myrhvold argues that, as a form of innovation, patents should be as liquid and transferable as, say, software, which of course is the non-tangible asset that made Myrhvold his first fortune.

Wall Street Journal columnist Alan Murray argues today that trolls have gotten a bad rap, that most major research universities fit the definition of patent trolls, and that, "At a time when the U.S. advantage in global trade is its intellectual property, weakening patent protection… would be a big mistake."

There's a distinction here, though, that Murray's missing. For one thing, big universities have well oiled machines for spinning off patents into lucrative companies. And Intellectual Ventures, Myrhvold's company, wants to create a marketplace in intellectual property that would foster innovation, not stifle it -- and that, of course, would make him even richer than he is now. Nothing wrong with that.

The real trolls, though, don't want to make money by spreading their bright ideas for a price; they want to win lawsuits. NTP could have licensed its IP to RIM for a reasonable rate years ago; instead it held the Blackberry maker's feet to the fire via a prolonged court case, in hopes of a bigger payoff. Eventually it got more than $600 million. But it didn't exactly bolster the case of MercExchange or the other "true" trolls in the process.

If I were an attorney, I might petition for a change of venue: Rather than deciding these issues in the courts, let's build more IP and patent exchanges and let market forces dictate what these good ideas are really worth. Better to match buyers and sellers than clog our courts with boxes of briefs that do little more than gum up the system. — Richard Martin, Senior Editor, Unstrung

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