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Markman Advisors Patent Blog

Is IBM a patent troll?

Zachary Silbersher

IBM owns patents.  IBM sued Groupon for infringement of those patents.  IBM just won a jury verdict against Groupon for $82.5M.  Does that make IBM a patent troll? 

IBM has a sizeable intellectual-property licensing business, with annual revenues in excess of $1 billion.  Likewise, the company claims that spends nearly $6 billion each year on research and development, and further claims that “[w]e rely on our patents to protect our innovations.”

John Desmarais, who represents IBM in its case against Groupon, said that recent patent reforms have made it much more difficult to successfully enforce patents.  The result has encouraged efficient infringement as well as refusal to enter license negotiations, even when infringement is clear.  Desmarais said, “[i]t’s put companies like IBM, who have real portfolios, real R&D investment dollars, in a situation where they have to go to court . . . It took years and millions of dollars when it should have taken a couple of meetings.”

It is curious to read about IBM, one of the largest and most iconic technology companies ever, paint itself as a victim of Big-Tech’s “efficient infringement” strategy.  Those typically complaining about efficient infringement are usually patent-holders who could not successfully license their patents.  And those patent-holders who have the audacity to enforce their patents through litigation are frequently labeled as patent trolls.  Seems like that is what happened in IBM’s case against Groupon.  Doesn’t that make IBM a patent troll?

Good try, author.  But the polite term for patent troll is NPE, or non-practicing entity.  Surely, IBM does not fall into this category because, well, it’s IBM.  IBM does a lot of things.  It has products and services, and though its business model has changed over the years, it still does a lot of different things.

Well, yes, it is IBM.  And yes, IBM is not an NPE to the extent it does lots of different things.  But IBM does not appear to be practicing the patents it prevailed on against Groupon.  Indeed, IBM’s complaint against Groupon does not allege that IBM is itself practicing the asserted patents.  And the complaint did not request injunctive relief. 

Ok, so maybe IBM is not practicing the patents it asserted against Groupon, but IBM still has a business other than patenting.  It does other things. 

Well, that may be.  But if the complaint in its case against Groupon is any guide, IBM presented itself, for the purposes of this case, as a company that is in the business of inventing and licensing patents, without necessarily practicing them.  The complaint explained that IBM is a recognized inventor, it spends billions each year on research and development, it relies upon the patent system to protect its inventions, and its shareholders likewise expect it to generate revenue directly from licensing those patented inventions—whether it is practicing them or not.  All of this suggests that, perhaps, you don’t need to practice your asserted patents to avoid being labeled with the pejorative, patent troll.

I think you’re missing the point.  Patent trolls do crazy things, like sue upon patents that are already expired! 

IBM’s complaint against Groupon asserted four patents: U.S. Patent Nos. 5,796,967; 7,072,849; 5,961,601; and 7,631,346.  The complaint was filed in March 2016.  The ‘967 patent was expired at the time of filing, and the ‘601 patent expired a few months after filing.  Patent damages can go back six years. 

Ok, but patent trolls typically assert low-quality patents.  For instance, you can tell because they were rejected by the Patent Office lots and lots of times during examination.

IBM’s ‘849 patent, which it asserted against Groupon, was pending at the Patent Office for close to 13 years before being allowed.  It faced at least six Office Action rejections (including both final and non-final) as well as an appeal. 

Wait a minute.  Even if IBM is not actually practicing the patents against Groupon, and even if IBM just tries to generate revenue from licensing patents its owns, the patents that IBM asserted against Groupon are homegrown.  They were developed and invented in-house.  It’s not like IBM acquired those patents from elsewhere, and then tried to assert them against other companies.  That is the point.

Well, is that the point?  VirnetX has been shamed over and over again as the consummate patent troll, even though its management includes inventors of the patents asserted against Apple.  I have witnessed district court judges tell patent plaintiffs, who themselves have homegrown patents, at the initial conference in a case, “You are a patent troll.”  And it was not a question.  

Ok, but those patent holders you’re talking about—they sound like they were small inventors.  They were not the size of IBM.  IBM is a big company.  IBM contributes lots of other productive things to society.  There’s a difference.

So, then you’re saying it’s a matter of degree.  Big companies with brand names who license their patents—they are not patent trolls.  Small companies, by contrast—yeah, they’re definitely more likely to be a patent troll. 

So then taking that a step further, that would presumably include startups.  Small startups that came up with a good idea, but lacked the resources to compete with Big Tech competitors who know that it is more efficient to infringe rather than negotiate a license.  And it would also include startups who presumably lack the resources to hire Big Law counsel when infringers—such as Groupon—refuse to take a license.  Which, presumably, is why these smaller patent holders are incentivized to sell their patents to NPE’s in the first place.  In fact, that is perhaps the demand in the market that NPE patent assertion entities satisfy.

Are you’re saying that, if you literally lack the resources to protect your patent against larger companies that intentionally pursue a strategy “efficiently infringing”—meaning, it is more cost effective to steal your invention rather than negotiate a license with you . . . THEN you are a patent troll?

Look, the easiest way to understand a patent troll is that you know it when you see it.  And you’ll see it when it suits you.  And it’s not like anyone ever went to jail for saying it, right?

Ok, I think I get it now.  Good talk.