Late last month the CEOs of four of the most powerful tech companies in the world — Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, Apple’s Tim Cook, and Sundar Pichai of Alphabet, which owns Google — testified before the House Judiciary Committee, which has spent a year investigating their companies’ alleged anti-competitive and monopolistic practices.
That’s quite a fall for Big Tech, which just a decade ago was viewed by Congress as an unalloyed social good. With every aspect of Big Tech’s behavior now under review, perhaps it’s also a good time to revisit its “patent troll” narrative. This is the notion, unlikely on the face of it, that somehow the richest and most powerful companies on the planet have become the “victims” of a handful of small-time bad actors using the threat of patent litigation to extort settlements and supposedly “stifle innovation.”
To be sure, a decade ago there were a few shady characters, such as the infamous troll MPHJ, who threatened mom-and-pop businesses with patent suits to extort cash settlements. But to the extent the patent troll problem ever really existed, it has clearly now been solved. Patent suits against Big Tech companies are down by as much as 50% compared to earlier in the decade. Meanwhile Big Tech’s revenues and market value have skyrocketed by 40% and 58%, respectively. Big Tech is hardly the “victim” here — each of the four companies testifying last month is worth more than the GDPs of all but the 16 largest nations in the world.
Nonetheless, Big Tech’s lobbyists have deftly deployed this patent troll narrative over the last decade to achieve what economists call “regulatory capture.” They secured the passage of the America Invents Act of 2011, got the Obama administration to appoint Google deputy counsel Michelle Lee as director of the patent office, and forced a variety of other regulatory and legal changes that weakened patent rights. This includes the creation of an administrative tribunal known as the Patent Trial and Appeal Board (PTAB) to cancel already-issued patents.
As the U.S. Chamber of Commerce warned as early as 2017, the PTAB “provides a channel for bad faith actors and injects a great deal of cost and uncertainty for patent owners.” According to an analysis by Josh Malone, policy director for the nonprofit organization U.S. Inventor, the PTAB invalidates 84% of patents challenged by Big Tech companies. Former Federal Circuit Chief Judge Randall Rader called the PTAB a “patent death squad.”
Many of these PTAB challenges are brought by Big Tech defendants facing patent infringement lawsuits in federal court — including cases in which the courts already ruled that those companies had infringed the patents in question. Take VirnetX, for example, a startup that invented the “Jason Bourne” technology that allowed CIA agents in the field to make the kind of secure encrypted phone calls to headquarters in Langley depicted in the movie “The Bourne Identity.” VirnetX spent more than a decade proving in three separate federal trials and two appeals — all of them victorious — that Apple had used VirnetX’s patented technology in its FaceTime application.
Yet despite being judged infringers, Apple still managed to label VirnetX a “troll” and get some of its patents ruled “invalid” by the PTAB before being reversed in the federal circuit. This past March, after 10 long years of delay, Apple was finally forced to pay the damages that the courts had repeatedly awarded for its egregious behavior.
But what of all the small startups and inventors without the resources to wage a decade-long legal battle against one of the richest companies on the planet? Most have little recourse against Big Tech’s market power, despite startups’ crucial importance to the economy as the prime generator of new jobs and new industries. That’s because patents are the only legally enforceable means small innovators have of preventing Big Tech from simply stealing their innovations, as numerous accounts show happens often.
The hypocrisy here is breathtaking. The last generation of startups climbed the ladder of success on the rungs of their patents. Now they are trying to pull that same patent ladder up behind them to block the next generation of startups from achieving the same success.
Big Tech is still pushing its “patent troll” narrative to prevent reforms like passage of the STRONGER Patents Act (S. 2082/H.R. 3666) that would help small startups and innovators, who are the engines of American job creation.
“Big Tech has spent millions to push the tread-worn ‘patent troll’ narrative to weaken the U.S. patent system,” notes Adam Mossoff, a law professor at the Antonin Scalia Law School at George Mason University. “As a result, China now provides more reliable legal protections for innovators than the U.S. does. As innovation and venture capital move offshore to China and other countries, this does not augur well for the future of innovation and U.S. competitiveness.”
Shortly after being appointed director of the patent office in 2018, Andrei Iancu gave a speech in which he acknowledged that “the patent grant is less reliable today than it should be.” He also issued a warning: “As a nation, we cannot continue down the same path if we want to maintain our global economic leadership.”