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Businesses Patents The Almighty Buck The Courts

A New Species of Patent Troll 258

Posted by samzenpus
from the easy-money dept.
Geoffrey.landis writes "According to the Wall Street Journal, there's a new species of patent troll out there. These new trolls sue companies that sell products with an expired patent number on them. That's right, it's against the law to sell a product that's marked with an expired patent number. The potential fine? $500. Per violation. And some of the companies have patent numbers on old plastic molds that have made literally billions of copies. Using whistle-blower laws, 'anyone can file a claim on behalf of the government, and plaintiffs must split any fine award evenly with it.' You've been warned."
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A New Species of Patent Troll

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  • by eldavojohn (898314) * <eldavojohn&gmail,com> on Wednesday September 01, 2010 @10:22PM (#33444862) Journal
    Forest Group, Inc. v. Bon Tool Co. in 2009 paved the way [wordpress.com] (rocket docket Eastern Texas, of course) for big fat jerkfaces to go nuts [law.com]. The AP told citizens it's okay to sue [journalnow.com], hell even on Slashdot I submitted an article way back in Feb of Activision's problems with an incorrectly marked patent [slashdot.org] and because of precedent on incorrect markings we found out in March that this could cost some companies trillions [slashdot.org]. Expired or wrongly marked could cost you $500 per item sold.
  • Wildly Overblown (Score:5, Informative)

    by Grond (15515) on Wednesday September 01, 2010 @10:45PM (#33445050) Homepage

    The emerging case law on this kind of action is putting the damper on a lot of get-rich-quick schemes. First, the potential damages are up to $500 per violation. Courts are not handing down massive damage awards; quite the opposite, in fact. It's likely that most of these cases will end up with damages assessed at some fractions of a dollar or even fractions of a cent per violation. $500 per violation is a cap on damages, not a target.

    Second, the courts are setting a fairly high bar for the 'intent to deceive the public' element of false marking. The majority of these cases are the result of typos or failing to retool an assembly line the moment a patent expires.

  • Good (Score:4, Informative)

    by harlows_monkeys (106428) on Wednesday September 01, 2010 @10:45PM (#33445058) Homepage

    As others have noted, incorrect patent marking stifles innovation.

    Letting the public enforce this is efficient. It reminds me of how certain forms of illegal stock trading were discouraged. Certain stockholders are not allowed to engage in something called "short swing trading". If they do, and are caught, they have to give all their profits from the trade to the company. The brilliant way Congress and the SEC came up with to enforce this was to make it so any shareholder can sue on behalf of the corporation. If the shareholder wins (and he always does, because the people who aren't allowed to do these trades are the same set of people that have to report all their trades to the SEC, and so their illegal short swing trades will quickly come to light), the illegal trader has to pay the shareholder's attorney fees. Finally, in the most brilliant part of all, the shareholder only has to be one at the time of filing the suit--not at the time of the illegal trade.

    Net result: law firms get the SEC data, run programs to identify short swing traders, go out and buy one share of stock in the company, and sue.

    To make it worse, profits are calculated in a way that is very unfavorable to the defendant. Suppose you bought stock at 100/share, later sold that all at 90/share, then later bought the same amount at 80/share, and then sold that at 70/share. You've had a net loss of 20/share, right? That's what you bank account reflects--but that's not how the court calculates it. The court finds the lowest you paid and the highest you sold for and matches them. Repeat until as much is matched as possible. So, the court would just look at that 90/share sale and the later 80/share purchase, and order you to pay 10/share to the company. The remaining 100/share purchase and 70/share sale are ignored. So in addition to losing in reality 20/share on your transactions, and having to pay plaintiff's attorney fees, you also have to pay 10/share to the company!

    This has made short swing trading so scary that among those who have to report their trades it virtually stopped shortly after these rules went into effect.

  • by Antisyzygy (1495469) on Thursday September 02, 2010 @12:42AM (#33445756)
    In the case of a mold used to make plastics, stamp metal, ect., its incredibly expensive for a company to get a new mold made. I used to work at a CNC shop as a lowly peon preparing and finishing parts for military contracts, movie cameras and manufacturing molds. The company I worked for routinely charged big bucks for molds simply because it takes a large amount of skilled and unskilled man hours to produce it. An engineer typically did the initial design in some sort of CAD or other program, then the CNC machines were programmed to prepare the part. Then the part typically went through several CNC machines before being finished. After this the part's measurements were rigorously checked to see if there were within specifications. Then little turds like myself (I was a freshman in college) de-burred the sharp edges, put it through various chemical baths and polished the shit out of it before cleaning it one final time. The aforementioned is still a simplification of the process. Generally manufacturing molds were ordered only once. Suppose a patent expires. If a manufacturer chooses to have the patent number included in the mold at the get go, then they need to either modify the mold without decreasing the functionality of their product or they need to get a whole new mold made. A lot of times a company may only have one mold for a particular part, so the cost of any mistake in modification is large since it may mean totally replacing the mold. The point is that the company is not doing anything inherently wrong in using the mold to produce a product that they have been selling under a patent they either owned or licensed if the patent expired. It still references a patent number that can be looked up online to determine if its expired or not if someone chooses to spend the time. My point is ethical considerations need to be taken into account in enforcing this law, because the lawyers are only looking to score some cash at someone else's expense. To be unfair and use a logical fallacy, "Do you think this law is unjust or do you hate small businesses?".
  • Re:Warehouse Ploy? (Score:3, Informative)

    by canajin56 (660655) on Thursday September 02, 2010 @01:19AM (#33445988)
    Nothing, because the law applies to "making a product that blah blah blah" not "selling a product".
  • by canajin56 (660655) on Thursday September 02, 2010 @01:29AM (#33446034)
    TFA mentions 50 years, about 49 years and 364 days short of your "day after". Additionally, the law is on the manufacture of goods with incorrect patent labels, not the sale, so it doesn't matter how long it was in the store. What matters is if you are still making them.
  • by dgatwood (11270) on Thursday September 02, 2010 @01:38AM (#33446084) Journal

    If a company was really interested in making a product, they'd check the relevant patent numbers online (which is pretty easy to do) and see that they had expired. No company that is /seriously/ interested in a product would simply look at it and give up. The company would certainly look up the patent to try to "get around it" and see that it had expired.

    When this law was written, looking up the patent likely meant somebody taking a horseback ride to Washington D.C. to the patent office and paying a patent clerk to locate the patent and bring it out for inspection. At the time, the law made perfect sense. However, technological progress has rendered the law unnecessary and absurd.

    And this, friends, is a perfect example of why EVERY law should be required to have a sunset clause after which time it is abandoned if not explicitly renewed. The fact that all these archaic laws are still on the books is embarrassing. Important laws will, of course, be renewed. Unimportant laws won't. This would also effectively cap the number of laws that can exist at any given time, which would be a good thing.

  • by abulafia (7826) on Thursday September 02, 2010 @02:40AM (#33446384)

    Also, from the summary:"it's against the law to sell a product that's marked with an expired patent number." Do I smell legislatively forced obsolescence? Does this mean I can't sell old tools in a garage sale, without the mentioned patent trolls coming after me?

    Tis why you don't make business decisions on a comment on a summary of a summary.

    To answer your question: no. This is similar to legislative bounties on other business practices that the state doesn't like, such as the ADA. I'm not going to get in to whether or not it is a good idea, but the notion that grandma selling dead gramp's tools is going to be hauled up on patent charges at her garage sale is silly. This is about claiming false "ownership" of IP.

    There may be good policy reasons why we don't want to put a bounty on people who falsely claim to be in possession of state-sponsored idea rights. But it is important to cast what is going on here correctly: it is about (mostly, as in any IP, this is complex) about companies falsely claiming to own IP that they don't.

    Some complaints in the original article ring true - manufacturing from an old mold, simple forgetfulness, etc.

    Well, those arguments don't work well for most categories of business (try the "I forgot" argument in your next contract dispute). I don't see why there should be a difference for people claiming government protection on objects they sell.

    Some of the hinted arguments I've seen (to be fair, not so much in that article) are even more bullshit - this should be allowed because they were true at one time, so we should be able to keep claiming it.

    Bite me. Insofar as using a state-imprimatur for a monopoly on something should be allowed at all, it has to be honest. Even hippies should like this - state ain't gettin' no (or at least suboptimal) rent.

    Libertarians should be much more up in arms. I guess anarcho-capitalists should applaud the chumming of the waters.

    Anyone who live in the present world, however, should think this a good thing. It is pretty narrow: don't claim you have a government monopoly that you don't, and we're enabling bounty hunters to fuck you up if you do. Real producers with a problem on their etching molds will fix it; those that are exploiting it won't.

    And for anyone who wants to claim "ZOMB, this will raise costs!", get back to me when you've come up with accounting that internalizes the overall cost of patents, before you start worrying about the costs of correcting lies about patents.

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