The Costly Impact of Patent Trolls on Innovation

patent trollThe phenomenon of “patent trolls” has frustrated several large technology companies in recent years, particularly Apple and Google. Patent trolls can use invalid patents and bargaining chips, because once the US Patents and Trademark Office grants a patent, it takes a high standard of evidence to overturn its validity. That often results in a long and involved legal case, and some defendants end up deciding it’s easier to settle the case for a payment than to fight it in court. Considering the statistics that 97% of all patent infringement suits get settled pre-trial, it’s easy to see why patent trolls are willing to take their chances with reckless suits.

Surprisingly, this is not a new practice that’s limited to the modern tech world. Patent trolling dates back to 1895, when George Selden was granted a US patent for using a gas engine on a chassis to construct a car. It can be argued that this idea was obvious and so the patent should have been denied, but instead Selden threatened the early carmakers with suits and collected huge sums in royalties.

It’s amazing how little things have changed since this earliest patent trolling case. As was the case with Selden, patent trolls today contribute nothing meaningful to the development of a given technology and in fact stifle its growth by raising the costs to legitimate developers. When Selden threatened to sue the early auto manufacturers, almost all of them signed up for licensing agreements except for one significant holdout, Henry Ford, who decided to fight the case in court.

That lawsuit was not resolved for the next eight years, as an industry group who bought the Selden patent did their best to turn public opinion against Ford as the suit dragged on. The initial trial decision went against Ford, but he appealed it and the Selden patent was finally invalidated just one year before its expiration.

Purple Leaf LLC Files Patent Suit Against Google Over Payment Technology

In the last few weeks, a company called Purple Leaf LLC filed a patent lawsuit in an east Texas court against Google. The suit claims that the search engine giant has infringed on technology related to online payments and receipts by systems like Google’s Checkout service. Specifically, the company refers to Google Checkout in its suit as infringing on its ‘311 patent, but asserts that the infringement is not limited to Checkout. The case is being handled in the US District Court for the Eastern District of Texas, Tyler Division, under the case name of Purple Leaf LLC v Google, Inc.

The Google Checkout service is used across Google’s vast collection of services, including services on Android phones and tablets. Purple Leaf is seeking to recoup losses due to the cost of the court case and due to estimated damages from the infringement itself on profits. It’s interesting to note that Purple Leaf is also targeting other large companies on the same grounds, including American Express, PNC Bank, SAP, CitiGroup and others.
Most recently, Purple Leaf added to this long list by filing a patent infringement lawsuit against eBay and Paypal in the same District court. Purple Leaf is a Texas-based company that is headquartered in Plano, and records show that the ‘311 patent is the only one assigned to that company. This patent covers methods and systems used for electronic transactions. It features 39 claims, 4 of which are independent.

The first of the independent claims involves electronic receipts featuring payment information and the actual data structure of the payment receipt form, including the data fields in which a payer can enter data that is kept hidden from the payee. The description sounds rather vague, but Purple Leaf seems to think it is enough to win a case against some of the biggest companies in the world.