Trolling for Dollars
Brenda Sandburg | The Recorder
Peter Detkin's spin sounds surprisingly like something out of the Brothers Grimm.
In the sleepy village of Santa Clara, there lived a very wealthy but very frightened giant named Intel. Intel was plagued by a fearsome band of evil trolls -- patent trolls, to be exact -- who wanted a glittering pot of gold in exchange for doing absolutely nothing. And they were very powerful because they said they owned the patent on some of the magic Intel used to become rich.
The true story behind the fairy tale, at least Detkin's version of it, unfolds like a case study on a patent system run amok. The assistant general counsel at semiconductor titan Intel Corp., Detkin spends much of his time these days fighting off claims of patent infringement by companies that have never made a semiconductor device. In 1999 alone, the claims topped $15 billion, Detkin said, and he hurls the epithet "patent trolls" at the companies that want Intel to pay up. He even keeps a couple of troll dolls on his desk in the gray warren of buildings at Intel's Santa Clara headquarters just as a reminder of his company's legal enemies.
"We were sued for libel for the use of the term 'patent extortionists' so I came up with 'patent trolls,'" Detkin said. "A patent troll is somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced."
The companies Detkin calls trolls relate a much different version of the fairy tale. In their story, Intel is a crafty colossus who stomped on their rights and brazenly stole the all-important magic that helped spin the semiconductor into gold. They're just getting a fair share for themselves and their clients and contend this is why the patent system is in place: to protect the small from manipulative mammoths like Intel.
And more and more, they are the ones who get to write the happy ending for the story.
A Chief Exponent
The fear Detkin describes can come from anywhere -- even the quiet, well-heeled suburbs north of Chicago. There, in an unremarkable office building it shares with a bank branch, is TechSearch LLC, one of the chief exponents of new-style patent enforcement.
In the last three years, TechSearch has made millions of dollars -- primarily from a patent it acquired on a method of transmitting data between computers. Close to 100 companies -- including UAL Corp., Sears, Roebuck and Co. and Hyatt Corp. -- have opted to pay TechSearch to license the technology rather than take the fight to court.
Not that the settlements have earned TechSearch much respect: "I have mixed feelings about those organizations. From an ethical standpoint, they're almost like ambulance chasers," said Andy Gibbs, CEO of PatentCafe.com Inc., a Web site that focuses on intellectual property issues.
TechSearch embodies the criticism leveled most against patent enforcement specialists: It is not the inventor who sought the patent, it produces nothing, it sells nothing. It simply makes money by exploiting broad patents that have never really been enforced. It lives, primarily, to sue.
"At one end of the scale is a professional group that makes good, sound legal arguments," said Stephen Fox, associate general counsel and director of IP at Hewlett-Packard Co. "At the other end of the spectrum are outright extortionists."
As one might expect, the term "extortion" gets under the skin of TechSearch's executives and lawyers. TechSearch was the company that hit Intel with a libel suit when a spokesman called the company a patent extortionist, and Anthony Brown, TechSearch's top executive, makes no apologies for the company's aggressive approach.
Brown has reason to feel protective -- TechSearch is his baby, after all. A former partner at Chicago's Jenner & Block, Brown founded the company three years ago without the key ingredient to build a successful enforcement business -- a patent. So he began a long search of the Patent and Trademark Office's list of issued patents. The goal: to find one that wasn't being enforced and that could ring the bells on the company cash register.
"The needle-in-the-haystack approach," as Brown calls it, struck gold when he found the patent on transferring data between computers. It's a patent so broad that Brown acknowledges anyone with a Web server could be sued for infringement.
The company now owns about two dozen patents, buying the rights from inventors and splitting licensing proceeds with them. The company won't disclose revenues, but has already pulled in at least $3 million on the Internet patent alone.
"If it weren't for companies like TechSearch the small inventor or small company would be deprived of their rights," Brown said. "Should big companies have a free ride because they are dealing with small companies or inventors?"