As solar technologies evolve, I expect to see a greater number of applied patents in this field, like in any other. ICP’s “DNA” includes innovation at the core of our strategy and thus we have begun to collect a number of patents (issued and applied) in numerous major markets where we intend on marketing our innovations.
However this blog entry by legal counsel at Sun Microsystems is concerning for the “patent playing field” in the USA. It reminds me of the time when ICP was not solely developing solar products back in mid-90s when we had a brief stint with voice recording technology. We had developed an innovative talking picture frame which was immediately picked up by the Sharper Image. It had been designed by none other than Ralph Baer, Inventor of the Sega Laser Gun and numerous other “talking” products. Suddenly, and out of the blue, we received letters asking for injunctions against us and Sharper Image by no less than a legal firm which had been incorporated solely for the purpose of chasing companies for patent rewards.
As noted in the SUN blog entry, I find this to be a perversion of the patent system. When an entire town makes it business to make it easy to sue american (or not) corporations for the purpose of collecting juicy awards in patent cases, you then have the term “free market” taken to its extreme.
It costs money to become a politician. It costs money to develop products. It costs money for most everything we do in life. So why would it not cost money to sue someone? This comes back to the “business of law”. When we permit lawyers to run on percentages, they simply seek the easiest money path. Salesmen on commission will seek the path of least resistance to a sale. Unless governed by strict corporate policies, true salesmen will sell, sell ,sell without regard for things such as “do we have the stock?”, “is the line being promoted profitable to the company”, etc.. So in fact, lawyers without limits are partly creating this issue and that may be where we should start in regulating the patent law industry.
Sass
1 Comment
Sass,
I am a young patent litigation attorney in the US, and I am interested in patent law reform. I also have a strong personal interest in alternative energy. That latter interest led me to your blog. I also remember hearing you on one of the podcasts that I listen to.
I completely agree with you that “lawyers without limits” is a problem within the US patent system. In addition, many attorneys consciously or unconsciously oppose certain useful patent reform that is contrary to their self-interest. That’s a real problem, and a real shame.
But I’m not sure that I agree with you (or with Sun’s General Counsel, that you linked) on one important issue. I think that contingency or “commission”-based fee arrangements for litigation are not necessarily a bad thing. To me, the fundamental problem with the patent system is rotten-apple attorneys and rotten-apple patents, both of which must be weeded out from the good ones. Achieving this is a complicated war that must be waged on several fronts.
I’m not sure that one of the fronts in this battle is fee arrangements. Although contingency-based litigation can lead to abuses, it is just as easy for hourly arrangements to be abused. An hourly attorney can over-bill. He or she can give you bum advice, and you still must pay. Just like some unscrupulous auto mechanics, some unscrupulous attorneys manage to find enough people to make a career out of this.
Importantly, the fee arrangement that a client may have with an attorney says nothing about whether any particular case or patent claim is worthy. When you walk through a neighborhood and see solar panels up on a roof, does their power output depend upon whether they were purchased with cash or credit?
Conversely, are solar panels that were bought from a certain Chinese firm, with cash, better than panels purchased from ICP, with a loan? How the panels were financed says nothing about whether they will meet their advertised specifications. Similarly, you cannot tell from the fee arrangement whether any given patent infringement claim is genuinely worthy or utterly frivolous.
I also disagree with the idea that commission-based patent litigation somehow carries no cost. As you note, *everything* in life has a cost. But that cost is not always paid in money. In TV, for example, viewers frequently “pay” for the costs of programming not with money, but with time – viewing advertisements. The advertisers, in turn, pay in money.
Let me analogize the broader litigation costs to your role as CEO. As a CEO, you likely employ many people to innovate — to develop new ideas that hopefully become your company’s profitable products. Doing that has at least two separate costs. First is the “money cost” of paying your employees their salaries and benefits, renting office space, etc.
But there is also a second cost, an “opportunity cost.” If you strategically decide to employ your talented engineers in a direction that ultimately is not commercially fruitful for ICP, not only are you out the tangible costs of salaries, etc., but you are also out the lost opportunity to have expended your team’s talents on a different, more fruitful endeavor. Which is the larger long-term cost: finding out that you were paying a few thousand dollars too much on computers for your team, or finding out that a year of your team’s time was spent developing a line of technology that will not be commercially competitive? The latter cost is not initially a “money cost”, but will of course become one in due time.
So, too, with commission-based patent litigation, there is no upfront money cost, but there is still a large opportunity cost for the client, that can become a money cost. For many individual inventors or small companies that need to enforce their IP rights, a contingent-based fee system may be more attractive than borrowing capital. Borrowing capital to pay an hourly attorney might mean borrowing at an unfavorable interest rate, or courting yet more investors.
Commission-based fee arrangements avoid those balance-sheet problems. But, like everything in life, this choice has a price. In order to attract a good patent attorney willing in taking their case, the client needs to offer the patent attorney a reward commensurate with the risk that the attorney faces – the risk of spending months (or years) litigating and then getting paid nothing, when the attorney could have instead taken on regularly-paying clients.
If a client has a truly meritorious case, and takes the contingent fee option, there is a large opportunity cost that the client will have to pay –in the form of a potentially much larger attorney bill at the end, to be paid out from the settlement or judgment. So contingent fees are simply a different way of managing risk and reward between client and lawyer. Choosing a fee arrangement involves a risk assessment much like deciding which level of deductible you need on your home or car insurance.
I go to some length to make this argument, because patent reform has its own opportunity cost. The attention and resources that busy CEOs and General Counsels can spend on thinking about this issue is limited. Your attention is a valuable and finite resource. Spending that attention on things such as fee arrangements yields the lost opportunity to devote it where it may yield more fruitful results – namely, on other fronts in the battle for patent reform.
Patent system reform in the United States is too complicated to be reduced to two bullet points on a PowerPoint slide, one that says “trolls” and one that says “contingent fees.” It involves us all – the attorneys, the clients, the Patent Office, the federal courts, and the public at large. Reforming it in a proper way will involve a large cost, money and otherwise.
In any event, and most importantly, kudos for caring about this topic. All the best to ICP.
Len