Patent Trolls Feed On Technology

Patenting Ideas And Cashing In With Lawsuits Is Lucrative – And Controversial

(CBS)  A federal judge put off ruling Friday in a patent-infringement lawsuit that could have shut down service to BlackBerry wireless e-mail devices nationwide. The suit was filed by a specialized firm that owns patented ideas and charges others to use them. Those who don't pay up get sued, reports Mika Brzezinski, and it can be a very lucrative business.

It starts with a piece of paper. Explains Alexander Poltorak, CEO of the General Patent Corporation, "If you have invented a new gadget or if you have invented a new process or method, go ahead and file a patent application."

Poltorak calls his clients technology inventors. Critics call them something else: Patent trolls.

It's a term that has been popping up in business and technology headlines. But these trolls don't invent and develop new machines. Instead they patent technology ideas, and wait for the moment to pounce when big companies like Microsoft and Yahoo start using the ideas -- or anything close.

What do they want? Money. A lot of it.

Yahoo's vice president of intellectual property, Joe Siino, says his company has battled patent trolls. "They have cost the industry in the hundreds of millions of dollars," he estimates.

Columbia Law Professor Tim Wu says trolls are taking advantage of a system created long before computers. Is this what the Founding Fathers had in mind?

"I think a lot of us think probably not," Wu says. "What they had in mind were discrete categories of real mechanical physical tangible inventions." Today, he says, you can patent virtually anything.

Take the plug-in, which allows people clicking on a Web site to launch programs such as video players. A court awarded a small company with the patent over $500 million in damages against Microsoft.

Is that really an invention? Wu says, "Well it's hard for the patent office to know. I think it's obvious."

Poltorak reasons: "you see every idea in hindsight looks trivial, 'Why didn't I think of that?' However for every idea there has to be someone who thought of it first."

But in the world of computers, Poltorak is reminded, you can think of anything. Then you can make millions off of keeping a big company from actually using it until they pay up.

"That's what the American spirit is all about," he replies.

Professor Wu says, "patent trolls aren't evil or bad in themselves. They are just taking advantage of a system that is broken."

The number of patent applications has doubled in the past decade, and so have patent lawsuits. Members of Congress are working to change the law, and the patent issue is now pending in front of the Supreme Court.