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Patent licenser doesn't want reform aimed at 'trolls' to adversely affect his industry

By Jessica M. Karmasek | Apr 21, 2014

WASHINGTON (Legal Newsline) -- It takes a lot more than people calling Marvin Key's company a "patent troll" to offend him.

Acacia Research Group, headquartered in Newport Beach, Calif., and its licensing business in Plano, Texas, is considered an industry leader in patent licensing.

According to its website, the company is an intermediary in the patent market and "facilitates efficiency and delivers monetary rewards to the patent owner."

Acacia boasts that it has generated more than $1 billion in revenue to date and has returned more than $455 million to its patent partners.

Yet, despite all of his company's successes, Key said it often still gets tagged a troll.

The derogatory term, itself, isn't what bothers him, he said -- it's what he calls a "misinformation campaign" going on in Washington, D.C., and beyond.

"The implication in almost everything you read is that there is nothing positive at all about licensing patents," Key said.

"The implication is when someone is sued, whether a small or big company, that every single one of those cases is frivolous, abusive and without merit. And that's simply untrue.

"Just as there are unsavory doctors and accountants, there are certainly some bad apples in this industry," he said, referring to patent assertion entities or non-practicing entities.

Key argues that what's going on -- the rhetoric driving the current reform talk -- isn't at all new.

"I read a white paper the other day, citing some of the same arguments -- back in the 1880s," he said.

"I think what is happening now is a misinformation campaign, and one that has been very effective and very well-financed."

Though he is in the business of licensing patents, Key said he is very much concerned for the rights of patent holders themselves and how any further legislation could impact the industry as a whole.

"What we worry about is the law of unintended consequences," he said. "There are aspects of the last legislation that are just now beginning to play out."

Key is referring to the America Invents Act, signed into law by President Barack Obama in 2011. Its central provisions were put into effect in March 2013.

The law switched the U.S. patent system from a "first to invent" to a "first inventor to file" system, eliminated interference proceedings and developed post-grant opposition.

"As you know, Washington is pretty good at passing laws that five or 10 years down the road don't act like they are intended," Key said.

Though much of the suggested federal legislation probably would be good for his business -- because patent holders will need resources with more laws on the books -- Key said he is hesitant to back any of the proposals.

"I believe anything that can be done to eliminate abusive behavior by an unsavory operator is great -- because, unfortunately, we're being grouped together with those bad apples -- but not at the expense of patent licensing itself," he said.

Christopher Banys, a California attorney who represents inventors, small businesses and sometimes patent assertion entities, points to big business.

The founder of Palo Alto, Calif.-based Banys PC said big business is responsible for the "bum rap" patent assertion entities and non-practicing entities are currently getting.

"You have these big companies making these products that are infringing a lot of patents," he said. "And because they don't want to pay out, they've said let's create a narrative about 'patent trolls.'

"But the patent troll narrative is a phony narrative."

What PAEs and NPEs do isn't illegal, Banys argues.

"A patent assertion entity is an entity that basically deals with the fact that most inventors are engineers, professors or people that aren't business people and aren't lawyers," he explained. "It is an entity that says to those people, we'll handle this for you.

"Is that somehow wrong? No. They're helping people deal with a difficult and expensive process."

What about these trolls, or "bad actors" as some call them? Do they really exist? Can they be reined in with additional legislation?

Well, Banys argues there's no such thing.

"What these companies are trying to say is that people are bringing frivolous lawsuits," he said. "But the actual amount of frivolous lawsuits -- patent lawsuits, especially -- is very small. Almost no one is bringing frivolous patent suits anymore.

"Basically, you have these same big companies that are infringing on patents and, to them, every suit is frivolous because they don't want to pay up."

Many agree that the term "troll" -- coined by Peter Detkin, counsel for Intel, in the late 1990s -- is imprecise and has simply become a pejorative that means the speaker does not like that particular patent owner.

"The problem is, we're turning it into this moralistic term, that what PAEs or NPEs are doing is somehow immoral," Banys said.

This includes demand letters, which are at the crux of the current patent reform debate.

"I get it. A legitimate letter can be a scary thing," Banys said. "That's why these businesses all have lawyers. A lawyer can tell a business, this is garbage, throw it away.

"But don't go blaming the middle man. These big companies like Google and Apple aren't the only ones coming up with these great ideas."

He continued, "There are an awful lot of inventors who came up with some great stuff and it ended up sitting on a shelf until someone came along, decided to take it and put a product on the market without asking permission.

"PAEs and NPEs are helping those patent holders stand up in court and get what they deserve from those companies."

Legislation proposed by Sen. Patrick Leahy, D-Vt., would empower the Federal Trade Commission to consider sending frivolous demand letters an "unfair and deceptive act or practice."

Some, like Obama, don't agree with Banys. Obama pushed for reform during his State of the Union address in January because, he says, businesses are hampered by patent litigation.

"We know that the nation that goes all-in on innovation today will own the global economy tomorrow. This is an edge America cannot surrender," he said in his address.

"Federally-funded research helped lead to the ideas and inventions behind Google and smartphones. That's why Congress should undo the damage done by last year's cuts to basic research so we can unleash the next great American discovery - whether it's vaccines that stay ahead of drug-resistant bacteria, or paper-thin material that's stronger than steel.

"And let's pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation."

From Legal Newsline: Reach Jessica Karmasek by email at

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