Regular readers of Hearing Economics are familiar with the ever-lengthening list of hearing aid patents that appears here bi-monthly.  The lists are boring to read and boring to compile but they get space because they’re important.   They reflect a battle between innovation and corporate control that is growing not only in size but in intensity, with effects radiating deep behind enemy lines.  The livelihoods of practitioners and manufacturers depend on the outcome, as do the pocketbooks and hearing of consumers.

Trolling for Profits

 

A recent patent skirmish in the normally closed-mouthed hearing aid industry signaled the presence of patent trolls in our midst.  Patent Troll[1]  is shorthand for Patent Assertion Entity (PAE) companies. PAEs scarf up patents and make their money, by some accounts, by enforcing patent ownership and collecting awards for patent infringement.  Trolls are not trivial:  small and medium-sized US companies reportedly spent $29 billion in 2011 on patent assertion cases.

Acacia Technologies and its multi-tentacled subsidiaries is one of the largest patent trolls.  The hearing aid industry hit their radar in 2005, when Acacia acquired patents “covering electromagnetic compatibility shielding (ECS) technology commonly incorporated into hearing aids.”  Acacia characterizes itself as a ‘licensing partner’ for patent holders, which I think means they go find a bunch of little guys with patents, partner with them, troll for anything resembling patent infringement, and sue.  Their website puts it this way:

Intellectual property (IP) is an important emerging asset class worldwide.  However, the ability to monetize IP has become increasingly difficult for patent holders with a licensing partner. … Among its recent large patent partnership wins [is]… a strategic patent partnering alliance with… the world’s third largest semiconductor company.

Perhaps I overstate out of ignorance, awe or just plain fear.  But consider the sheer scale of this:  that “3rd largest semiconductor company” referenced above has 40,000 patents in its portfolio.  That’s just one portfolio out of 250 patent portfolios under Acacia’s roof.   We’re talking millions of patents. Compare those gigantic numbers to our Big 6’s portfolios (Table 1) and you can see why it shakes me up.

 

Table 1.  Big 6 Hearing Aid Manufacturer Patent Activity

Company

# of Patents/# Issued in Last 3 Years

# Published Applications

1.  GN Resound A/S

102/36

98

2.  Oticon A/S

153/79

227

3.  Phonak AG

293/89

355

4.   Siemensa.  Intellectual Property Dept (Princeton NJ)[i]b.   Siemens Medical Instruments PTE.LTD

562/112

135/132

555

295

5. Starkey Laboratories, Inc

98/78

188

6. Widex A/S

93/56

145


[i] Siemens does many things. Many of their patents are not for hearing devices.

 

http://blog.apptopia.com/patent_trolls/What Trolls Do Best

 

Of the aforementioned $29 billion spent on patent assertion in 2011, only about 20% ($6Bil) went to inventors, which doesn’t speak well for encouraging the small-time inventor or even specialized industries such as hearing aid manufacturing .  The rest of the money — $23 billion —  paid for legal expenses, supported the “operating expenses” of the trolls or showed up as profits on troll company P&Ls.  Small wonder that PAE activites are often characterized as a  “tax on innovation.”

Counter-Troll Measures

 

President Obama has gone on record as anti-troll.  The US Congress passed the America Invents Act in 2011, but it is thought to lack teeth for rapidly advancing software technologies. A recent NYTimes article summarized the US situation as a mess in search of a solution:

Given the time and money it takes to sort out patent claims, there is something a little insane about the American way of resolving these disputes. Germany has a specialized patent court, which streamlines the process. In the United States, there is talk of setting up patent markets, so that start-up companies could quickly find out what patents they need and whom to pay, rather than putting out their product and waiting to be sued.

What This Has to Do With Audiologists and Consumers

 

In a word – tax.  If PAEs are a tax on innovation, you can bet your office or your check book who is paying that tax.  You and I, business owners and consumers, both consumers of hearing aids.  Make no mistake, the rising costs of hearing aids lie in good part at the doorstep of the Troll.

We’ll check in with that German court and the hearing aid industry in another post.

 

image courtesy of apptopia

References    (↵ returns to text)
  1. Per Wikipedia, a patent troll is ‘a person or company who enforces patent rights against accused infringers in an attempt to collect licensing fees, but does not manufacture products or supply services based upon the patents in question.’

5 Responses to Troll Thoughts,Troll Tallies

  1. Dan Schwartz, Editor, The Hearing Blog says:

    Part 2:

    PAE’s also act to protect small inventors from having their intellectual property stolen: Before the advent of PAE’s, one would need to find a patent lawyer willing to work on a contingency basis to defend it — And this was only possible if the payoff would be in the millions.

    Two concrete examples from the 1970’s & 80’s are the patents infringed upon by Sears for the pushbutton release socket wrench, and by the Big Three for the intermittent windshield wiper. If PAE’s were around at the time, these egregious patent infringements would have never occurred.

    • Holly Hosford-Dunn says:

      Thanks, Dan, for saving me time and effort by writing the other side of the story. I agree, PAEs have a place and surely could not have achieved the success the have without serving some well. But Might makes Right and it seems as though the balance of good deeds to bad tips more toward levying taxes on everyone in sight who may conceivably infringe, or not have the resources to prove they are not. I am not an attorney or an expert, meaning that my writing is exploratory and welcomes examples such as your to flesh it out. Now, could you give me/us examples from our own industry? What are your thoughts on Sebotek and RICs?

  2. Dan Schwartz, Editor, The Hearing Blog says:

    There’s another side of this debate: Patent Assertion Entities protect the intellectual property rights of individual “garage workbench” innovators against large corporations which have unlimited legal budgets.

    Let me give you an example where a PAE was really needed for protecting an innovator: Remember last year’s “Harbowl” Super Bowl where the Harbaugh brothers coached against each other? Well, Roy Fox saw this coming early on, and paid to copyright the terms “Harbowl” and “Harbaughbowl” in the event the 49ers faced off against the Ravens — Smart guy, right?

    Well, when this became a reality, that’s when an army of lawyers employed by the NFL raised an eyebrow.

    Mr. Fox, figuring last year that the Harbowl might happen some day, signed up with the online legal services business Legal Zoom, and went through the process of applying for a trademark on both Harbowl and Harbaughbowl.

    The USPTO processed Fox’s trademark application in February. In July, the PTO published the trademark request, as is standard, in order to see if anyone opposed it.

    Resistance came from the NFL, famous for its zealous protection of its trademarks and its content. (Notice how many ads refer to “the big game” because they haven’t paid the NFL for the right to say “Super Bowl.)

    The NFL decided to bully Roy out of the copyright because the league was worried that a tee-shirt with the name “Harbowl” would trick customers into believing they were “buying official NFL merchandise.”

    Over the course of August, NFL lawyers pushed Mr. Fox to abandon his trademark application. Mr. Fox didn’t want to abandon it. So the NFL pushed harder.

    “If you are still interested in resolving this matter amicably and abandoning your trademark application, please contact me as soon as possible,” NFL Assistant Counsel Delores DiBella wrote to Mr. Fox in October. She warned that otherwise, the NFL “will be forced to file an opposition proceeding and to seek the recoupment of our costs from you.”

    “I was threatened to be taken to court,” Fox told me, “and I just assumed I would lose, and I couldn’t afford the court costs.”

    Mr. Fox is not a businessman or a lawyer. He says, “I didn’t know my rights.” He didn’t want to fight a costly legal battle with the NFL, and so he made a humble request: he would abandon his trademark in exchange for some Colts tickets. The NFL said no, according to Mr. Fox.

    Full story:
    NFL Bullies Man Who Trademarked “Harbowl” To Abandon The Copyright
    http://www.cincyjungle.com/2013/1/24/3910900/nfl-bullies-man-who-trademarked-harbowl-to-abandon-the-copyright

    NOW can you see why what you call a “patent troll” performs a valuable service?

  3. Holly Hosford-Dunn says:

    So trolls can specialize, too. Though that may be good economics, it doesn’t commend them as good dinner guests or neighbors.

  4. AuD says:

    Not to be confused with internet Trolls ; )

    According to Wiki, “a troll is a person who sows discord on the Internet by starting arguments or upsetting people, by posting inflammatory, extraneous, or off-topic messages in an online community (such as a forum, chat room, or blog), either accidentally or with the deliberate intent of provoking readers into an emotional response or of otherwise disrupting normal on-topic discussion”

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