Troll Thoughts,Troll Tallies

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}}[[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.'[[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

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