In late January this year, Huawei and Rockstar Consortium filled
a joint motion to dismiss the lawsuit against Huawei on its Android-based
devices. We don’t know the amount of money that Huawei had to pay to Rockstar,
but one thing for sure, it’s certainly not a small amount that Rockstar would
like to settle for letting Huawei off the hook.
Rockstar is known to be a patent troll for its exploitation
of ex-Nortel patent portfolios. Its core value lies in reengineering existing
products on the market and collecting evidences that they have used Nortel
patents. This way, Rockstar can therefore generates financial rewards by suing these
companies for patent infringements.
There are two ways for patent troll to make money, and we
would like to use the carrot and stick analogy to explain this. In Rockstar’s
case, a carrot licensing would be Rockstar goes after firms and tries to sell
its patents by claiming “my patented technology is cheaper/ better/more
efficient/more appearing, etc.” This way, Rockstar can friendly lures target
companies to licensing its products. So the licensee is not under compulsion
but rather persuasion to license the patent.
In contrast to carrot licensing strategy, stick licensing approach
is Rockstar actively sources firms that have been using ex-Nortel’s patent
technologies, and approach them with a threat of patent infringement lawsuit. “The
value proposition here is ‘take a license or else… (I will see you in court).’”
It’s an interesting argument that if it is not the fear for lawsuits, nobody
would ever buy license. Hence, “every carrot license is really a stick license
in disguise”.
It is interesting to use the carrot and stick analogy for explaining how a patent troll makes money, I agree that pretty much every carrot is a stick in disguise since a patent troll do not have much to lose. Small patent trolls may not have the finance to support it but the corporate backed Rockstar has all the support it needs. As long as they have the money for a lawsuit, they are forcing the defendants to spit money out. The defendant is bound to lose something anyhow. Even if the plaintiff has to fork out compensation to the defendants for damages and litigation cost, the case would have distracted them from their normal operations and got on their nerves as well. The attack definitely leaves a scar.
ReplyDeleteHi Jun,
DeleteIt's interesting that you bring up small patent trolls and how they may not have the finance to support such an act. It makes me wonder how small patent trolls get the guts to go after such large companies. Maybe it's because they have a legitimate patent in their hands or because they know it will be much easier for these large companies to pay up and however much they pay will barely make a dent. Either way, Rockstar is special in that they have corporate backing. Now that's really unfair!
Hey Tian,
ReplyDeleteI think you did a good job highlighting that companies that choose to purchases license from other companies may have been forced to do so under the threat of litigation through your carrot and stick analogy. I was thinking that another way to counter and get around the "stick" of patent licensing would be to have your own "stick", or patents that you might be able to use against the suing party. However, as we discussed in class, NPEs don't really have resources or operations that could be curtailed by counter-suing; as a result, it seems that companies will have to deal with patent trolls until a fundamental change to the system is implemented.