In my last post I blogged about Rackspace’s victory over a patent troll. The same company were again busy the next week, launching a lawsuit against IPNav.

The suit was actually triggered when another company, Parallel Iron, sued Rackspace for infringement of some patents relating to the Hadoop Distributed File System. However, IPNav had previously contacted Rackspace on behalf of Parallel Iron about the patents, and Rackspace allege that there was an agreement not to sue without notice. So, they are suing IPNav for breach of contract.

The case will of course be interesting to watch, but it caught my eye because of the extreme differences between the parties. I understand that Rackspace has a strong anti-patent stance, and at the other end of the scale, IPNav rely on patent assertion to generate revenue. You can see from the comments on the Rackspace blog and the IPNav blog that the two parties have got completely opposing views, in public at least.

Of course, bad quality patents in combination with patent trolls represent a significant headache for software companies, and instinctively it does not seem fair that a “patent assertion entity” or a “non-practising entity” with nothing to lose can demand (and get!) large payments for patent infringement, or pick up licence fees from companies who do not want to litigate. I think everyone is agreed that this is a problem that needs to be fixed. But the solution will not be easy to find.

First of all, the concept of a patent having a similar legal nature to that of property is fundamental to the patent system and will not change as long as the patent system exists. Similar to property, a patent can be sold to someone else, rented out via a licence, or be mortgaged.

So it’s only natural that a patent can be thought of as an “asset” that can be bought and sold; and it is the next logical step for a market to grow up around intellectual property rights. A patent troll is doing nothing more than exploiting the system for what it is.

That of course, does not justify the behaviour that we see from patent trolls. But that’s where the problem arises. Any new or modified legislation will find it extremely difficult to penalise the trolls who are engaging in unacceptable practices from those non-practising entities who do not “deserve” to be penalised.

Think for example of Kodak. This company had a spectacular fall from grace, having not adapted to the move in photography towards digital imaging and subsequently filing for bankruptcy. When they filed for bankruptcy, their 1100-strong patent portfolio was one of their main assets, and was sold to a collection of technology companies.

So on that basis, Kodak would fall into the definition of a “patent troll”. But it does not seem reasonable to put them into the same bracket as companies who deliberately set out to monetise patents as their only revenue stream.

Indeed, for every large company that fails, there are a string of suppliers who are affected. We have seen a series of high street stores, football clubs and large businesses go bust. Each one has an effect on the supply chain which includes small local companies. When a company goes bust, it is vital that their assets can be capitalised upon by the financial administrators or liquidators. So, the sale of patent assets in that scenario could be an important mechanism for making sure that the various creditors see some money back from a company that has gone bust.

Even amongst companies who are unashamedly non-practising, there can be a variety of motivations behind their activities, and various ways in which the patents that they aggregate are used. In the famous book Freakonomics, there is a chapter that discusses a company called Intellectual Ventures. The chapter talks about them in glowing terms, as enabling innovation for the good of humanity and assisting inventors obtain just reward for their innovations. However, opinion on the merits of Intellectual Ventures is split. Some people see them as pure patent trolls, while some people buy into the benefits that they claim. The real truth may be somewhere between these two views. However, the point is that legislation will find it difficult to distinguish between a “noble” non-practising entity and a “devious” patent troll who is intent only on extortion.

In the meantime, a good starting point would be to make sure that patents are of better quality. Encouragingly, the USPTO is engaging with the software community on this issue, although it will be interesting to see what changes actually come about.

The situation in the UK is more encouraging. Patents are only granted if there is a “technical” innovation so this acts as a kind of coarse filter that prevents the worst kinds of dubious patents from being granted in the first place. Courts are of course the last place you want to end up, but the Patents County Court has been enjoying some success as an alternative venue to the High Court following changes to its structure in 2011 that limit the damages in patent cases to a maximum of £500K and costs to £50K, and in Scotland new procedural rules were introduced at the end of 2012 that have given judges the power to be more proactive in case management of IP disputes.

So, in the meantime patent trolls will unfortunately continue to flourish and will represent a burden on innovation. There’s not much that can be done in the short term, apart from consider the issue, plan for what your approach will be, and then forget about it and get back to getting your own products and services out there!