Monday, March 05, 2012

Here come the Patent Trolls

Plastics News is reporting that Multilayer Stretch Cling Film Holdings, Inc. has filed suit for patent infringement against 9 film manufacturers. They may well have been here before, but this is the first instance that I am aware of in the plastics industry where a non-practicing entity is using acquired patents to sue external operations for patent infringement. A company or person engaging in this practice is commonly known as a Patent Troll, not the kindest term of endearment. You can see the preliminary complaint online if you are so inclined.

Normally in patent infringement cases, the plaintiff is largely looking to prevent the defendant from making any more of the contested material, and maybe make a few bucks in the process. The reason that patent trolls are looked down upon is that they are suing only with the intent to get a settlement - shake down the opposition, if you will. They are most definitely not looking to prevent the defendant from continuing to make the product. Since the troll is not making the patented material themselves, they have nothing to gain by shutting down the defendants. Yet strangely, that is what is requested in their complaint, but since they are also asking for triple damages, all attorney fees, and a new condo in Hawaii, the Kool-aid must be pretty good at that law firm. (Just kidding about the condo.)

Plastics News' report states that some of the firms have already settled, so things are going to plan for the troll. Sadly, sometimes it is just cheaper to settle a lawsuit rather than fight it, and patent lawsuits are pretty risky ventures. Consider this: the invention was made by people with technical training, the patent application was written by lawyers with technical training and examined at the patent office by examiners with technical training, but the trial will be in front of a judge and jury with no or minimal technical training. That is a very risky situation. And the best that the defendants can hope for is that they can keep doing what they've been doing in the past. Being a winning defendant in a patent lawsuit gets you the grand sum aggregate total of $0.

Most of the patent trolls I've seen so far have been in the electronics and software arenas where there are some pretty large cashflows to tap into. While some of the defendants here are pretty large - AEP for instance, in their 2011 annual report had sales of nearly a billion dollars, but an income of only 12 million [*], they are making very little if any money on the allegedly infringing product. For patent trolls to be bothering with the plastics industry says to me that the trolls have run out of place to look for easy money, and they know they will encounter little resistance in the plastics industry.

[*] That's 1.2% profit margin! Need any more proof that the film industry is cutthrout?

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