Last week, in “Bingecast: Hal Philipp on Patents, Litigation, and Entrepreneurship,” Hal Philipp was back to talk with Walter Bradley Center director Robert J. Marks about his mixed bag of struggles, conflicts, and ultimate successes as a talented inventor.

Among other things, he introduces us to a financial risk most of us never meet, the patent troll.

Transcript:

0:38:20 | Patent trolls

Robert J. Marks: (above left) I was once contacted on the phone by some attorneys and I found out they were “patent trolls” and decided not to pursue any relationship with them. You were also affected by patent trolls. What’s the story there?

Hal Philipp: (above right) Yeah, there was a company in Michigan, actually, headed by a guy who was a lawyer, strangely enough—or maybe not so strangely enough—and he had acquired a portfolio of capacitive sensing patents that went back quite a ways. Some of them were about to expire. But he was going around the industry, bludgeoning companies to pony up money, otherwise he would sue them. And he wouldn’t actually sue the companies. It was really just a shakedown. I looked at the patents and they were garbage. There was nothing there. It didn’t apply to anything that these victims of his were involved in. But just to settle the case, to get it out of their hair… and one of the victims was General Electric, oddly enough. Because they were a customer of mine but they were also using older capacitor technology from another company. And on the basis of that, this guy was going after GE. I looked at the patents and, as I said, it was a garbage case. But GE didn’t even blink. They just paid the money.

Robert J. Marks: So it’s almost blackmail.

Hal Philipp: It’s kind of like blackmail. They just paid the money, They didn’t want trouble.

Robert J. Marks: And what was your response?

Hal Philipp: I stood up to the guy. He came after me too, ultimately.

Robert J. Marks: So what did he say? He said, I found another patent that makes your patent no good, or… ?

Hal Philipp: No. His basic claim is that he has technology that precedes mine and therefore I have to buy a licence to it and pay him money. No merit to the case. Merits have nothing to do with it. It’s a pure shakedown attempt. And so, on the basis of some letter he wrote, shaking me down, before he filed a lawsuit, I wrote to an attorney in Pittsburgh – now he was in Michigan – and asked, can we not file suit against him in Pennsylvania with counterclaims and drag his case into Pennsylvania. This way, he has to be hiring Pennsylvania lawyers; he can’t be using his own lawyers who were getting a percent royalty, a percent commission off of his blackmail activities.

Notes: Investopedia describes the patent troll: “A patent troll is a derogatory term used to describe the use of patent infringement claims to win court judgments for profit or to stifle competition. The term may be used to describe a number of activities that utilize patents and the court system to earn money. While the practice of patent trolling is not illegal, a patent troll has no intent of ever developing a product or service by utilizing a patent. The end result is bad faith infringement threats and licensing demands that cost companies significant money to litigate or settle without any addition to the public good.”

Robert J. Marks: That was probably the lawyers that contacted me, working on a percentage.

Hal Philipp: Working on a percentage, yeah, so if you can get out of their jurisdiction, it’s great for you because he suddenly has to pony up real cash to defend his position. So in the end we came to an amicable settlement—absolutely nothing!

Robert J. Marks: But it did cost you some attorney fees…

Hal Philipp: It cost attorney fees. But if you let these people get away with it, you’ll attract other people who will do it too. You become an easy mark.

Robert J. Marks: It’s like the U.S. saying they won’t negotiate with terrorists. .

Hal Philipp: Yeah, You become known as a soft touch and everybody comes after you. You have to be known as tough. If you are going to play in the heat of the kitchen around patents and licensing, you have to be covered in teflon, asbestos, and everything else. Otherwise, just get out of the kitchen, You have to be tough as nails. And you have to vigorously oppose these people. Otherwise, other people get ideas.

Notes: Investopedia comments on court costs: Patent trolls are less of a problem in Europe because many European countries stipulate that losers in such court cases pay the legal expenses of both parties. This has the effect of eliminating some frivolous lawsuits. In April 2014, however, the U.S. Supreme Court ruled on Octane Fitness, LLC v. ICON Health & Fitness, Inc. to make it easier for the courts to impose legal costs on losers.

From Electronic Frontier Foundation: “To be sure, the patent troll problem is not a new one (remember the infamous RIM v NTP case?), but recently, we’ve followed a troubling new trend: more and more small developers and companies targeted by trolls.” The Foundation offers resources for dealing with patent trolls.

Inventor and entrepreneur Hal Philipp’s story is both inspiring and cautionary. Many people who cannot create ideas are happy to just appropriate them and make the inventor disappear. But, from his experience, they can be thwarted: See: What It Really Takes to Build a High-Tech Company, Sell It, and Get Rich. Inventor and entrepreneur Hal Philipp offers a rewarding but cautionary true story.

Mind Matter News Podcasts with Hal Philipp

Episode 1 | Hal Philipp: Inventor of the Modern Touch Screen
Boxing robots and automatic door openers too
with Robert J. Marks, April 11, 2019

Episode 2 | Hal Philipp: Formula One Racing Tech & Keyless Cars
Accidentally founding an ideal business
with Robert J. Marks, April 25, 2019

Episode 3 | In Patent Disputes, the Bigger They Are, the Harder They Hit
Hal Philipp on litigation and why owning a patent is only a license to sue
with Robert J. Marks, May 2, 2019

Episode 4 | I Sued Apple for Patent Infringement Hal Philipp on Tangling with Apple and Selling His Company with Robert J. Marks, May 9, 2019

Episode 5 | Advice for Budding Inventors and Entrepreneurs: Hal Philipp Shares His Experience with Robert J. Marks, May 16, 2019