[hvis]

I'm not sure it's feasible to meaningfully regulate/legislate what a "healthy bank account" is for such a company. There is always risk that, when the going gets tough, the company will transfer funds (e.g. by purchasing some "consultation services" from a tightly-controlled shell company), or that it will get into too many lawsuits, losses on which will still exceed the available balance.

> There are a variety of reasons why forming a "real company" that produces products might not be practical. For example you might be in a field where the startup costs for a competitive company is in the billions (silicon manufacturing), or that is a natural monopoly already monopolized by one or two big companies (operating systems). Your competitors also have patents on things that you would need to be competitive and for whatever reason you aren't willing to license them.

But what are you doing with those patents, then? As much as we both consider them to be a bad idea, patents are supposed to be a vehicle to promote tangible advancements in the field, to encourage development and manufacturing. If you don't produce anything but just stop anybody else from doing that, or just collect rent by granting out permissions, you are not using patents "correctly".

[gpm]

> I'm not sure it's feasible to meaningfully regulate/legislate what a "healthy bank account" is for such a company.

I'm not sure it is either, the law is a blunt tool and it's not always possible to legislate things like "be ethical".

One potential way to do legislate this is to require that plaintiffs place funds in escrow pending the outcome of the case, to pay for the other sides fees if they lose. Occasionally courts will already order this under current law. I'm not going to generally advocate for that as a good idea though, I think it probably has a lot of side effects and I haven't put enough thought into it to be sure it is a good idea.

> But what are you doing with those patents, then? As much as we both consider them to be a bad idea, patents are supposed to be a vehicle to promote tangible advancements in the field, to encourage development and manufacturing. If you don't produce anything but just stop anybody else from doing that, or just collect rent by granting out permissions, you are not using patents "correctly".

Theoretically, it was the act of inventing that occurred prior to the award of the patent that the patent is supposed to be rewarding. The reward is precisely the ability to extract rent from people who use the invention (whether by making it and selling devices at a premium, or licensing the patent).

You see this mechanism actually function in pharmaceuticals for instance, because patents are so valuable there are companies that pour resources into inventing new drugs that they can patent. (I have other issues with patents in this industry, I wrote about them elsewhere in this comment thread, but the reward mechanism really does motivate useful work here: https://news.ycombinator.com/item?id=27587034)

[hvis]

> One potential way to do legislate this is to require that plaintiffs place funds in escrow pending the outcome of the case, to pay for the other sides fees if they lose. Occasionally courts will already order this under current law. I'm not going to generally advocate for that as a good idea though, I think it probably has a lot of side effects and I haven't put enough thought into it to be sure it is a good idea.

That's an interesting direction, but how does the collateral compare to the average lawsuit's costs? What happens if the suit drags on, exceeding the collateral, do the parties just agree to disagree and drop it?

I could also be a small company, on the defending side, which is the frequent case in patent trolling scenarios. I shouldn't be barred from defending myself in court if I don't have the ability to post the collateral up front (if I'm convinced my case is strong, at least).

On the flip side, a small IP owner should still be able to sue a giant company that is violating their patents/copyrights/etc. Even if the said company has a lot of money and is liable to create huge attorney bills. But I suppose if the escrow for plaintiffs becomes more common, it's a small price to pay for the benefit of the whole ecosystem.

> You see this mechanism actually function in pharmaceuticals for instance, because patents are so valuable there are companies that pour resources into inventing new drugs that they can patent. (I have other issues with patents in this industry, I wrote about them elsewhere in this comment thread, but the reward mechanism really does motivate useful work here: https://news.ycombinator.com/item?id=27587034)

Good points on the pharma industry.

But okay, let's agree that there are pharma companies (research laboratories, etc) that don't ever do the end production themselves. Perhaps that's even a good state of affairs (of which I'm less certain).

Still, those companies are "real", and they have financing and budgets for stuff other than the patent lawsuits. They have to do the said research and put quite a lot of money in it (which is what makes those patents valuable and arguably a benefit to society as a whole), and that distinguishes them from an average patent troll.

[gpm]

Collateral requirements would generally only apply to plaintiffs (the people suing), requiring collateral for the defendant is obviously problematic...

You would expect the value to be set by the court as an approximation of the amount of fees that they might award to the defendant (which in turn is an approximation of what a reasonable defense might cost), as the lawsuit goes on you would expect the court to periodically increase the collateral requirements on the plaintiff, since the total cost to defend the suit has gone up.

Small, legitimate, companies having to put up collateral is an unfortunate side effect, but if they have good claims (and can convince a lender of that) they should be able to finance it... so that's probably not the end of the world? It does seem like a bit of an access to justice problem, not really sure how I feel about it.

> They have to do the said research and put quite a lot of money in it (which is what makes those patents valuable and arguably a benefit to society as a whole), and that distinguishes them from an average patent troll.

This is true if they license the patent directly to the manufacturers, but that's not necessarily the case. It seems entirely reasonable for a company to discover a drug, patent it (so they have something to sell), and then sell the patent to another company that deals with licensing it out to drug companies.

A license management company (aka patent troll) in the middle comes with a number of benefits:

- Chances are there's still a lot of risk associated with that drug, e.g. it might fail in human trials, by selling the patent immediately you reduce your risk.

- Licensing patents is not your core competency as a drug discovery company, it makes sense to have an entity that handles licensing for the patents invented by many different drug-discovery companies.

- You might, for whatever reason, want to stop operating as a drug discovery company. Maybe you want to retire. This shouldn't wipe out the worth of your previous work.

Generally, assets being transferable seems like a good thing. A lot of our society is based upon that principle... and if patents are transferable, it seems inconsistent to say "you can do X with asset Y, and so can most other companies, but not if the only thing a company does is doing X to assets Y". Inconsistencies like that generally lead to weird arbitrage opportunities and inefficiencies in society...

[hvis]

Imposing limits on intellectual property for public benefit is nothing new, though. Expiration terms, for example.

So the system might still work fine even if all patents get shut down when a company that acquired them does.

It's not what I suggested, though: just that a non-practicing (at least in some sense) company can't litigate.

That would mean that you can sell your patents to some shell company even. But the recipient couldn't sue anybody over them until they either start a profitable business on the side relating to said patents. Or they resell it again to a company that satisfies the requirements. Or have a lump sum set aside in escrow, I guess.