Original subtitles

The U.S. Patent system lets you patent a thing

and then sue anyone that does that thing.

But what if you could patent anything.

I literally could not defend myself.

I didn't have the money.

So I heard numbers between 4 to 500,000, all the way to a

million dollars for a defense, which may or may not succeed.

This is a game that big companies play because they know they can outspend you.

I think that they misunderstood the language of their own patent.

So it doesn't matter if you're right, it matters

if you have enough money to defend yourself.

I ran out of money, I couldn't fight this case anymore.

And the problem is, if you walk away, uh,

they win by what's called default judgment.

All... it's all consuming, it's all you can

think about, there is unknown downsided play.

You could lose everything.

Their lawyers actually threw a fit and told

us they were going to destroy our business,

and destroy everything we had worked so hard to build.

It's like being accused of a crime you didn't commit,

and not having any way to... To argue that.

So they actually, uh, will win and can take your code

and can take whatever assets your company has if you decide to not fight anymore.

I assumed they made a mistake because nobody can own the patent on a hyperlink,

that's just common technology used on the web.

The plaintiff added my name personally to the suit.

So by continuing to distribute my app, I can ultimately go to jail.

That's what I was afraid of.

You're basically are guilty until you're proven innocent.

It... it consumed me, 100%.

Literally, zero ideas came out of these patents that were of any...

It was the demise of my company.

It could be money flushed down the drain because you're going to lose...

You are stuck in a lawsuit, not of your own making, you did not do anything wrong.

I lost my house as well.

I have no idea who's financing the lawsuit that I got dragged into.

The demand letter that says you have three days to pay or shut down your business.

That was a very scary moment, I felt

I realized really quickly, talking to other business owners

that this wasn't an isolated case.

People try to extort us, again and... It was my best option.

I didn't have an option.

You can't get out, you have to pay this guy to go away.

If you... if you don't have the resources,

to defend yourself the facts from your side could

potentially never be heard and you could lose everything.

And that's the way it is.

Technically what we do... that was so bad that I would say,

"we bought a $200 scanner from office depot,

and put it on our network and plugged it in."

My name is Austin Meyer and I'm a computer programmer, aerospace engineer, and pilot.

As well, I wrote a computer program called x-plane.

X-plane is a flight simulator

that lets pilots practice flying on their personal computers at home

so they can then fly their real airplane more safely.

As well, people that aren't pilots at all enjoy flying x-plane because they

get to enjoy all the thrill of flying without all the cost and the risk.

About five or six years ago, I made a special version of x-plane

for the Google android operating system.

Just like any app developer would, I uploaded my app to the Google store

so anybody that wanted to could download it and fly it.

They did.

Some time went by and then it happened:

I was working at a trade show in Wisconsin when I got a call from a lawyer.

He told me that I was being sued for patent infringement

for putting an app on the Google play store.

Who was suing me?

Google?

Well,

Actually not.

I was being sued by a company called Uniloc.

This is a company I had never even heard of before.

Uniloc claimed to own a patent that described the idea of

looking up a name on a list on a computer.

And since the Google store apparently looks up your name on a list

on a computer, to see if you paid for the app that you're launching,

Uniloc claimed to own the idea of how the Google store works.

And because of this, they were suing myself, and a lot of other people too,

simply for using the Google store to distribute our apps.

Now, Uniloc had nothing to do with the creation of the Google store.

Uniloc had nothing to do with the creation of x-plane.

I never even heard of them before.

But none of that mattered.

They were suing me and many other people, simply for using the Google play store

to distribute our apps.

Now, at this point, the question you should be asking is, what's in the patent?

Does the patent really give Uniloc the right

to sue people for using an online store?

Well, here it is:

This, exactly, is the claim in the patent that Uniloc said we infringed on.

"Computer code executable on an electronic device to prevent

unauthorized access to electronic data stored on the electronic device."

That's it.

That's it.

These words do not include any source code,

that could be of any use to any computer programmer at all.

These words do not help me, or Google,

or anyone else, design, or even use the Google store.

These words just say, that if someone else goes through the trouble

to actually write a computer program that prevents unauthorized access to data,

that whoever has this patent can sue them.

This isn't an invention, this isn't a new idea,

this doesn't contribute one bit of knowledge to the computer industry.

It certainly didn't contribute anything to me.

It just says that whoever wrote down these words, can sue anyone that actually makes,

or in my case uses, an app store.

Next, I looked at the lawsuit.

"Uniloc has been damaged as a result

of defendants infringing conduct described in this count."

See, Uniloc claims they've been "damaged"

by my putting an app on the Google store.

Uniloc only files lawsuits for a living, how can they be damaged

by some guy like me putting a flight simulator on an online store?

I tried to figure out how Uniloc was damaged by looking at their lawsuit,

but, they never really seemed to specify exactly how they've been hurt.

I called a lawyer.

I told him to have the case just tossed out because of it's obvious absurdity.

What the lawyer told me next, sobered me.

He said that I would take about three years

of my life, and $3,000,000 to defend myself...

and at the end of it all, I'd be put on trial,

in front of a jury in the outskirts of Texas that would decide my punishment,

for putting an app on the app store.

I live in South Carolina.

How could I be put on trial in front of a jury in the outskirts of Texas,

for committing the sin of using the Google store to distribute my app?

It was at this moment that I realized

that I'd entered the most terrifying mess of my life.

What I'm about to tell you is shocking.

And I'm inviting you to come with me on my journey to uncover the patent scam.

First thing I want to know:

Who's behind all this?

I hit the 'net to find out.

Controversial patent lawsuits?

What does this company do?

A dozen lawsuits filed just last week?

Let's check out their website.

Hmm.

Members only.

Maybe there's something in their source code.

Ah, there it is:

Patent commercializing?

Reap the rewards.

Who owns this company?

The Marathon Patent Group?

Hmm?

They're not inventors?

They just own patents?

And they're traded on the Nasdaq stock exchange?

What's a patent troll?

So what is a patent troll anyway?

My first trips were to go talk to the experts and find out for myself.

Patent trolling is the practice of taking patents and using them to sue

or threaten to sue others.

It's not then taking those proceeds, and using

it to create the next greatest technology,

but it is basically building a business out of suing or threatening to sue.

Unfortunately, patent trolling has become a lot more common in the last ten years.

Uh, last year, patent trolls sued about 3,600 companies

and, uh, there were hundreds of patent trolls active in the federal court system.

The estimates vary but they generally come over $10 billion a year.

The vast vast majority of plaintiffs are not inventors,

they're people who have purchased patents for nothing,

from bankruptcy estates of failed companies,

or... or they've just purchased patents for very, very little

and their sole goal is to make money by suing people.

It doesn't even matter if the patent

actually should have never have been granted,

the cost of invalidating a patent is so high that

defending yourself in a patent litigation is so high,

that everyone... Almost everyone ends up having to write a check.

"Almost everyone ends up having to write a check."

What kind of check are we talking about here?

Well, as it turns out, the average settlement that a person has to pay

to a patent troll to make the lawsuit against them stop, is $340,000.

That's right, the average person is forced to pay the patent troll $340,000 just

to end the lawsuit because they don't have the $3 million to defend themselves.

When I tell people about my lawsuit, they always say the same thing:

They say, "hey, Austin, if Uniloc says that the Google store

infringes on their patent, why don't they just sue Google?"

Oh, oh, let's think about that for a moment.

If they sued Google, I think Google has $3 million dollars.

Google can defend itself and probably, over years, win.

But, if Uniloc sues as many people as possible that use Google

then think of how many people they can sue

that don't have the $3 million to defend themselves.

Those companies will be forced to settle.

Even if they've done nothing wrong.

And, once it became how obvious it is to make easy money by filing these

patent infringement lawsuits people can't defend themselves against,

you can pretty much figure out what happened next.

Companies like Uniloc were formed.

Companies that exist only to file lawsuits.

Now, here's just how far it can go:

Uniloc, the company suing me, is owned by a much larger company called

the Marathon Patent Group.

The Marathon Patent Group does not make anything.

They don't invent anything.

They just sue the companies that do.

And the Marathon Patent Group is traded on the Nasdaq stock exchange.

That's right, the Nasdaq stock exchange was designed

to foster innovation, and now, the Nasdaq hosts the Marathon.

Patent Group, a company who's only function, is to sue.

And it's all based on holding a patent.

So, are these patents brilliant?

Well, let's take a look at some.

These are real patents.

Method of video gaming over the internet.

Method for voice

communication with an entity, such as a plant.

Snowboard training apparatus.

Animal ear protectors.

Forehead support for a urinal.

A hose to breathe from a toilet bowl.

A reality alternate method.

A domestic animal telephone.

Method to search for event photos on the internet.

Self hair cutting apparatus.

An anti-eating face mask.

Method of swinging sideways on a swing.

Exercising a cat with a laser pointer.

Self-defense weapon key holder.

Apparatus to simulate a high-five.

Dog knows art apparatus.

A bib for use while operating a motor vehicle.

A buttocks kicking apparatus.

A stick that a dog can fetch.

This all seemed just too crazy for me to actually believe.

I had to talk to someone who was experienced in this.

I found a guy by the name of Kevin O'Connor.

Kevin's sold and developed companies worth billions of dollars.

And he was also being sued by a patent troll.

So he knew his way around the block.

Kevin was sued simply for making a website that scans large numbers of product

and then shows you the one that's best for your needs.

So, Kevin, I'm being sued for patent infringement.

That's too bad.

It is not fun.

Let's hear your story.

So December, 2013, we get this letter from law firm and

says we're violating their patent, and they claim to have the

patent that facilitates bilateral, and multilateral decision-making.

That's been around since caveman days,

it's baffling how anyone can have a patent on that.

I mean, it's basically decision-making,

uh, dating all the way back to probably neanderthal days,

uh, people deciding whether to trade chickens for cows.

I mean, it's... it's basically how humans interact,

or communities interact with each other.

They had a patent on it.

Okay, so you got the letter.

What did the letter say?

Uh, the letter basically said, uh, they got this, it's called a demand letter,

they said that, they've got this patent, uh, they believe we're infringing on it.

Uh, we can settle now, or we can through prolonged discovery.

Uh, we're going to have motions in the court,

you're going to have to incur lawyer fees.

You know, the more this goes on, the more expensive it's gonna become for you.

Once you got this lawsuit, what'd you do?

I mean, the first thing you do is you... You research the hell out of it.

You're trying to figure out, you know, one, is this a valid patent?

-Who's behind it? -Who else have they sued?

Uh, we did a lot of research, they kind of picked on the wrong company,

you know, we have one of the largest knowledge graphs in the world, so...

So we did a lot of research. And who is behind this?

Who are these lawyers? Who are these, um, inventors?

-'Inventors' of this patent. -Uh, and we found a pattern.

We found a very disturbing pattern.

Um, it was basically, there was these two... Two people,

um, who we believe met in Harvard Business School,

uh, Eileen Shapiro and Steven... Steven Metz, um, that had

uh, they were not technologists, but somehow, mysteriously, they had some

-I think it was maybe ten... -Uh, technology patents.

You never know who is behind these shell companies,

and in our case, it was Lumen View Technology,

and she was behind it, but there was a series of these shell companies

that were prosecuting these portfolio patents.

Uh, and they were very, very aggressive.

Once we learned all that, I was pissed. I was so pissed.

Uh, I knew we didn't infringe, I knew we could win,

uh, it really just came down to money.

How many dollars have you put into this so far?

We got $350 to $400,000 invested in this.

-In two and a half years? -Yeah.

And it's still not over.

No.

No, it won't be over for... I don't know, another year, year and a half.

How much more money are you gonna spend?

Well, I committed a million, SO, I'll KEEP... I'll KEEP FIGHTING IT.

All right, so I'm being sued by a patent troll right now

for using the Google play store, I've been in this now for about four years,

and there is no end in sight, what do I do?

I get asked this question a lot.

Are you rich?

So, I guess the big question is, can you... can you afford the pain?

So, your lawsuit is a particularly absurd case, which is,

you're being prosecuted not for developing technology in violation,

you're simply using someone else's technology.

As consumers or businesses, we use thousands of technology products,

that could, at any moment, be a violation of thousands of different patents.

I mean, anyone is at risk.

What kind of legal system is when anyone can be guilty of patent infringement

at any given time and their lives destroyed?

I mean, really?

Is this... is this the kind of society that we wanna... We wanna live in?

This is... this is terrible, this is a travesty.

So what do I do?

I tell most people, you're a little deep into it.

I tell most people to settle, it's not worth it.

Why should I settle when I know it's the wrong thing to do?

You know, ask the guy that owns the liquor store uh, why he pays $100 for protection,

and not take a bullet in the head, right?

I mean, the right move is to take a bullet in the head, stand up to the extorter.

Smart move is to pay $100 bucks, get the protection.

I've thought a lot about this problem, just trying to figure out, like,

how do you pull people together to go after him, you know?

How do you build some kind of deterrent system?

It's complicated.

Fighting one off, I'm not sure that's the solution.

If fighting one off isn't the solution,

and settling involves encouraging them to do it again, what's left?

I've... I've gotten to learn the way they legally operate

and set up money, and go after people.

It's a very asymmetrical fight, uh, it's kind of like terrorism,

uh, where they can come in and cost them $400 to file a lawsuit against me.

It costs me $2 million to go call their bluff. No one calls their bluff.

Very few people ever call their bluff.

So it's a brilliant, brilliant, uh, strategy,

and for them, no downside whatsoever.

-For you? -For me, it's nothing but downside.

I think a lot of these patent trolls are sociopaths.

They know the damage and the carnage they

they create in society, they just don't give a shit.

-They don't care. -It's the almighty dollar.

They give greed a bad name.

An idea is not private property, you can't own an idea, it's not possible.

You can't own a concept.

Look, I've been doing I've been inventing for 40 years.

Ideas are cheap.

Turning a good idea into a successful product and company?

That's really, really hard.

What the patent office has done is completely put everything on it's head.

They're... they're putting all the value in the idea

and they'll make it extremely expensive

for people like us that are trying to improve the world

by actually creating products and services that benefit others.

So that's Kevin's story and I'm starting to see the tip of the iceberg

in this ongoing national disaster.

The lawsuit against me has been dragging on for about four years now,

and there's no end to it in sight.

I've watched my daughter, grow up from age one to age five, always under the threat

that I'd have to turn over my savings for her future to a lawyer that's suing me

for using the Google store.

This has cost me time.

THAT I'll NEVER GET BACK.

But, am I the only one in this wretched situation?

Coming out of college, I knew that I wanted to be a programmer.

I knew that I wanted to create applications that people enjoyed,

people wanted to use every single day.

So, the idea for ditto really came from watching

thousands of people try to buy glasses in the real world.

And we realized they were really struggling.

You know, that's really what kind of made this exciting,

like, it felt like we were really solving a consumer problem.

Well, I started it in my basement, in 1997, with, uh, two other people.

It was basically just, uh, I wanted to stop annoying

my friends sending them emails all the time.

So I thought, you know, I'll just put all this on a website,

and they can come check it out when they want to.

Okay, time out. Just wait one second here.

This guy is Drew Curtiss, and he runs a website called Fark.com.

He was sued for posting news at his website.

Okay, now I'm gonna reach the patent.

"Writing three key messages, purpose."

"Answer the question, why should I be interested in this?"

Two to three statements that

support the headline and entice the reader.

For example, answer the question; Why is this news?

Present facts or statistics or other evidence to

show why your story is important or interesting.

The statements don't necessarily have to relate to each other,

but must support the headline.

"30 to 40 words in total per highlight."

That's it.

That's the patent.

That's the patent that the patent troll used to sue Drew Curtiss

for posting news at a website.

All right, sorry for the interruption.

Back to the movie.

So I kind of flipped over a napkin and started drawing it out,

it was just an exchange of economics for power.

The day my brother got back from Afghanistan

was the day that we actually went live.

And we sold out. We sold out.

We... we did this in a nightclub here in Chicago.

-And, uh, it sold out in about 17 minutes. -We had a lot of fun.

My wife and I worked hand in hand.

And uh, we were the first photographers in the event.

So we've gone to lots of great places, we've photographed

lots of great people, captured memories for them.

Running my own business definitely made me happy.

It was something that, you know, I always wanted to do

and, uh, you know, just having the ability to be creative

and share your creativity with the world was

something that I think everybody wants to do.

Eventually, one of my apps, White Noise, uh, became extremely popular,

even became the number one app on Itunes

and that's when I was able to focus on my startup full time.

I was able to watch folks who came in as

interns from college grow into senior managers in the organization.

And it was almost like getting to, uh, you know, be a parent or at least an uncle.

Uh, it's been the best thing ever.

When you're building something and the first customers say, like,

"Wow, that really helped us."

Uh, there's no greater feeling.

It was, uh, December 31st, 2013, and I was with my family ringing in the new year,

not knowing what lay ahead of us.

And, uh, we had champagne glasses in our hand

and at 12:04 a.m. my email lit up on my phone from a patent attorney.

Saying, "I see you've been sued for patent infringement.

Maybe I could represent you."

All of a sudden, on 9/11, in 2013, I received a demand letter.

The demand letter basically stated that I infringed upon a patent,

and it didn't tell me how, or it didn't tell me why,

it just says, "We believe that you infringed upon this patent

and if you do not cease and desist, we're going to sue you."

In February of 2012...

And, uh, I remember it very clearly.

A letter came in the mail, saying, "Dear Doctor Vicinanza,"

um, "We understand that, uh, you have certain technologies",

uh, in particular, network-based scanners that," uh, "we feel," uh,

"infringe on our proprietary patent and therefore we suggest that you call us..."

"So you can arrange to get a license to use your equipment."

Yeah, we'd been in business for about 10 years when I got

hit by a patent troll lawsuit in 2011, out of nowhere.

So, it was somebody who was claiming that Fark, and Reddit, and AOL,

and six other companies were infringing on a patent of theirs.

Essentially, it involved emailing press releases to people.

Got a curious phone call from an attorney.

That claimed that I was infringing on their patent.

It was a lot of jargon and nonsense and then a bunch

of claims and one of the claims was uh, if you, uh,

scan a document to an email, that's protected under this patent.

What the patent said we were doing wrong was,

taking a document, putting it on a scanner,

and pressing a button, and having that scanned to an email.

The demand letter said nothing about what we were infringing on...

Nothing about what we were doing wrong or what

they were even trying to claim against us.

So, this is usually what you get.

This is, uh, a demand letter.

And it usually comes with a lot of paperwork.

These are, you know, four patents here, and they basically say,

"You're violating something here, one or more of our patents you're violating."

Um, a lot of times they don't even tell you.

In my case, they actually illustrated where they think

I'm infringing on their patent, and it's right here.

When you click this button, it opens Apple's app store.

And that's it.

That's all it is.

A button, that goes out to the internet and opens up Itunes,

and that's... that's a million dollar lawsuit? Really?

And it says right there,

"...Storing results of a two-way interaction to a central location."

That sounds like using the internet.

Later, I discovered I was not alone and that many other small businesses

had been targeted and sent these demand letters,

and they all say pretty much the same thing, they reference a few patents,

uh, and then they claim they wanna get a licensing fee from you.

Uh, if you don't pay them a licensing fee, they're gonna take you to court.

Okay, so you've seen some pretty absurd lawsuits here,

but now, it's time for the mother of them all.

Uniloc, the company that's currently suing me,

was also suing a company called Rackspace, for selling linux computers.

Uniloc's excuse for the lawsuit?

That Uniloc held a patent that described rounding numbers when doing math.

This, because Rackspace's linux computers rounded numbers when doing math.

When someone is sued for doing math, I pretty much wanna talk to them.

I've been accused of running linux.

Because the linux kernel does math.

It rounds, it rounds up or rounds down, they said we violated their patent.

You know what happens when you have a phone and it rotates like that.

We've been accused of having a free mobile app that rotates on your phone.

We have, an accusation right now that we send email.

Uh, we have been accused of... Selling cloud computing services.

They said, "if you charge somebody money for providing a computing service,

that violates our patent."

So you may notice that Uniloc's lawsuit against.

Rackspace was for selling linux computers.

Why linux?

Think about it, and the answer becomes clear.

If they were to sue Rackspace for renting out time on Apple

or Microsoft operating systems for rounding numbers,

any jury would just laugh it right out of court.

But when they choose linux, that's an operating system

that most jurors just don't know much about.

Turns out, Linux rounds numbers just like Apple and just like Microsoft.

All the operating systems work on the same computers.

But by choosing linux, Uniloc introduces just enough doubt

to stand a chance of succeeding.

And it's that tiny little seed of doubt that drives the entire lawsuit.

They don't really care that their

interpretation is ridiculous on the face of it.

And the trolls don't even care how nonsensical or irrelevant their patent is.

The thing about these users suits is that we're all now users of technology.

So that's why you see folks who are angry about

patent trolls not only including tech companies, but retailers,

your mom and pop store down the street.

If you have a scanner in your house... do you?

-Do you have wifi in your house? -Absolutely.

-Do you have a smartphone in your pocket? -Of course.

Okay, so those things make you a target for a patent lawsuit,

because you are using the technologies which are at stake.

Man. But historically, patent holders won't go after

users because they don't want to sue their customers.

The thing about patent trolls is they don't have customers, so they can

go after folks without worrying about their reputation in the marketplace.

When I received the demand letter, most of the screenshots were of Apple's app store,

well I'm an end user of that technology.

I didn't invent that technology, I'm just using that technology.

But they're claiming that end users are violating their patents,

even though Apple has a license patent, even though Apple says,

their developers are not infringing.

It doesn't matter to the patent troll.

It doesn't matter.

If they could pin that... that interpretation in any such way,

then they force you to respond.

Because, their point is not to win.

Their point is to make you spend money.

If they can make it more expensive for you to prove

that you're right than it is for you to pay them off,

then 99 out of 100 people will just pay them off and go about their business.

And every one of these people are... Are coming in and running around, and saying,

"well, Newegg could not have succeeded but for my patent". Which is utter bullshit.

Right? None of our developers or software developers

had, you know, ever referenced any of these patents.

For example, on the online shopping cart, what they coded for that,

for that functionality, every website in America

that's an e-commerce website, um, has a shopping cart.

You know what I say at our company?

Ideas are cheap.

I have an idea every day, you know?

What, am I gonna go patent every one of them?

This law firm that sued me had absolutely no value to add to my business.

They were only trying to extract money in exchange for agreeing not to sue me,

which I call extortion.

Pay money to not be sued?

Well, so what if we do get sued?

This'll never stand up in court.

Of course, we do have to have to pay our defense fees.

They are hard costs, that are already tremendous and tragic and ridiculous.

They count on the fact that most companies can't manage, um,

their legal defense and they have to basically end up paying far, far more

than, um... than what the plaintiffs are asking for.

And so those plaintiffs will very cleverly...

They'll price below the cost of defense.

A patent suit generally costs $1 to $2 million to defend through to judgment.

So in 2011, when I gave my ted talk,

they were estimating that the cost of defending a patent troll lawsuit

was about a million and a half.

The legal expense of defending yourself against the patent,

um, trolling lawsuit can be in the millions of dollars.

And a lot of times the patent trolls are picking on small companies

that they know cannot afford to go through the whole legal process.

You probably spend about $3 to $4 million.

So far, I would estimate that the legal fees have been in the millions.

And I think we're talking about several

million more before it's all said and done.

My small company couldn't afford that, and they knew that.

It would be half a million dollars or up, to

defend against a patent infringement lawsuit.

And how much money did you make in the year leading up

to the patent infringement lawsuit?

We made about $30,000 profit in 2013.

Every case has been brought against it so far.

Has been by MPE's where there was no product for us to buy

or no service out there in the market that we could have bought.

We should fight and we do, um, with what we have but we don't have that much.

For me, hundreds of thousands of dollars is a lot of money.

It was more money than we spent on the entire app.

So what'd you do?

Um, we scraped together a little bit of

money that we could, uh, could get a hold of.

We emptied our 401k, we paid our attorney enough to get the job started.

The lawyers, the first question they ask you is:

"How much money do you have?"

And since I didn't have anywhere near a million to $3 million in the bank,

I was laughed off the phone.

Some of them were extremely rude.

When we got the lawsuit, we knew we immediately

had to make some very hard decisions.

So we actually held a meeting and I told all of my employees,

I said, "everybody is getting laid off.

I'm gonna move the office back to my basement,

and I'm gonna try to do everything myself."

And I figured within... By the end of the year we might be out of business.

I had planned to hire another couple of

employees that year and I wasn't able to do it.

You know, I laid off seven people, um, most of whom were engineers.

Um, I lost employees.

I had to... I had to get rid of them so I could finance the litigation.

You have to learn a lot about the legal system

so I can't tell you how much time I've wasted on this,

time I could have been focused on my own products.

Last month I probably could have hired 20 people,

except for what we're spending on patent litigation and...

Instead of spending 18 hours a day running my business like I normally do,

I had to instead spend that trying to figure out how to fight this lawsuit.

It took up 100% of my time for the better part a the year.

I probably spent 60 or 70 hours a week doing litigation activities,

um, in those first couple months.

Um, what I should have been doing was finding new customers and growing

our business, and signing up new eyewear manufacturers to our site.

The business ground to a halt.

Every resource, financially as well as my... you know, mental resources

and my time were focused on what were we going to do next?

How were we gonna survive?

We had to stop growing basically in order to deal with this.

Everything on the business side was derailed.

Not only am I trying to run a business, I'm trying to run a business, plus,

deal with lawyers, and you know, um, looking up doing research on the patent

and the patent troll and coming up with responses, so yeah, it did take a toll.

It was a... it was a... Tough time for us all.

They want you to make it so painful to fight them, that you just give up

and you pay them off.

And even my boys, they... they knew that, you know, their dad was tied up with this,

that my mind was elsewhere.

And we consider 2014 a whole year lost.

Over all, yeah, I would say it had an effect on my kids.

They... they... missed their dad for about three months.

My oldest son who was eight at the time, uh, was listening in on all our

conversations about strategy, and at one point he, uh... he tried to help,

and he says, "Daddy, I know what you need to do with this guy."

-And I go, "What?" -He goes, "You should kill him."

These trolls don't just ruin people's businesses,

they ruin their lives and their families.

And if you settle with the patent trolls

you're just encouraging them to do it to you again.

Or, to do it to someone else.

Which lawsuit?

The first one.

It's still not resolved.

How long is it gonna go on?

It could go on several more years.

It can go on forever.

It can go on... For the... For your entire life.

The patent troll needs to make it as difficult for you as he possibly can,

so you'll finally just give up in exhaustion and settle.

One of the ways he does this is a process called discovery.

They will bleed you dry in the discovery process.

They will ask for fountains of information,

and it's a very intrusive process.

We're talking email records, financial records, bank statements.

The list goes on and on, and they don't really need this for their case.

They just want you to pay a lot of money and a lot of time.

That's how they bleed ya'.

They bleed ya', bleed ya', bleed ya'.

Show us the hundreds of thousands of emails that have been sent back and forth

between you and investors, and... and anything that has to do with

how you created this idea, and then we'll

take a look later and determine whether or not you're infringing.

That's just... That's cheap.

It's... it's cheaper for them.

If it was made more expensive for them, perhaps they wouldn't do it.

But they know it's expensive for me.

Uh, it's... it's very similar to, what if somebody broke into your house

in the middle of the night and you have to sit there on the couch

while they argue with the cops over how much

of your stuff they can take when they leave.

So the person being sued has to reveal

everything about his own business.

What does the patent troll have to reveal about his?

It basically created again a huge imbalanced burden on defendants.

Plaintiffs have no documents or records to turn over, right?

Why don't the plaintiffs have any documents or records to turn over?

Because they're shell companies.

Patent trolls are just shell companies.

They don't make anything, they don't produce anything.

They don't have employees.

It's smoke and mirrors.

You don't even know who's suing you.

You have no idea.

You don't know anything.

They've thought of every single angle and you can't win.

The company that sued us was nothing more than a couple lawyers

that were in a room in east Texas that thought they could make some money.

In one case of a friend of mine now, uh, they won.

The judge actually said, um,

"this is actually insane, and you're owed all these punitive damages."

But it was a non-practicing entity.

They have no assets, so then they just throw up their hands, and say,

"sorry, we don't have any money."

You get a million dollar judgment against the shell company,

they go, "okay, poof, we're outta business."

So that's what a shell company is.

It's an empty shell put together just to hold a patent and no other assets.

As the money comes into the shell company, the patent trolls funnel it down into

their own pockets so the shell company itself never achieves any value.

For the patent troll, there's no risk.

Because he has no business, he has nothing to lose.

Let's examine one of these shell companies.

You remember our friend, Steve Vicinanza?

In order to use my $200 scanner on the network,

I would have to pay them $120 thousand.

But who are we paying this $120 thousand to?

Uh, the patent troll was an entity called.

-Project Paperless... -Project Paperless?

Yeah, that's a shell company.

But who are they suing?

Well, it turns out there's a directory called.

"The Best Businesses To Work At In Atlanta."

The businesses on that list were the ones that were sued for using scanners.

The Best Businesses To Work At In Atlanta,

clearly, businesses with good morale, happy employees, a decent stream of money.

They're the perfect fruit to pick, ripe for the taking by patent trolls.

What law firm would go and ruin these people's lives like this?

Turns out, it's a law firm called.

Hill, Kertscher, and Wharton.

Hill, Kertscher, and Wharton demanded that each business

that used a scanner to scan a document to an email pay them a thousand dollars

for each employee in the company that used a scanner.

If the companies didn't pay, then Hill, Kertscher, and Wharton would sue them,

and the victims would be looking at $3 million in legal fees.

Hill, Kertscher, and Wharton's excuse for this nonsense?

That they were representing a client called Project Paperless.

So who is this Project Paperless anyway?

A little more research found that Project Paperless was just a shell company,

which in turn was owned by three more shell companies.

And the people who set up those shell companies?

Three guys, by the names of Steven Hill, Douglass Kertscher, and Scott Wharton.

Sound familiar?

The very lawyers that were filing the lawsuits.

The supposed victims that the lawyers were representing were just shell companies

created by the lawyers themselves.

Imagine going to a lawyer and saying that you want to sue people for using scanners

but you don't want anyone to find out who you are while you're doing it.

And the lawyer then saying, "Oh, okay, that's no problem.

We'll just set up dummy corporations for you to hide your identity

while we sue everyone in the Best Work Place directory in your own hometown."

Well, that's exactly what Steven Hill, of Hill, Kertscher, and Wharton,

of Atlanta, Georgia did.

The address of one of the shell companies, by the way, was a condo in Florida,

owned by a friend of one of the lawyers.

One of the businesses they demanded money from, by the way,

was a company called Cobb Pediatric Therapy.

Cobb Pediatric Therapy is a business that helps disabled children.

When they got their lawsuit threat from Hill, Kertscher, and Wharton

they had to promise Steven Hill that they would never again use a scanner

to scan a document into an email.

That's what Cobb Pediatric Therapy had to do

to make the lawsuit threat against them stop.

So now, whenever disabled children come into Cobb Pediatric Therapy to get help,

Cobb Pediatric Therapy cannot help the children as effectively as they otherwise

would, because they are not allowed to scan their documents into emails.

So this, to satisfy the lawyers.

So now, we have the latest commandments from the lawyers.

Thou shalt not scan!

All the lawyer has to do is manufacture a victim that holds a patent

that describes what we all do every day.

Once he's done that, he just starts sending out the lawsuits,

to the best business places to work at in Atlanta, for example.

In the demand letter they actually showed a screen shot of my app.

And they referenced the hyperlink and they said,

"That is in violation of one or more other patents."

A hyperlink. You know, the thing you click on on the internet, that is basically

uh, the backbone of the world wide web.

That is not patentable and you should not be able to abuse the court systems

and drag small companies like mine on such a simple concept.

And... Here's the problem, is what do you do at that point?

So what do you do?

I'm being sued for something equally obvious.

What are my options?

It's very difficult to say what a company should do when when they're sued...

When they're sued by...

Particularly, say, a patent troll, because the choices are all... are all bad.

And so then he told me we had a couple of options,

and one of those options was to kind of settle out of court,

in which case, I would have to give up some type of royalty fee.

Or some type of payment.

Most companies have to settle because they can't afford expensive litigation

and those companies that do settle, it's like blood in the water.

Other patent trolls see that, they see that you're willing to pay

to get out of the lawsuit and they're gonna come knocking.

But when I got into the weeds and started talking to more lawyers,

I understand that, um, this is just what trolling is, and they sue a

bunch of players in the same day, and, you know, most of them advised me,

"Hey, this one you can settle, and most likely you can settle it,

for slightly less that it would take you to win in court."

The way this plays out for us is that, you know, we're not one of the companies

so big that they leave us alone 'cause they're afraid of our... our legal budget,

but we're not so small that they ignore us because they think we can't write a check.

We're right in the middle where, you know,

they know that we can't afford to keep fighting forever,

and I feel like they leverage that to try to get settlements out of us,

but in the next year we're still going to be a middle sized company,

and we're venture-backed so we're gonna continue to get hit,

and it's gonna continue to be draining for us.

And we went from never having had a patent lawsuit at all

to having one come up every couple months, what we call repeat business.

We started to get people who would come after us again and again and

when we saw that, we realized, this is just paying off the bully.

This is not something that will change.

Um, so... I actually went to mediation.

For the first time I met, uh, for the first time, the plaintiff.

I saw his face, and I met this person in front of kind of a federal mediator.

Um, the mediation wasn't a mediation at all.

Uh, I got into a room with my attorney and these guys made some more demands

and the demand was, "Look, we may or may not win this case",

we may or may not win this appeal, but what we are going to do,

as soon as this appeal is over, is we're going to sue you with a different patent

in our patent portfolio and we're gonna start this all over again.

And you're not gonna be able to... to fight,

"'Cause we know you're running out of money."

We're going to sue you with a different patent in our patent portfolio

and we're gonna start this all over again.

That scenario I tend to mitigate risk, as an ex-banker, an ex-pilot.

That... that scenario I didn't even see coming.

Why isn't the national media all over this?

Well, now it's time for our next step down the rabbit hole.

So, when these people settle, can I go ask them

all about the settlement to find out what happened to them?

You can ask what people settled for, but you generally won't get an answer.

So it turns out that, uh, when you settle as opposed to come to a trial judgment,

uh, the settlements have other terms in them,

and one of the terms is always non-disclosure, which means that, uh,

if I pay you to go away as a patent troll,

I'm not just paying you, I'm also giving you my silence.

They always ask for that.

Nine out of ten times, the first thing that the patent troll asks you to do

is to sign a non-disclosure agreement.

In my case, they would not even tell me which specific claims we

were infringing on unless I signed a non-disclosure agreement.

So we have been approached by numerous patent trolls in the past,

and unfortunately because I'm under a non-disclosure agreement,

I'm not allowed to really talk about the specifics or what happened.

The specifics of the lawsuit are...

Are covered in a non-disclosure agreement as part of the settlement agreement,

so I really shouldn't talk about anything specific like who's sued me,

how I was sued, or, the specifics of how I infringed

upon a patent that I really can't even talk about.

It was... I just don't want to talk about current things.

But I can talk about what generally I've been accused about.

Yeah, I... I... can mention that I am in ongoing cases, but we're

not gonna mention names, or we're not gonna mention... yeah.

What law firm was it that sued you?

Uh, I really can't say.

What was the name of this company?

I am not going to talk about that.

Who were the lawyers that were doing this?

I can't disclose that.

Uh, what... what truly makes me sad, uh,

is to think about the people who are silenced.

Silence is a part of the agreement.

Did this troll ever offer to settle with you?

Um, we did end up settling this case.

For how much.

We have not disclosed that.

-Are you allowed to disclose it? -No. - Why not?

I don't want to get into that.

Can we turn this off for a second?

Turn it off.

Tell me about the success that you've enjoyed

from the products you've brought to market.

I'm not able to discuss that.

Why?

Um...

Because sometimes...

Hold it a sec.

On, okay...

Can you tell me... They... they can actually, anyway...

Can you tell me... If anyone else has taken credit for your work?

It's probably better that I not discuss that.

They're not even allowed to tell anyone what happened to them.

And as a result, the problem can never be made public and solved.

What court would even allow this?

It's mostly in Texas, unfortunately.

There's one particular district, the eastern district of Texas,

that is perceived as being very favorable to patent owners,

and, uh, over a thousand patent troll lawsuits are filed there every year.

Why do they pick Texas?

It's a number of reasons.

The patent trolls pick Texas because they believe

that the juries there are friendly to patent owners.

They pick Texas because they believe that the local rules of practice

are favorable to patent owners and make defending a case very expensive.

And they pick Texas just because it's far away from a lot of the people getting sued

and that alone creates financial pressure,

because that's a distant and inconvenient forum.

So the place in Texas, is it like some place right inside of Dallas

where you come into DFW and get right to work defending ourselves?

The eastern district of Texas is to the east of Dallas

and the courthouses where most of the patent litigation are taking place

are in Marshall and Tyler which are smaller cities

uh, getting closer to the Louisiana border.

So tell me about the computer industry

that happens in Tyler, Texas and Marshall, Texas

that made them such a good venue for these lawsuits

where we know we can get knowledgeable juries.

The Tyler and Marshall, Texas are not, uh, centers

of the United States technology development.

They're... they're more known for the litigation itself

and, uh, they've actually created a large industry of litigation support,

and a lot of work for the lawyers there.

But, uh, I don't know if any large technology companies

that are actually creating products out of these cities.

Most of the time, particularly when you're dealing with these patent trolls,

you're not dealing with a real business.

You're dealing with something that is a post office box somewhere in Tyler, Texas.

We actually got sued again, this time from a non-practicing entity

out of east Texas, where they all come from.

The most shocking thing was... was finding out that there's a... The east district

uh, east Texas, uh, district court where a lot of patent cases are filed.

No businesses are located in east Texas, except patent trolls. Right?

Why? Because that jurisdiction is most sympathetic um, for patent trolls

and is very expensive for businesses to go and, uh, litigate there.

The... it's a cottage industry for the entire city,

so, all the jurors are corrupt.

You know, all the... All the people who work

for the courts are corrupted by this... this... This patent troll industry.

Could this even be true?

I quickly found a website that laid all the figures out,

and the statistics were staggering.

44% of all the patent infringement lawsuits in the entire country

are being filed in one tiny, isolated district of Texas.

And 95% of those cases are filed by non-practicing entities.

Companies that invent nothing.

They just file patent lawsuits.

Now I was on to something, I signed up for

an insider analytic site called Lex Machina,

and did a search of all the patent lawsuits being filed in the U.S.,

and I started to see something very peculiar.

The same name kept appearing on a huge percentage of these lawsuits:

William Elsworth Davis III.

His name is listed as a lawyer in 419 patent infringement lawsuits.

Another name kept coming up:

Thomas John Ward, Jr.

His name is listed as a lawyer in 725 patent infringement lawsuits.

So, well over a thousand cases were handled by two very busy lawyers

all in the eastern district of Texas.

It just doesn't seem possible somehow.

Then, I started looking to see what judges were handling these cases.

And that's when I saw it:

Judge Leonard Davis, and Judge John Ward?

Beau Davis is Judge Leonard Davis' son, Johnny Ward is Judge John Ward's son.

The lawyers are the sons of the judges.

So, if Judge Leonard Davis and John Ward can encourage more patent trolls

to file more lawsuits in the eastern district of Texas,

then their sons are the ones who will rack up the billable hours,

or perhaps, a percentage of the take.

Now, both Judge Leonard Davis and John Ward have just recently retired,

and they've gone to work for the very law firms

that represent the patent trolls and their victims.

Now that the eastern district of Texas has

been established as a patent trolling haven,

the judges are working at the law firms that handle the cases.

The odds of getting a case dismissed uh, early, on a rule 11 motion

or on summary judgment, almost impossible, to the point where

I think many defendants were counseled

by their other outside counsel to not even bother filing those.

You know, summary judgment motions because...

And the outside counsel again would...

Would say things like, "You don't wanna piss off the judge.

Because he's gonna get upset with you for filing this."

You know, why they do it, only they know.

It's between them and it's between god, right?

But, there are judges in east Texas that, um, you know, have...

They... they use discretion in certain circumstances that we've become aware of.

For example, where someone files a venue transfer motion.

If the judge denies the venue transfer motion,

there's a pretty darn good case that on appeal,

um, that... that judge will be overturned

by the fifth circuit or the federal circuit.

And so the way that the judge gets around, um,

being overturned is... He just doesn't rule on it.

He just will not rule on the venue transfer motion until right before trial.

And judges can take... There are some judges, like...

Like east... In east Texas, they continue to refuse to fee shift.

They essentially are, you know, a post... in the post-octane world,

half of all fee shifting cases have been granted.

Fee shifts have been granted.

In east Texas, since octane was... was, ah, was issued by the supreme court,

there have been zero fee shifts, until finally

it just got so damned egregious, right?

It finally got so egregious that people started filing what are called

writs of mandamus up to the fifth circuit and up to the federal circuit.

But there are companies, right, that at the end of the day,

either because they've been victimized so many times

or because the companies have principles, they realize somebody's gotta do it.

Someone's gotta do it, and if we don't do it,

if people don't complain and start building up a record, of abuse...

Of just wrong-doing, or abuse. Yeah, it's not wrong.

It's technically not wrong, but certainly abuse... This'll just continue forever.

So the judges never toss out patent trolling lawsuits,

no matter how ridiculous the claims.

The judges never grant your motion for a change of venue,

no matter what state you live in.

The judges never make the patent trolls pay your legal fees,

no matter how asinine the lawsuit.

The lawyer advises you to not even ask for

these things because it might anger the judge.

And this is a venue where I'm being sued?

Shakespeare said, "There's something rotten in Denmark,"

I say, what the heck is going on in Texas?

Armed with the first 55 patent infringement lawsuits I could find

in Marshall, Tyler, and Longview, all in the eastern district of Texas,

off I went to the address of every company on that list.

First stop, Marshall, Texas.

Of course, I imagined Marshall to be a thriving business community.

I mean, with all these big tech companies, lawyers, and courts,

their airport was sure to be busy and bustling with lots of air traffic, right?

Here's the wi-lan office, uh, as far as I can tell.

So we can come and see... why don't we bring the camera around,

and see what's... See what's, uh, going on in this office here.

This is, uh, just a few days after they received $33 million for patents,

and, uh, this is in the middle of the day on a Thursday.

Let's keep going.

Here we have Perdiemco, uh, Perdiemco filed a patent infringement lawsuit.

Hello?

Hello?

We'll keep walking. If they come out, we'll... Go talk to them.

This is the office, uh, listed for a company called Lodsys,

uh, and if anybody wants to travel to Marshall, Texas

and see it for themselves, we're at 505 East Travis street.

Lodsys is well known as being one of the biggest patent desertion

entities in the world, uh, they sue a lot people for patent infringement.

This is their address.

Hello?

And they claim to be from, um, Marshall, Texas, where we are now.

Let's keep walking.

Here, we have, uh, a company called Packet Intelligence,

they have filed, uh, two lawsuits for patent infringement.

Hello?

We've been walking up and down these halls for

about 25 minutes now looking for, uh, for anyone.

And, uh, no one's been here.

But a large number of patent infringement lawsuits come out of this hallway.

Well, I guess we'll go to the next address.

It's been empty for... We looked at that space, 'cause when we moved in here.

-Mm-hmm. -It's been empty.

No one's in their office today.

No one's in there today?

-Nope. -Oh.

Hm, maybe knock on the door?

No one's down there.

This is the address, uh, used for a lawsuit

for patent infringement that Follycode filed.

How about Lake Cherokee Hard Drive, can we see them?

Uh, no, this is just the accounting firm, we do the...

Oh I see... what about Blue Bonnet Telecommunications?

-Same thing. -What about Star Code I.E.D. Technologies?

They're all the same.

Oh, they're not actually here.

The only entity here is A&G LLP.

Are these companies here?

Um, I serve as a registered agent for them.

I see.

They are located in east Texas.

Can you say where?

Uh...

When I went up to suite 1504,

I saw a company called Collins Investigations.

You see, these companies are filling lawsuits

that cost $3 million to defend against,

and they're all based right here in your office that's about 15 feet wide.

What's going on?

And he said, "Well, patents are property just like

anything else, and I have no further comment."

And that's when they, uh, showed me the door,

uh, and closed the door in my face, and this is the next thing I saw.

"Baxter Building, Law Offices," on the door.

The address for many many companies that file patent infringement lawsuits.

The baxter building law offices, 104 East Houston Street.

Mckool Smith, sounds like a law firm.

Mckool Smith.

Empty, nothing there.

Leggat Hagan, whatever that is.

East Texas Boot Company, gotta see who they are.

So, We're here at 211 West Tyler, - -On... it's a...

An address that a lot of lawsuits come from.

There doesn't seem to be anybody here.

So, uh, this company's been suing, uh, Intel, Dell, HP.

Yet, as far as what they produce, well, their office is kind of this...

Kind of run-down place with blackout shades and curtain behind it.

When I look up Aloft Media, "Aloft Media sues 10 COS. Over weather patent."

"Aloft Media sues s.A.P. Over messaging patent."

"Aloft Media LLC versus Yahoo."

"Adobe, Microsoft, accused of infringing on browser-related patents."

If you're wondering where these patent infringement lawsuits

are coming from, if it's from Aloft, or Stragent, or Azure, this is it.

So, uh... I guess this is, uh, I guess this is, uh, innovation,

American innovation, yeah.

55 addresses, each one a so-called business

that was spewing out nothing but patent infringement lawsuits.

Almost every office was deserted or registered agent,

or in one case, a mailbox at a UPS store.

But the businesses claimed in the lawsuits did not even exist.

And the lawsuits just keep on coming.

The people behind the curtain do not want to be discovered.

You know who they are?

No.

But there has to be.

Some way we can find someone on the inside.

Someone that's a real... Patent troll.

There was the famous case of the scanner troll, who sent thousands of letters

to small businesses demanding payment for companies that used scan to email.

No, no, we all ready know who that guy is.

That's Steven Hill. Next.

There was a patent troll that sent thousands of letters to cafes and hotels,

and a bakery, and a funeral parlor,

Demanding payment just for providing wi-fi.

Ah. I don't know about that one.

Let's see, patent troll says.

ANYONE USING Wi-Fi INFRINGES ON HIS PATENT.

He won't sue individuals at this stage.

The guy behind this?

A lawyer, named Raymond Niro.

A real life patent troll in chicago.

I gotta see this for myself.

I am the person that was involved in the whole business of what a patent troll is.

Patents are property.

They're issued by the government, after an examination.

And then a court looks at them and says they're good or bad.

If I have a patent for wi-fi, that's specific, and is useful and novel,

then yeah, it's my property.

And if you infringe it, you have to pay me a license fee.

But I would wanna look more carefully at what somebody's telling you,

that they were abused by somebody that sent them a letter

and they went out of business because of it, because I'm not buying that.

You come to me and say, "mister Niro, there

are a bunch of people that are using my idea.

Can you help me?"

I say, "Sure, I'll try to help you, license your patent".

I go talk to them.

I say, "Listen, you're using this guy's invention.

You gotta pay them a royalty."

"No, I'm not gonna pay him."

What do we do?

I go to you and I say, "What do you want to do?"

You say, you know, "I wanna stop them."

I want them to pay me.

They're stealing my property.

They came to my house and took my goods.

They went on my farm and took my animals.

They infringed my patent.

"They took my property."

I say, "Okay, I'll help you."

If it's meritorious, I'll help you.

Is there something wrong with that?

Is that un-american?

Is that wrong? I don't get it.

You know, I tell juries in closing argument,

I say, a patent is sorta like having a property, and you build a flower patch.

My wife loves flowers. I build a flower patch in my front yard.

Beautiful flowers.

Maybe even I commercialize it, but I don't have to commercialize it,

I don't have to have a nursery, and sell them.

And beautiful... It's my property, I paid for it. I grow the flowers.

And some guy comes along and walks right through it.

Crushes the flowers.

Puts a path right down the middle.

What am I supposed to say?

"Oh, that's great? It's okay.

You can trespass on my property?"

No, you say, "I don't want you to do that."

That's a patent lawsuit. That's patent infringement.

You have trespassed on my property, and all I'm asking you, to do two things.

Stop doing it, and pay me for the compensation,

for replanting the flowers that you just destroyed.

Is that bad? Is that evil?

Is that wrong? I don't think so.

I'd like to have somebody show me the

statistics on how often this doomsday scenario

that you guys seem to be portraying really happens.

How frequently is a company run out of business

'cause of a patent infringement lawsuit?

You know what, I'll bet you can't find a hundred cases like that.

And if you can find a hundred cases like that, then let congress take care of it.

But 1,000? 2,000? Never happens.

Show me the statistics that this type of abuse of process,

has driven a thousand companies out of business.

Show me that. If you can show me that, get the thousand people, line 'em up,

and have them sign an affidavit.

"I was driven out of business 'cause of a patent

infringement suit that cost me $3 million."

You know what? I don't think you can get a thousand. I don't think you can get 500.

I don't even think you can get 100. But I challenge you to do it.

You can't do it because people that are

sued are locked up in their non-disclosure agreements.

They're not allowed to talk about what happened to them.

That's why you can't get a thousand people.

Nonsense. They can talk about it.

...Because they are forced to settle because the alternative was to...

Who? Who was forced to settle? Who?

The people that signed the non-disclosure agreement.

Who are the people? Who are the people?

Identify the people. Give me the list. Give me their names.

Give me their addresses. Give me the lawsuit.

You know what? You can't do it.

You know why you can't do it? You bought into the propaganda.

-You know what? You can't do it. -You know why you can't do it?

You bought into the propaganda.

If McKool Smith and other firms of significance stopped taking patent cases,

where are the people that have meritorious inventions, where

where are they gonna go?

Whoa! Stop, stop, stop.

Time out. McKool Smith, McKool Smith I know that name.

Where have I heard that name?

That's right.

There were McKool Smith signs all over that patent troll hive in Texas

that spat out all those lawsuits from those abandoned office buildings.

Of course Raymond Niro knows who McKool Smith is.

The deeper I dug, the more I realized that this network of greed was interconnected.

And there's something interesting about this address too, by the way.

McKool Smith's own office,

which we have now confirmed is actually just a patent troll hive,

is across the street from the courthouse where the patent troll cases are tried.

Where we find Jellyfish Technology of Texas, in Motion LLC, Arksar LLC

Marshall Feature Recognition LLC, Hopewell Culture Design...

Weiland Technologies, Specialized Monitoring Solutions LLC,

they're all at 104 East Houston street.

On all these companies, they've all filed patent infringement lawsuits,

and they're all at the exact same address.

What is that address?

Well, here we are at the courthouse, look across the street,

and we see 104 East Houston street

if the judges and juries hearing these patent infringement lawsuits

wanted to find out what "business" were filing these lawsuits,

they would have to walk about 50 yards.

The juries would have to walk about 50 yards

to see that the lawsuits that they're hearing

are coming from abandoned offices across the street.

And the lawyers and judges in east Texas are dragging these lawsuits out for years.

So Kevin said these people are all corrupt.

That is a heck of a charge.

But, we've seen these trials being held across the street

from the patent troll hives that spew out the lawsuits.

Where the juries would have to walk about 50 yards

to see that the businesses filing the lawsuits don't even exist.

We've seen the judges that never toss out these lawsuits,

no matter how asinine they are, while their sons are racking up

the billable hours representing the trolls and their victims.

We've seen manufactured victims,

clearly empty companies that could not be hurt in any way,

by the rest of us working for a living.

But is it always this way?

Could it ever be that a lawyer might actually find someone

that believes he's the first person to think of some obvious idea?

Well, you remember our friend, Mike Skelps?

He makes a living by going to marathon races

and photographing all the marathon runners.

When he's done photographing the race,

he uploads each runner's picture to his website,

so you can look up the pictures by the bib number.

You know, the number on the marathon runner.

Needless to say, Mike was sued for patent infringement, and the guy that sued him,

claimed to own the idea of looking up a marathon runner's picture

by the number on his chest.

Who would take out such a ridiculous patent?

Meet Peter Wolf.

The essence of the patent was to allow people to search for their pictures,

event pictures, of... of marathon runners, or... or triathletes.

Uh, to allow them to search by bib numbers using a computer system.

Marathon photos started their business their business in the mid '70s,

so that had been around for a long time.

Uh, what I came up with in 1999 involved doing it on the internet.

It's a method of doing business.

And what is the method?

The method is to allow people to order the

pictures online, as opposed to the other method

of going through the postal office and sending letters back and forth.

The difference is I'm not sure if I can even explain it.

It's... More... For attorneys to hover over and recognize the difference.

You know, I'm fairly lay at this, but uh... So in 2006, when the patent issued.

I thought I was home free.

I ended up contacting some attorneys and asked them what we could do.

Uh, they said, "well, we can sue them."

When we filed a claim against mister Skelps,

it forced him to hire attorneys here in California,

and I used my existing California attorneys, uh, to, uh, fight the battle,

the legal battle of proving that he was indeed infringing on the patents.

If the patent is presumed valid, and they don't adhere by it

they run the risk of being punished.

And then my attorney would have to respond, uh, and this gets very legal.

And, you know, I had no qualms about it.

I, uh, I felt somewhat sorry for mister.

Skelps, uh, uh, What's his name?

-Mike Skelps. -Mike Skelps, yeah, mister Skelps.

-Uh... -Why do you feel sorry for him?

Because I think he spent an awful lot of money uh, trying to fight,

when we could have sat down and resolved these issues, uh, rather reasonably.

-How... how reasonably? -What do you mean by "rather reasonably"?

Uh, I mean, I don't want to go into the monetary, uh, situation,

but I have probably about a dozen licensees or had a dozen licensees

that just came and we reached a reasonable agreement, that did not impose, um...

hardship on them in any way.

And they simply paid me a small royalty, a reasonable royalty.

Gosh, I just can't imagine imagine the $300,000 settlement offer,

the requirement to make the lawsuit stop, represents their not

wanting to be a burden on somebody that's making $30,000 a year.

Quite frankly, I think the lawyers that negotiated for me,

you know, they were shooting high, willing to settle for a lot less.

Um, what Mr. Skelps...

Now they were putting hundreds of thousands of dollars into this,

to file all the necessary paperwork.

So those lawyers wanted to get something out again.

And that's usually the consequence once a lawsuit is filed.

Is... is he a patent attorney?

Is... does he represent the United States patent office?

Once the patent office issues a patent, that patent is presumed valid.

Okay? Unless it is proven invalid.

The patent is presumed valid, just like a person is presumed innocent,

a patent is presumed valid if it is issued by the United States patent office.

Who is he to say that it is not valid?

When the patents were overturned,

did you return any of the money to the people that, uh, had to pay you?

No, typically in a license agreement, you explicitly say that any money

that has been paid is non-refundable.

The agreements that we wrote were... Involved non-disclosure agreements

and they... they were also confidential.

I have a... quite a few patents.

I wanted to know, what makes a good event photograph?

Is it important to photograph the entire body, or just the chest up?

Or, get the face?

Most people like to see their face.

One of the answers that I got was that a good event photograph includes,

for runners at least, to show the legs.

That's the most important part.

Because they run with the legs.

Whereas before, I was taking pictures of the chest and up,

so, now, it became obvious to me that, uh, getting their legs in the picture

would be of value.

We came up with the idea of putting an advertisement into the photograph,

branding and advertising into the photograph,

and getting paid by the advertiser,

and giving the pictures away for free to the, uh, participants.

Huh.

That's fascinating.

If you leave out garbage, you're gonna get cockroaches.

If you leave out garbage patents, you're gonna get patent trolls.

So, the question we should all be asking is,

who keeps approving the garbage patents?

I'm Robert Williams, I'm an attorney, formerly a patent examiner.

How much time does a patent examiner give to a patent?

Okay, the, uh, quota that each examiner has to meet under

the count system is a certain number of counts per week.

Uh... uh, an examiner at a high level will only have about four hours to...

Per each count that they have to get within that quota system.

So, of course when I hear that, what I hear is,

an examiner has four hours to decide if a patent is valid.

Mm-hmm.

I've currently been in litigation over someone

that's suing me for patent infringement now for three years.

And this three-year absurdity of a lawsuit

was started by somebody that had only had four hours.

Mm-hmm.

To pop the patent out of... out of his office with an approval.

Doesn't that seem crazy?

That someone is only allocated four hours to approve a patent

that could then result in years and years and years of litigation?

I do think that time is one of the challenges that the USPTO is facing

in terms of allowing the examiners adequate time to do an in-depth search,

and to prepare a detailed office action that prevents

that presents the most salient issues into the record and, um, you know, first,

to just identify that best evidence, but also to consider

and apply the best available evidence to make that,

um, prosecution as... as short and effective as possible.

The examiner is primarily gonna look at previous

patents applications, or previously-issued patents.

Primary body of knowledge that the patent examiners draw from

is actually what's already been patented.

The applicant is essentially given the benefit of the doubt that they are

in fact the inventor and that their invention is new and not obviousness.

The way the statutes are written, section 102,

103, is that it defaults to a patent being allowed.

It says that an inventor shall be entitled to a patent.

Again, the default position is that it is patentable.

Of the IPR's that go through the full process and reach a final decision

on the merits, roughly 75% or more, uh, were completely invalidated.

So why were they approved in the first place?

The only answer I can give as to why

those patents were approved in the first place

is because the examiner decided, based on the evidence

that was available to him or her at the time,

that that application merited being allowed as a patent.

You're gonna have to forgive me for asking here,

uh, "method of swinging on a swing."

Mm-hmm.

This was approved November...

-Priority date, November 17, 2000. -Mm-hmm.

Have you seen this one before?

You know, I think this probably is an... an example

of a limitation of the evidence that was available.

People may have used that method of swinging on a swing

prior to the putative invention date but there's no documentary evidence of it

and so if you have to act based on evidence and there's no evidence

available to contradict it then legally we're kind of stuck.

So, there was no evidence that

anyone had swung on a swing sideways before,

and since there was no evidence of that, the patent had to be approved.

Um, that's the only conclusion that I can draw but I don't know

specifically what went on during the prosecution of this patent.

Uh, in 1999, no one had ever thought

of a stick that a dog could fetch before.

How could that be approved?

Uh, again, I... that... I guess that does seem obvious

certainly applying our common sense test for obviousness,

um, I've... can only... I don't know what evidence the examiner had access to

and what was in that record when that application was examined

but apparently the examiner concluded based

on that record that it was in fact patentable.

Sorry, Daisy, you can't have it.

So, apparently you can own an idea, no matter how obvious,

if you can just convince the United States Patent Office

that it's never been patented before.

So, let's summarize how patent trolling works.

In the movie, "The Big Short", Margot Robbie, in a bubble bath,

apparently naked, explained how the home mortgage fraud was committed by the banks.

Now I'd love to hire her to explain how patent

trolling works as well, but I can't afford her.

But, I did manage to get us a plumber from New Jersey.

Let me tell you how to become a patent troll.

First, take out a stupid patent.

It don't matter how stupid it is, believe me.

Two, form a dummy corporation in east Texas.

That's the best place to sue people from, 'cause the judges are... How do you say?

Sympathetic to your cause, if you know what I mean.

Three, rent an abandoned office building as an address for your fake business.

Let me know, I might be able to help you with that.

Four, find victims that are too small to defend themselves,

but not too small that they don't have no money.

Five, now you sue them.

Six, use some dummy name on the lawsuit.

You don't want no one to know who you are.

Only lawyers need to use their real name.

Seven, offer an average settlement of let's say, uh, $340,000.

Make sure to call it a licensing fee.

Eight, force your victim to sign a non-disclosure agreement,

so they can't say what you did to them.

Nine, just sit back and watch your buddies,

the east Texas judges, refuse to toss out the case,

'cause their sons get to take the cases on both sides.

It's perfect.

Ten, use the money you just made to repeat the steps one through nine, forever.

I'm done.

You've seen how this affects me and many other

small business owners all over the world.

But how does patent trolling leak into your life?

Well, here's a recent patent, it's for a communication device,

capable of being used for voice communication.

Yup.

It's a patent for the telephone.

And it was a approved by the United States Patent Office on August 17 of 2010.

Yup, the United States Patent Office approved a

patent for the telephone on August 17 of 2010.

And here's a little glance at the details of this patent.

Dial.

Connected.

Send.

Over?

Disconnect.

End.

Yes, that's in the patent:

How to use a phone.

The patent trolls have now patented how to use a telephone so they're suing Apple.

Here's the lawsuit:

Apple's accused iphones are capable of being used for voice communication.

Apple's accused iphones have two cameras.

Apple's accused iphones have a camera and a display on the same side of the phone.

Apple's accused iphones have a camera located

on the side of the iphone that is opposite the display.

Apple's accused iphone is capable of displaying its location on its display.

Apple's accused iphones are wireless communication devices.

The "664" patent is presumed valid.

So now, of course, Apple's having to pay huge legal

costs in defending themselves in court, fees, obviously,

that are passed on to you and me every time we buy an iphone.

No wonder these Apple devices are so expensive.

We're paying off the patent trolls.

But I have a Samsung Galaxy.

Oh, John, they're suing Samsung too.

Oh.

Hmm.

Of course they're suing Samsung.

Of course they're suing all of us.

They're patent trolls.

Now, who would file such an asinine lawsuit?

Well, in this case, it's a company called.

Corydoras Technologies, LLC.

You all ready know they're a shell company designed to hide whoever's behind it.

But every lawsuit lists the lawyers that are filing it

so the victims can call the lawyers to offer their settlement.

We can find out who the lawyers are every time.

So, what lawyers would ever press such a case against, effectively, all of us?

The answer is, these lawyers.

These ones, right here.

And notice, they're all from Texas.

Hmm. What a coincidence.

So, these people are effectively suing all of us for using cell phones.

I had to give them a call and ask why.

-This is Betty. -Yeah, Elizabeth Derieux please.

It's me.

Hey, um, this is Austin Meyers speaking, I am looking at a lawsuit, um,

of, uh, Corydoras Technologies versus Apple...

-Uh-huh. -...Where apparently Corydoras

uh, claims to own the idea of a communications device

capable of being used for voice communication.

Am I understanding that right?

Does Corydoras own the patent for a communications

device used for voice communication?

-I represent Corydoras... -Uh-huh.

-...In that matter. -Uh-huh.

And I... I'm not sure

like, are you connected with Corydoras in some way?

I just have not met you and... No, I'm not connected with Corydoras, no.

Okay?

So, does Corydoras own the idea of using a, uh...

A device capable of being used for voice communication?

Corydoras owns the patent that's asserted in the litigation, yes.

And does that patent claim to own a...

A device capable of being used for voice communication

as stated in your lawsuit, paragraph 16?

I'm just not sure what you're asking me, I.

I'm asking... What I'm asking...

Yeah sure, I'd be happy to be more clear about my question, certainly.

I'm asking if Corydoras owns the idea of a device being used for voice communication.

Because that's... that's what you state in your lawsuit,

with your signature at the bottom.

And so I'm wondering if you actually believe that.

I'm happy to call you back at a...

At a time when I have a little more time to discuss this.

So right now, you're not able to tell me whether

-whether this... This company owns... -You know what?

I mean, I don't even know who you are, and I'm not sure exactly what you're asking.

If you're asking... if you're just reading the complaint,

I don't have the file in front of me...

I... I am reading the complaint, yes...

If you're just reading the complaint, Yeah.

The answer is that the matters asserted in the complaint are accurate

to the best of my knowledge at this time.

The language in the complaint is accurate.

Polasek, Quisenberry & Errington.

Yes, John Polasek, please.

May I have your name?

Sure, Austin Meyer.

-Please hold. -Mm-hmm.

Hi, Mr. Meyer, may I ask what this call is in regards to?

Uh, yes, this is with regards to, uh,

patent infringement suit between Corydoras and Apple computer.

Okay, well, Mr. Polasek is not in.

Would you like to leave a message for him?

Hello?

Yeah, Ottis Carroll please.

Uh, this is he.

Hi, this is Austin Meyer speaking.

I'm looking at a, uh, lawsuit, filed against, uh, Apple computer,

a patent infringement lawsuit,

um, on behalf of a company called Corydoras Technologies, LLC.

And I notice in this lawsuit that you claim, that, uh,

Corydoras, LLC, owns the idea of a communication device

that is capable of being used for voice communication,

or at least it would seem by my reading of the lawsuit.

Am I misunderstanding something about that lawsuit?

Uh, you know what? You might not be, but you're talking to the wrong guy.

You need to call a patent lawyer who's involved in it.

I need to call who? I'm sorry.

Uh, you need to call...

There's another lawyer listed, one of the patent lawyers, give him a call.

-Uh, John Polasek? -Yeah, give him a call.

I'm just curious, why is your name on the lawsuit

if you're not the right person to talk to about said lawsuit?

Well, you know what?

I don't have any reason to talk to you right now.

Okay, I think everyone in the room understands patent trolling now.

But does the federal government understand it?

When, uh, someone asserts a claim that's not valid, that's called patent trolling.

And when they do that, they are threatening a business,

usually a business, sometimes it's an individual, with, uh, enormous costs.

Uh, litigation costs, uh, costs of having to pay damages in the claim.

Then what they're effectively doing is keeping

good products from getting to the marketplace,

extorting money from legitimate businesses,

and stifling new start-up businesses.

Okay, so they know about it.

Good.

Well it takes a lot of things for a bill to become a law,

and so, even though this got the overwhelming support

of the house, and was voted very strongly out of there,

uh, there... it never made it out of committee

in the senate side because, um, Harry Reid reportedly said, "Over my dead body"

that this would actually um, you know, discussed,

and that was because of his support from the trial lawyers.

Um...

Uh, okay. Um... That would've been really good footage.

It makes me wanna strangle Harry Reid.

Yeah, I mean, you might wanna... You can say... reportedly.

-I don't know if that... -You said "reportedly."

-I did? Okay. All right. Good. -Um.

Oh, so close!

They know about patent trolling, but they just don't care.

They're siding with the trial lawyers, and hanging the rest of us out to dry.

Of course, most lawmakers are lawyers,

so maybe that shouldn't have surprised me at all.

So many software developers out there who have been shut down,

their apps have been pulled out the stores,

their websites have been shut down, or, they simply settle, and they pay,

and it's just lining the pockets of these patent holders who

aren't really doing anything with that intellectual property.

So, I think it's just like a... Like a... a...

It's an extra tax on our skill, on our craft.

And is the tax decided by the... the government and the voters?

No.

Who decides the tax?

The lawyers.

Everyone should be concerned about this.

This is a $80 billion tax.

Right?

Because they sue everybody and at the end of

the day all these costs show up in two forms:

One, good companies go out of business because they can't afford it,

so the consumer misses some great product or

service, or it gets passed on in increased...

Increased cost of goods, you know, so, it's

gonna cost the consumer at the end of the day.

Who's getting rich?

Once again, it's the lawyers.

Yeah.

Imagine if you wrote a book, and we had patents on books, and you had one guy

who got the patent to write books about whales, and he was the only guy,

and then you wanted to write a book about whales.

You'd have to go to Fred, who has the patent on whales, and get his permission,

maybe a license agreement, so that you too could write about that topic.

Doesn't that sound ridiculous?

Well, that's exactly what's going on in software, today.

That's how ridiculous it is.

And that's why it needs to be fixed.

Why don't we make software copywriteable, instead of patentable? And if we did that,

I think that would be a huge step forward.

I'm sorry, but any time I see a method of accomplishing blah, blah, blah, blah,

that scares the hell out of me.

It really, really does, because that's not patenting a physical device.

You know, like this microphone that's in front of me.

That is a physical design that does a specific thing.

That I believe is patentable.

But the method of accomplishing a task is ridiculous to me.

But there's so many of those method patents that are out there now

that you can't even run a simple website without getting popped.

It hurts innovation in a very,

very tangible and real sense because when a startup...

And there are numerous stories of startups, basically in the app space

or people who simply just produce podcasts, right?

Getting the threat letters, saying, "We will sue you because of",

for example, not because you produced a podcast,

but because of the way you're loading it onto Apple itunes

or something like that, something stupid like that.

Can you imagine the world we've been in right now,

if steve jobs, right out of college was just...

Was slided with IPK's That he couldn't get out of?

If Newegg software coders had gotten

this legal letter in 2001, saying, "if you program a shopping cart".

"You... you have to give us 1% of your revenue, forever," right?

Newegg wouldn't exist today, right? What a complete joke.

If we had gotten our lawsuit the same day we launched,

we would have to shut down immediately. That would have been it.

I would have been really angry about it,

but I would have had no resources to fight it at that point

or no idea whether or not I infringed and so I would have just walked away.

So the cost of this abuse is literally incalculable.

There are certain areas that are notoriously patent troll bait,

and I've had people say,

"I'm not gonna create a business there because there are too many patent trolls."

That's a loss for us in society.

That's a loss for the country.

It's hampering innovation because

people are afraid to write software because,

boy, somebody else must have some similar idea to that,

and sure enough, you can almost guarantee that there's some patent somewhere

that... somehow, any piece of software is gonna infringe on.

Yeah, it's absolutely impossible to tell

if you're about to be sued for patent infringement.

Why not start all over and just write a new app right now?

Wow.

I would love to write a new app. I really would.

But, there's also the fear of being sued again by something else.

I feel that the risk is too great for a small guy like me,

with no venture backing,

with no money in the bank to just try to start all over again.

This is not what the american dream is all about.

This is not why people start companies.

This is not the kind of attitude that makes people want to go build new things.

That's the challenge that... That entrepreneurs face,

and I thought that the american dream was something much different than that.

It just baffles me that this industry exists, it's allowed to exist

and that we have agencies, government agencies that... That get fat off it.

Someone needs to bring it down.

And now, here's how you fix it:

This is so easy to fix, it's ridiculous.

First of all, no more method patents.

Method patents are stupid.

It's just somebody writing down the steps he takes to do something.

No more software patents.

We have copyright for software.

You don't need to patent the whole damn idea.

No more 20-year duration.

Patents last 20 years because it took 20 years to recoup your investment

in the steam age!

Does it take 20 years for a product to go through its lifecycle today?

It's ridiculous.

Patents should obviously last about five years at the most.

You should file your lawsuits in the defendant's district, not east texas.

You wanna go sue someone?

Fine, go sue 'em.

Don't drag 'em to your abandoned office building in texas.

Trolls should reveal who they are, not hide behind dummy corporations.

How do you justify suing somebody when you're

afraid to even let anybody know who you are?

Don't sue someone just for using technology,

sue the person that claims to have invented it.

You can't just sue everyone that uses the Google store.

Don't sue someone if you make more money suing people than making things.

Of course that just sets the stage for patent trolls.

Do all these things now and we'll solve

the patent trolling problem for the future.

It's a snap.

And none of these things will cost any money to do.

In fact, it'll save taxpayer dollars because we won't have all

these expensive lawsuits gumming up the federal court system.

We don't have to throw money at this problem.

We just have to close the loopholes that the government left open.

That's it.