All language subtitles for The.Patent.Scam.2017.1080p.WEBRip.x264.AAC-[YTS.MX].eng

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.