Cross-posted at Forbes.com’s “On the Docket”
Is a patent troll toll built into the .99 ¢ or $1.29 you pay for a song online?
The troll responsible for this toll, unlike the cranky but harmless Dora the Explorer character depicted to the left, is an actual company, Sharing Sound, which holds an actual, government-approved patent. Improbably issued in 2001, Sharing Sound’s absurdly broad patent covers “distribution of musical products by a web site vendor over the internet.” Instead of creating a product or service with the patent, Sharing Sound lied in wait and finally this past May filed patent infringement lawsuits in the U.S. District Court for the Eastern District of Texas against Apple, Sony, Microsoft, Rhapsody, Brilliant Digital Entertainment (BDE) and Napster, and separately also sued Amazon, Netflix, Barnes and Noble, Wal-Mart, and GameStop. The patent (here is a good summary of it) essentially describes how these companies sell music online. Other than BDE, all of the companies have reportedly settled, the latest being Apple and Rhapsody.
Sharing Sound’s patent, and the litigation arising from it, are a sad commentary on the quality of federal patent examination. As one commentator noted, online selling of digital goods was well underway before the Patent Office issued the Sharing Sound patent.
Although the terms of the settlements remain private, Sharing Sound no doubt kept its monetary demand below the defendants’ anticipated cost of litigation. Is such a “feeding the troll” strategy viable, however, in the long term? As Winston & Strawn attorneys Gene Schaerr and Jacob Loshin argued rather convincingly in a September 22 Washington Legal Foundation Web Seminar, the risk-benefit analysis on litigating vs. settling more often comes out on the side of fighting patent trolls.