Project4 3/10/06 9:52 AM Page 1 History of the Patent Troll and Lessons Learned By Robert H. Resis, Esq. The activities of today’s patent trolls have Eli Whitney—the First Patent Troll? Thomas Jefferson in a patent application. attracted the serious attention of U.S. Eli Whitney’s cotton gin (short for engine) Jefferson replied on November 16 that “the business,1 and for good reason. The invention provided the means for produc- only requisite of the law now uncomplied majority of today’s patent infringement tion of cotton to go from one pound of with is the forwarding a model, which 2 cases are filed by a patent troll —that is, cotton per day per worker to 50 pounds of being received, your patent may be made one whose only “business” is to generate cotton per day per worker.6 Whitney, how- out & delivered to your order immediately.” maximum patent licensing revenue via lit- ever, did not enjoy the commercial suc- In February of 1794, Whitney completed igation or the threat of litigation and who cess of his patented invention. Indeed, his the model to his satisfaction, and in March has no need for a cross-license. Additional- company, which made the patented cotton he took it to Philadelphia to demonstrate it ly, the Federal Circuit recently held that a gins, went out of business within three in Jefferson’s office in order to receive his 11 patent troll was entitled to a permanent years of the issuance of his patent. patent. The patent that Jefferson had injunction on a business-method patent Whitney was subsequently reduced to approved November of 1793 was issued to 12 because there is “no reason to depart from suing plantation owners in the South over Whitney on March 14, 1794. the general rule that district courts will the course of many years.7 As such, By the time of patent issuance, word issue permanent injunctions against patent Whitney can be fairly identified as per- had spread throughout the South of infringement absent exceptional circum- haps the first patent troll in our nation’s Whitney’s invention. Planters were quickly 3 stances.” In 2006, it is expected that the history, even though he started out as a planting green seed cotton in vast amounts. Supreme Court will decide whether the manufacturer of his patented device. Whitney set up his company in the North 4 Federal Circuit is correct. Whitney had mechanical talent. For to make his invention, and his partner, Today’s news accounts and court deci- example, he made nails from a machine Miller, was to oversee the installation and sions involving patent trolls highlight the he built himself. Starting college late in use of and payment of royalties generated shift in the nature of the typical patent life, Whitney graduated from Yale in 1792 by the patented cotton gins in the South. infringement suit from those filed around at the age of 27. With no U.S. industry Within a short time after Whitney’s inven- 20 years ago. At the start of the Federal that suited his mechanical talents, tion in 1793, U.S. exports of cotton rose Circuit in the early 1980s, most patent Whitney accepted a position to tutor in from 0.14 million pounds per year (in infringement suits typically involved a 1792) to 17 million pounds per year (in South Carolina. Upon arrival, he discov- 13 patent owner/exclusive licensee who was ered that his promised salary would be 1800). Whitney, however, did not enjoy actively engaged in making and selling a halved. Whitney refused the position and the great commercial success provided by patented product or a product made using a his patented cotton gin because: 5 rather than return to the North, he accept- patented apparatus or method. An exam- ed an invitation from the widow of • His invention was easy to copy ple of the typical infringement suit of its Revolutionary general Nathanial Greene • His demand of one-third of the sales day is Motorola v. Hitachi, 750 F. Supp. to stay at her plantation and assist her revenue of cotton processed using his 1319 (W.D. Tex. 1990) (holding certain manager, Phineas Miller.8 patented cotton gin was much greater products were not covered under a 1986 At the Greene plantation, Whitney than cotton planters were willing to pay patent license agreement and that both par- learned that the only variety of cotton that • His company was unable to meet ties’ patents were valid and infringed). would grow away from a coastline was a demand, experienced a fire, and went While there has been a dramatic per- green seed variety.9 Ten hours of painstak- out of business in 1797 centage increase in the number of patent ing handwork was needed to separate one • infringement suits brought by patent He was required to file suits in the pound of cotton from a few pounds of the South, and Southern courts were not trolls, it would be incorrect to assume that 10 small green seeds. Whitney set out to willing to give him speedy justice today’s patent troll is a totally new phe- make a machine that would greatly When Congress refused to renew nomenon. Patent trolls have been around increase production. He studied the hand since the start of the U.S. patent system. Whitney’s patent, which expired in 1807, movements of workers, and within days he Whitney concluded that “an invention can Indeed, some of the most high profile built a model that separated the cotton inventions in the United States precipitat- be so valuable as to be worthless to the from the seeds. inventor.”14 The money Whitney eventual- ed patent troll suits. A review of several In October of 1793, after perfecting patent troll cases involving high profile ly received for use of his patented inven- his machine, Whitney sent a drawing of tion went to cover his attorney fees and inventions provides valuable lessons for his new invention to Secretary of State today’s patent trolls and their targets. other expenses, and he was penniless after Number 2 • Volume 17 • Winter 2006 • American Bar Association • Intellectual Property Litigation • 1 “History of the Patent Troll and Lessons Learned” by Robert H. Resis, Esq., published in Intellectual Property Litigation, Volume 17, No.2, Winterl 2006 © 2006 by the American Bar Association. Reproduced by permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Project4 3/10/06 9:52 AM Page 2 spending about 10 years in court.15 gas engine of the compression type, experiments, certainly, and invention, not The lesson learned from Whitney’s comprising one or more power cylin- improbably, would have been necessary patent experience: ders, a suitable liquid-fuel receptacle, a to determine the steps required to reor- Pigs Get Fat, but Hogs Get Slaughtered. power shaft connected with and ganize the Otto engine. arranged to run faster than the propelling Whitney should have been more realistic A patent is granted for solving a prob- wheel, an intermediate clutch or discon- as to the money he could expect from the lem, not for stating one. If we were necting device, and a suitable carriage to construe the claim as the com- commercialization of his invention, given body adapted to the conveyance of per- plainants urge, we should be obliged to the ease of copying his invention, that his sons or goods, substantially as described. small start-up company could not meet go further and hold it uncertain, indefi- Ford asserted the defenses of invalidity 22 initial demand, and that he was a lone nite, and consequently invalid. and noninfringement. The court held that Northerner with relatively little wealth Selden’s patent was valid over the prior Turning to the question of infringement, seeking relief against Southern landown- art, which included two well-defined the court found that Ford’s autos having ers in Southern courts. At the very least, types of compression gas engines, that is, Otto-type engines did not infringe the Whitney should have considered offering the two-stroke “Brayton” engine and the Selden patent, which disclosed autos hav- to sell a minority ownership interest in his four-stroke “Otto” engine. In reaching this ing only modified Brayton-type engines: company to the most influential and pow- holding, the court found that “the engine While the conclusion of noninfringe- erful Southern planters, thereby giving Selden referred to in his patent for the ment which we have reached leaves the them an interest in the successful enforce- completion of his description was the patentee empty handed with respect to ment of his patent. Brayton engine” and that “Selden made his patent for the short time it has to George Selden—the First material improvements upon the Brayton run, it cannot be regarded as depriving Recognized Patent Troll structure in order to adapt to the purposes him through any technicality of the just 20 George Selden (1846–1922), a patent of a road vehicle.” Specifically, the court reward for his labors. He undoubtedly appreciated the possibilities of the motor attorney, expressly set out to be a patent noted that the engine shown in Selden’s vehicle at a time when his ideas were patent had an “inclosed” crank chamber, troll. In 1879, Selden filed a patent appli- regarded as chimerical. Had he been cation for a “road engine.” Selden pur- and the court “was satisfied that the use of able to see far enough, he might have posely delayed the issuance of his patent the inclosed crank case rendered unneces- taken out a patent as far reaching as the over the next 16 years while he waited for sary the heavy bed of plates of the former Circuit Court held this one was.