This topic is, I think, closely enough related to patent remedies to merit a mention here. Richard Posner and Gary Becker discuss the issue of patent trolls on their blog this week. I agree with much of Judge Posner's analysis, but not all of it. In his blog post and in some previous comments of his in The Atlantic and Slate he seems to be calling for a patent working requirement. My understanding is that patent working requirements--roughly, the idea that a patent is enforceable only if the patent owner practices the invention within a set period of time--were at one time fairly common in some countries' patent laws (and, as mentioned in my post the other day, according to Christoph Rademacher failure to work appears to remain a ground for granting a compulsory license in Japan, though there appear to be no cases on point), but that they are rarely found today (or if found, rarely invoked). (There is also the question whether working requirements, permissible under some circumstances under the Paris Convention, are consistent with TRIPs. For a recent discussion, see Levon Barsoumian, Comment, India's Use It or Lost It: Time to Revisit TRIPs?, 11 J. Marshall J. Intell. Prop. L. 797 (2013), available here (discussing whether a provision of Indian law that would permit compulsory licensing in cases of failure to locally work the patent is consistent with TRIPs article 27, which among other things states that patents shall be granted without discrimiunation as to whether the patented product is imported or locally produced).) As a matter of policy, the common arguments against working requirements are that (if licensing doesn't count as working) they discourage entities that lack the ability to make products (e.g., universities) from investing in the inventive process. Licensing, after all, can be an economically efficient division of labor. They also might be easily evaded if a small amount of manufacture would suffice.
Anyway, regardless of the merits (and meaning) of patent working requirements, there are a couple of things Judge Posner states that strike me as questionable:
. . . There are no upfront costs if the patented invention is never produced, but serves merely as an excuse for a threat to sue.
It’s not just that patent trolls don’t do anything that encourages innovation; they impair innovation. Trolldom requires inventors to invest more resources in searching the files of the patent office before applying for a patent (and for safety’s sake again after they begin making the patented product or process), to avoid being hit by a license demand from a troll. This makes trade secrecy a more attractive alternative to patent protection than it would otherwise be. And trade secrecy not only is often a costly or even infeasible alternative to a patent; it also conceals information that a patent is required to disclose.
As for the upfront costs, I think Judge Posner is confusing the costs of invention (research, development, testing, etc.) with the costs of innovation (producing and marketing a commercial embodiment). A nonworking patentee does not incur the second of these costs but does incur the first. As for the trade secrecy point, I don't get it. I suppose that a company that worries about being sued by a patent troll might be marginally less motivated to seek patent protection itself for fear of disclosing its technology to the troll and thus inviting a lawsuit, but that point seems to be belied by the number of patents in existence (which Judge Posner also notes), and in any event all you need to do to invite a troll lawsuit is to produce a product, not to obtain a patent on it. Judge Posner's point about trade secrecy strikes me as a non sequitur.
For discussion of some possible reasons why suits by patent assertion entities seem to be less prevalent (though not zero) in other countries, and cites to some relevant sources, see my book at pp. 246-47, 286-87; see also Menno Driese, Trolling Strategies of Non-Practicing Entities in Europe (May 25, 2012), available here, and Anna Mayergoyz, Note, Lessons from Europe on How to Tame U.S. Patent Trolls, 42 Cornell Int'l L.J. 241 (2009). Bottom line, while explanations such as patent quality and expansive claim drafting play a major role, I think that the law of remedies--in particular, the high damages awards and disinclination to award attorneys' fees in the U.S.--is also partly responsible (though the eBay standard cuts the other way). Query: will the Unified Patent Court (if and when it takes effect in Europe) make Europe a more attractive option for patent trolls?