Austin Meyer (@x_plane_austin) is the software developer of flight simulator X-Plane and aircraft sensor fallback Xavion, an entrepreneur fighting against the unjust incursion of patent trolls, and producer of the documentary The Patent Scam.
What We Discuss with Austin Meyer:
- How the patent troll industry shakes down innocent victims through legal loopholes for massive profits.
- What might put someone unwittingly on the radar of a patent troll.
- Why virtually anybody can be the target of a patent troll thanks to the way current patent laws are written.
- What Austin discovered when he tried to confront his own patent trolls personally at their legally registered offices.
- Why patent trolls are repeatedly able to get away with frivolous lawsuits that any reasonable jury would laugh out of court.
- And much more…
Like this show? Please leave us a review here — even one sentence helps! Consider including your Twitter handle so we can thank you personally!
What would you do if you were minding your own business and then got a call or a notice in the mail informing you that you were being sued for millions of dollars simply for using an app store, your smartphone, or a computer program that millions of other people use? You’d probably blow it off, not believe it, discount it as a scam, or think there’s been some mistake.
That’s exactly what happened to our guest for this episode, Austin Meyer, who has since spent years and hundreds of thousands of dollars defending himself against a patent troll — just one among the underground of shady companies and law firms specializing in legal extortion against app developers, small business people, and anyone else who gets caught in the line of fire. Listen and learn how to potentially protect yourself against one of the most predatory grifts of our time as detailed in Austin’s documentary The Patent Scam.
Please Scroll down for Featured Resources and Transcript!
THANKS, AUSTIN MEYER!
If you enjoyed this session with Austin Meyer, let him know by clicking on the link below and sending him a quick shout out at Twitter:
And if you want us to answer your questions on one of our upcoming weekly Feedback Friday episodes, drop us a line at email@example.com.
Resources from This Episode:
- The Patent Scam
- Austin Meyer’s Website
- Austin Meyer at Twitter
- Austin Meyer at YouTube
- Patent Troll Definition, Investopedia
- Patent Trolls, EFF
- How I Beat a Patent Troll by Drew Curtis, TED 2012
- The Town That Trolls Built, Bloomberg Opinion
- Apple Patents Bold New Innovation: A Paper Bag, The Guardian
- Wheel Patented in Australia, New Scientist
- Boy Takes Swing at US Patents, New Scientist
- Patent on a Method for Exercising a Cat, Boing Boing
- Patent No. 6,004,596: Peanut Butter and Jelly Sandwich, The Wall Street Journal
- The Patent Office is a Friend to Greedy Attorneys with Lee Chang, Patent Trolls 3
- Supreme Court Considers Why Patent Trolls Love Texas, The New York Times
- Big Game Hunting in Boston, Way Better Patents
- Apple’s Epic Patent Troll Fight Drags On as Appeals Court Strikes Down Latest Request Copy, The Verge
- Why South Korea’s Samsung Built the Only Outdoor Skating Rink in Texas, Harvard Business School
- Infamous Wi-Fi Patent Troll Settles For Peanuts, EFF
- Patent Troll Targets Minecraft, Boing Boing
- EFF Wins Final Victory Over Podcasting Patent, EFF
- Donald Trump & Stormy Daniels Both Claim Victory After NDA Lawsuit Tossed, Deadline
- Ditto Defeats Patent Claim After Teaming Up With A ‘Troll’, TechCrunch
- Eric Rosebrock of iDrumTech, The Patent Scam
- Patents 101: The Different Types of Patents, Revision Legal
- Courts Are Drawing The Line On Business Method Patents, Forbes
- Shell Corporation, Investopedia
Transcript for Austin Meyer | Slaying the Patent Scam Trolls (Episode 326)
Jordan Harbinger: [00:00:03] Welcome to the show. I'm Jordan Harbinger. As always, I'm here with producer Jason DeFillippo. On The Jordan Harbinger Show, we decode the stories, secrets, and skills of the world's most brilliant and interesting people, and turn their wisdom into practical advice that you can use to impact your own life and those around you. We want to help you see the Matrix when it comes to how these amazing people think and behave. We want you to become a better thinker. If you're new to the show, we've got episodes with spies and CEOs, athletes and authors, thinkers and performers, as well as toolboxes for skills like negotiation, public speaking, body language, persuasion, and more. So if you're smart and you like to learn and improve, and you'll be right at home here with us.
[00:00:42] What would you do if you're reminding your own business and then you've got a call or a piece of mail that told you, you were being sued for millions of dollars for using the app store, using your smartphone, or using some computer program that millions of other people are using? Well, you'd probably blow it off or not believe it or think that there's just been some mistake. Well, that's exactly what happened to today's guest, Austin Meyer, who has spent years and hundreds of thousands of dollars defending himself against a patent troll. In our conversation today, we'll learn about this underground industry of shady companies and law firms who specialize in legal extortion against technology companies, app developers, small businessmen, and anyone else that gets caught in their line of fire. This episode should scare you because these lawsuits can happen to anyone and can be life-altering, highly stressful, and financially ruinous. So have a listen and learn how to potentially protect yourself against one of the most predatory grifts of our time, the patent scam.
[00:01:43] If you want to know how I managed to find all these amazing folks, it always happens through my network. Check out our course Six-Minute Networking, which is free over at jordanharbinger.com/course. You might not think you need it cause you don't have a podcast. Well, this will help you at work. It will help you in your personal life and in any endeavor that you do. And this is a free course, it will change the game for you, jordanharbinger.com/course. By the way, most of the guests on the show, they subscribe to the course and the newsletter. So come join us, you'll be in great company. Now here's Austin Meyer.
[00:02:19] Tell us how you found out about patent trolls, the idea that they even exist. I mean, this is kind of your story where you're sitting there with your app X-Plane, which by the way, is super popular. I've been talking about it and people were like, "Oh yeah, I know that app. It's made quite an impact, but as far as apps go, it's popular. But let's be honest, you're not Steve Jobs over there. You've got other businesses, and one day you woke up to a lawsuit that made no sense.
Austin Meyer: [00:02:45] Right. So the story is a little bit interesting. I was working at a trade show in Oshkosh, Wisconsin, where I was sitting there in a sweltering hot aircraft hangar showing X-Plane, my flight simulator, to a steady parade of sweaty pilots wandering through the hanger to look at my various wares. And so I'm sitting there showing X-Plane to these pilots and all of a sudden the phone rings. It's someone on the other end, I'd never heard of before saying, "Hello, I notice you've been sued for patent infringement. I'd be welcome to, or I'd be happy to represent you for a price." I said, "I haven't been sued for patent infringement. I haven't infringed anybody's patent." He said, "Oh, you have been sued for patent infringement even if you don't know it yet." And I said, "Just don't even talk to me. I'm busy. I'm at a trade show. I'll call you back after the show." I hang up the phone and got back to work. Well, about four days later, I got home from this trade show in Wisconsin back to my home in South Carolina, and I decided to go on ahead and return this guy's call. And I said, "So what's going on? What do you mean I've been sued for patent infringement? I've never read a patent before. How can I be sued for infringing on a patent that I'd never heard of or read about?" He said, "Well, it doesn't matter if you've heard of the patent. It doesn't matter if you've read the patent, and I can assure you from the court records you are being sued. And if you'd like, I can represent you in this matter and possibly work towards a settlement." And I said, "No, I'm not going to settle with somebody I've never even heard of before for infringing on a supposed patent that I've never heard of before." And he said, "Okay, just remember your defense cost is going to run around three million dollars."
Jordan Harbinger: [00:04:10] Wow.
Austin Meyer: [00:04:12] That was a phone call and it happened about as fast as it took me to relay the message to you just now. And at that point, I stopped for a second, I said in my mind, a Twilight Zone episode, and that's how I learned about patent trolls.
Jordan Harbinger: [00:04:22] That's wild. So you've never heard of this before. You're just minding your own business. You do the app as one of your businesses -- just one of your businesses. You're not Dropbox or whatever, right? You're a guy who makes an app that's reasonably popular, but you're not on your yacht -- you know one of your many yachts having this phone conversation. You're just like a normal guy that made an app that lives in Texas. That's kind of what I'm trying to convey here. Because I think people, when they hear about this, they go, "Oh man, you won the lottery of bad luck. You have a huge company and you're exactly the type of guy that can afford it. So I don't feel so bad," but that's not really what happened. Can you tell us what you were actually supposedly infringing upon and what was going on there?
Austin Meyer: [00:05:06] Sure. So to back up, let me just address the two statements you made. I didn't get extraordinarily bad luck, and I'm not running a multi-tens or hundreds of millions of dollars company.
Jordan Harbinger: [00:05:15] Right.
Austin Meyer: [00:05:15] Both of those statements are correct. I did not get incredibly unlucky. This happens a lot. And I don't run a gigantic company. It's a small mom and pop, it's me and about a dozen or so subcontractors and people that are working with me. I'm in South Carolina. It's where I'm located. Although these lawsuits have historically all come out of East Texas. So the way these trolls work is they will often start off suing the smaller businesses, and the smaller, the better. Because if they can find someone that runs a really small business, that person will not have the three million dollars to defend themselves in court. They're forced to settle. Now, that people have sued me said they would settle up if I just gave them $50,000 in cash. I refused. But what they do is they get these small, maybe $50,000 settlements -- the average settlement is apparently $315,000 the last time I checked, and once they've gotten the settlements from these people that are too small to defend themselves, then they go after Apple. Then they go after Microsoft, then they go after the big companies saying, "Look, our patents have already been proven valid. Everybody else paid, so why won't you pay to the big companies." Well, they're ignoring the fact obviously that the small people paid the patent because they couldn't afford the three million dollars to defend themselves.
Jordan Harbinger: [00:06:26] So you got sued according to the documentary, The Patent Scam, which we will link in the show notes, and by the way, is something I highly recommend. It's free, at least for now on Amazon Prime Video, and we'll link directly to it in the show notes for this episode. I highly recommend people watch it. If you're a business owner, it's nightmare fuel. And for everyone else, it's just kind of interesting. But you got sued. The technical reason, the infringement supposedly that was going on, wasn't that your app infringed on another type of flight simulator app that this company happened to make or own. You got sued --I'm going to get this wrong here -- but basically, because you uploaded the app to the Google app store and the Google app store does something where it checks to see if the person paid for the app or something like that. And the technical reason was what? Checking for something on a list on a computer. It was really vague.
Austin Meyer: [00:07:17] Yeah. So here's what the patent claims to own the idea of one computer checking another computer to see if a computer program is allowed to run. That’s what the patent claims to own. So, if computer A communicates the computer B to decide whether a computer program can be allowed to run, that's what they claim to own. And what is a computer programmer, which I am, I can tell you which is ragingly frustratingly insane is the patent has zero source code, zero useful information. There's no way anybody could look at the patent and say, "Oh, that's how you do it. I get it. Now, I can make my app better because I've read the patent." That is completely, totally 100 percent absent. There is zero useful information to patent. Well, the patent is if computer A talks to computer B to decide to allow a computer program to run, we own the idea. Boom, and the lawsuit is filed. The patent has zero redeeming or zero informative or zero educational use. It contributes to the field and no way. It only claims that anytime one person uses a computer to talk to another, to unlock a piece of software, we have to be sued by paying royalties to whoever wrote down that idea on a piece of paper and send it to the government.
[00:08:33] Now, the way the Google Store works is you buy the app, the Google Store tells your phone, the app can run. Boom. One computer told another, an app can run. So they claim to own that idea. This applies to all apps on the Google Play Store, all apps on the iOS Apple Store, and all apps where you pay money to unlock the app. So the patent covers anybody that has one computer tell another to unlock an app. They just sue whoever has just enough money maybe to be interesting, but not enough money to defend themselves so they can establish the patent is valid. And then when they go after for the big boys, like Google or Apple, a few years down the road, they can say, "And now we're doing it and everybody else is paying. Why won't Apple?" And they've got their little argument ready to go in for the 10 or a hundred-million-dollar attacks.
Jordan Harbinger: [00:09:20] And this is interesting because the idea here that you wrote a piece of software that infringed by accident on some idea -- I can sort of wrap my head around that. It's grossly unfair. It's ridiculous. But you didn't write the software that causes the Google app store to check if the app was downloaded. So to be a hundred percent clear, your simulator app is not the infringing app. It's the fact that you used the app in the Google app store, like every other app in the Google app store and the Google app store infringed upon it. Therefore, since you were in sneezing distance from a technological standpoint…you are somehow liable to the tune of millions of dollars, or at least a 50K settlement as they had asked for because your app uses the Google app store. So basically to simplify this, you used the Google app store to upload your app to let other people use it. Therefore, you infringed on this patent that the Google app store uses a piece of because it exists.
Austin Meyer: [00:10:20] Yes. Everything you've said is correct. Now, let me give you another case, kind of similar to this that I had encountered. This had happened to me several years before, but I didn't quite recognize how nasty the attack was. Back when I distributed X-plane on DVDs rather than digitally downloaded all the time, I received a half-attempted threat from a lawyer saying that by using these DVDs, I had to pay him money because the disc manufacturer was infringing on his patent. In other words, the DVD-ROM disc manufacturer was infringing on somebody's patent, and so this lawyer was going after all of the people that used the discs from the disc manufacturer and threatening to sue each one of them individually.
[00:11:06] So it is exactly like saying buying a Ford motor car and then receiving a patent lawsuit from someone that says Ford infringed on their patent. And since you're using a Ford car, you have to pay them the patent royalties. And this has been worked in the courts, I think when it comes to suing somebody for, say driving a car, because I think any jury would see that for what it is and kind of laugh at right out of court. But once you get to the technology industry things -- I think in many people's mind, it just gets a little bit murky, just murky enough to people who are like, "Well, he used the Google store, but you know who owns the intellectual property on that?" And you get into kind of maybe slightly confusing or murky questions, and that's why this thing is allowed to kind of propagate inside the tech industry.
Jordan Harbinger: [00:11:51] This is definitely something that I think a lot of juries or a lot of laypeople listening right now might be like, "But wait, how can this happen? You mean if I'm wearing a Garmin GPS watch and Garmin infringes upon a patent because somebody says they invented GPS watches, even though they didn't, and I'm running outside with this, how could I be liable for that?" I'm throwing this thing out of court. But when you're getting sued for, let's say, offering Linux computer software, which does a certain type of math, and your patent is that your algorithm is being used on Linux computers? Well, I'm a Mac user. Maybe I don't really know anything about Linux. Maybe I've never even heard of Linux. So now I am going to possibly approve a verdict against a company like Amazon Web Services because they use Linux computers. And I said, "Yeah, I guess the guy who invented the algorithm that their computers use. He's been infringed upon, and I don't really get it, but Amazon's a big company. They can afford to pay him $50 million for that poor guy." Meanwhile, that poor guy is a law firm, and the guy who supposedly invented the idea was never a guy at all. It was just a crappy patent that should never have been approved, and the winners are not some small guy who invented something, it's a giant law firm in Texas that only does litigation against guys like you and me, big companies, and they don't make anything. And so I want to tell people what a patent troll really is because I think a lot of people don't really understand the trolls. Patent trolls are entities, law firms, companies that litigate patents. All they do is to sue people. All they do is drive up legal costs for companies and individuals and encourage them to settle. They're not in the business of computing. They're not in the business of apps. They're not in the business of manufacturing anything. Their business is litigation, patent litigation. They do nothing other than sue or threaten people. They claim or using patents that they bought or got in bankruptcy. They didn't invent anything. They don't make anything. That's the whole business, and I want to highlight that because that makes it even more despicable. This isn't, "Hey, I've got an app company and I invented that," and you say, "Well, I don't know anything about that. I invented that." We're not litigating that. I'm just saying, "Ooh, I got you, Austin. I have a vague patent that I designed to ensnare people like you. Give me 50 grand," and you say, “Well crap, I can't afford to fight you. Here's your money."
Austin Meyer: [00:14:11] Right, so everything you said is correct, but everything you said would cause I think a cautious lister to say, "Well, what if he's exaggerating? What if they really do create goods and services? What if they don't just file lawsuits?" So what I want to do is I just want to put out one or two pieces of information that prove that you're correct, rather than just suspecting or assuming it.
Jordan Harbinger: [00:14:31] Great.
Austin Meyer: [00:14:31] The first piece of information I want to give is I have looked at these patents. The patents never actually have computer source code. They never actually have anything useful in them. It would actually teach a computer programmer how to do his job. They're always vague statements that simply say if computer A sends information to computer B to unlock a software program or something like that, we own the patent. As the patents never have any function in the industry except to spawn lawsuits, you can tell from reading them, they contain no useful information. They only claim to own what people are doing. And the second piece of evidence I want to provide to back your statement up is that I collected a list of a hundred or so of these lawsuits, a hundred more or less, of these lawsuits, and I found the addresses in East Texas and I flew my little single-engine propeller airplane out there because there's really like no airline service out to this slight deserted little kind of wasteland area of the country. So I decided to fly my little small airplane out to the small airport and rented a car, and I drove around to all of these addresses of these so-called companies that are filing the lawsuits, and every single one was a rented post office box or an abandoned office in a building. And the building would contain only abandoned offices. It's what I call a patent troll hive. It's a building where no people come or go. Myself and the film crew spent hours in these buildings over about three days, and we never saw another human soul inside the buildings. They're kind of like graveyards with no visitors. And it's nothing but empty abandoned offices with the UPS notes and the FedEx notes just pasted on the door from weeks or months in the past, waiting for a signature, a pickup that never came. So we can see that the patents have no informational or educational value of any sort. And are filed from businesses that are documented as nothing but abandoned offices or mailboxes.
Jordan Harbinger: [00:16:27] Maybe they crawl out of the drain at night. Did you guys go at night?
Austin Meyer: [00:16:31] We put in some pretty long filming days. It reminds me of what the clown from the Stephen King novel in the sewer trying to lure people in there.
Jordan Harbinger: [00:16:38] Yeah. In East Texas, they all float down here, right?
Austin Meyer: [00:16:41] I guess so.
Jordan Harbinger: [00:16:43] So one major issue with patent law is that when you get sued by a patent troll or by anybody enforcing a patent, the burden of proof is that you did not infringe. So the burden of proof is on the defendant. This can take years and millions of dollars because I think a lot of people are going, "Well, wait, how are they going to prove that I infringed upon looking up an item on a list? Isn't that just going to stop it? Isn't the judge going to see this or the jury going to see this?" You don't get that far. We are the ones that have to prove that we did not infringe.
[00:17:10] So in your case, you had to somehow prove that you did not infringe on a patent. But even if you can prove that there's a ton of problems with patents themselves, and we'll get into those in a little bit. But I want to throw out some statistics here and Austin, tell me if I'm on the mark because I know that you got, unfortunately, to have personal knowledge with this -- the average patent troll best-case outcome is something like one to two years or two to three years and at least two million dollars. Right?
Austin Meyer: [00:17:40] That's a little on the low side. It's typically more in the three to four years. $314,000 is an average settlement, the last time I checked and a three-million-dollar defense fee if you go through a trial is the average.
Jordan Harbinger: [00:17:52] Wow. So three million dollars litigation fee and three to four years -- I'm actually going to change that because I can't even believe that I had it half of my notes. And so of course people settle because it's cheaper than litigating. And if you're running a startup company, you don't have -- I mean, just having your management go to court could sink the company, let alone the cost of paying for it. So, of course, you just cut a check because you want them to go away. It's just like extortion from an organized crime group. There's really no difference other than maybe instead of Frankie Knuckles showing up at your door, some lawyer from East Texas is sending you documents by FedEx.
Austin Meyer: [00:18:32] Right, so I'm going to try to avoid anything that might be like an adjective or an adverb and try and stick to like actual things that I know have happened to me. But without question, what you get are letters from lawyers to your lawyer, but you actually -- and this is really going to blow your mind -- you can't actually tell who's suing you. The lawsuit name is like some sort of a, a shell company with like no website and they're a post office box somewhere, and so you actually don't know who is suing you while it's happening. All you know is you're getting these letters to your lawyer and if you ever ignore the lawsuit, then this shell company that's a PO box somewhere in East Texas, it's going to be able to take out a lien on your assets. And so you're forced to spend time and money, years and ultimately millions of dollars having your lawyer argue with the lawyer that's representing a post office box.
Jordan Harbinger: [00:19:28] That's insane. So even if you win, they just bankrupt the shell company and you would then have to pierce the corporate veil and try to collect from the other shell company that owns that shell company to find somebody who actually has a wallet.
Austin Meyer: [00:19:40] Right. So for example, there was a law firm that was prosecuting a lawsuit against someone that's doing like speech therapy for children or something like that. As I recall, all the research I did, I still couldn't find out who they were actually representing. So you literally cannot tell who is suing you and so many of these cases, and about the farthest I could get was that the so-called company being injured in the patent, the plaintiff in the patent troll suit had the same address as the condominium of one of the lawyers. So the best I could tell, whoever was filling the lawsuit lived in a condominium of one of the lawyers at the law firm. You can't tell who's suing you. The closest you can guess is the lawyers themselves.
Jordan Harbinger: [00:20:21] That's wild. And you know what? It actually makes sense that a law firm would do this because in order to buy a patent, all you really need is somebody who can negotiate and somebody who can look at a patent and somebody who can maybe file a patent or maintain it, which is a law firm. And then you just have somebody who's in charge of buying up all these patents and then you need to be able to litigate as cheaply as possible. Who does that? Well, law firms and lawyers do that. So it's a pretty -- and I'm putting this in air quotes because I don't mean good, but I mean it's a good business for a law firm to be in because they can -- it's like a contractor building a house. If you know everything about how to build a house and you have the equipment to do it and the manpower to do it. Then, by all means, you can probably do it cheaper than me, who would have to then hire a contractor to do it. So a big company isn't necessarily going to hire a law firm to do this, they might as well just be the law firm.
Austin Meyer: [00:21:13] Perhaps. So I'm always reluctant to say anything I can't prove in a case like this, but let's just say when you were sued by patent troll, you typically could not tell who was suing you. You can't see any farther than the lawyers on the other side.
Jordan Harbinger: [00:21:27] Yeah, that makes sense. And again, I'm not implying that anybody specific is doing this, but in my research, I found that there were firms that were in the business of doing just this in a certain way, but again, I don't have specific names, of course, nor would name them here because that's dangerous territory. I want to highlight though, again, you don't have to be a wealthy company to get hit. You are merely a consumer of the product. Yes, you made an app, but that's what made you use the app store. There are people that could get sued for using a -- literally, anyone can be accused and sued for violating patents. Austin, why don't I get sued by Apple for using their product? I mean, technically I'm violating patents using an iPhone.
Austin Meyer: [00:22:11] So Apple has a patent on the paper bag. Okay, Google it. It sounds like I'm joking. I promise I'm not joking. Pop open a web browser while you're listening to this broadcast. If you like Google Apple's paper bag patent. Apple owns the patent for the paperback. It was filed, by the way, about a year ago, a year ago. They filed a patent for the paper bag and got it. And I'm not even kidding. Apple could sue everyone in the world many times over if they wanted to. Well, why don't they? Well, the answer is simple. They make more money on selling goods and services than filing patent infringement lawsuits against consumers. Their business model is clear. Make these cool, or at least apparently cool, I say actually cool phones and computers and laptops and amazing technology. Put it out there and return for pretty hefty, elevated prices and take the money and flood the bank with it. That's Apple's model because they deliver goods and services and of course, that's most people's business model in exchange for goods and services for money.
[00:23:08] But the patent system allows you to sue anyone for patent infringement if you own the idea that someone else's doing. And how do you own the idea? Write it down on a piece of paper, send it to the government, and call it a patent. Now, a lot of people are listening to this point, they’re going to say hold the phone. The government's not going to approve a patent if you haven't actually thought of a new idea.
[00:23:29] Well, in Australia, the patent for the wheel was recently approved. Apple as I just said had got a patent for the paper bag. That was just within the last year or so. There was a patent for a swing on a swing sideways. There is a patent for using the laser pointer to amuse your cat. There's a patent for how to make a peanut butter and jelly sandwich, and all of these are fairly recent patents. These aren't like from a hundred years ago or anything. These are fairly recent ones. And so the patent office will approve basically anything once you send it in, and then once that patent has been approved by the patent office, the law says that a patent is assumed valid, the patent is assumed valid -- that's something that was written into the law long, long ago. We'll fast forward, you've got the patent office approving patents after an average of about three or four hours of research. And if the patent office doesn't find any similar patent after three or four hours of looking, they approve your patent. And that's how Apple gets a patent for the paper bag. Somebody sitting at home by themselves gets a patent for using a laser pointer to amuse a cat and someone in Australia gets a patent for the wheel. And I was a patent attorney up in Michigan or something like that and got a patent for swinging on a swing sideways, these ridiculous patents are approved by the office constantly. All that has to happen is the government has to let something slip or let their guard down or make a mistake, and as soon as that happens, the patent is approved. Once the patents are approved, it can be used to sue anyone and because it's assumed valid. The suit basically goes charging forward unless somebody can find a way to stop it.
Jason DeFillippo: [00:24:56] You're listening to The Jordan Harbinger Show with our guests, Austin Meyer. We'll be right back.
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[00:25:42] Where was DesignCrowd when I was in school and I had to come up with ideas for my science fair poster board. Damn you, 1990s. Come on. I think Jason. I was drawing stuff in crayon on a poster board from Kinkos, speaking of the devil, back then.
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Jordan Harbinger: [00:28:19] This is really scary and should kind of be scary. I did find the paper bag patent for Apple. What key to note here is the reason that Apple doesn't sue people who are using their products is because patent holders don't usually want to sue their own customers. They make more money, like you said, offering goods and services, but patent trolls don't have customers at all. Because they don't actually do anything but sue people who use it. So there's no reputation to protect. There's no actual reason for them to be on anyone's good side or have some sort of public image. They don't have to worry about anything other than going after people. So that's why they're able to do this. How do patent trolls abuse venues? And by venue, this is a legal term where you get sued. And you had mentioned you went to East Texas. East Texas -- and I remember studying this in law school-- the reason that everybody sues there is because there are certain favorable characteristics of that venue. Are you able to explain why this is the case?
Austin Meyer: [00:29:25] Well, sure. It was only a few judges that were getting the majority of these patent lawsuits, and when I looked at these judges that are getting these patent cases over and over and over, what we found is that these judges never tossed out any of the patent lawsuits as the ridiculous frivolous cases that they obviously were. And I was like, "Why are the judges letting all these people in?" Well, then I noticed as I was doing research, that some of the lawyers had the same last names as the judges -- the lawyers in East Texas. I was like, "Well, that's a strange coincidence." I dug a little deeper. It turns out the lawyers are the sons of the judges, and so what happens is these lawyers in East Texas would take these patent lawsuits while their parents are the ones hearing the cases. Then what they would do to try and stop her from being any supposedly favorite trading or whatnot is the lawyer from one judge would make his case to the other one's father and then the other lawyer for the other judge would make his case to the other one's father. So there’s a little crisscross where each judge would hear the other one's son in court. And we found that just statistically speaking, the judges never made the patent trolls pay any damages if they lost and never tossed out the lawsuits and also never granted venue transfer.
[00:30:36] So for example, I live in South Carolina, but the judges would not grant us a venue change. In other words, nobody, in this case, was in East Texas. I was in South Carolina. The guy that we think was behind it was in Australia, and so he said, "Would you like a venue change either to California or South Carolina, something where somebody is that's actually involved in the case." The judge said, "No, you have to stay here in East Texas." And the statistics show -- I know I can say this without fear of slander or libel because I'm just stating statistics -- the statistics show that the judges would never grant the venue change. They never let the case leave their district, even if zero people involved in the case were actually located in that district. So you're stuck there even though there's no possible justification for being stuck in that venue. This venue where the lawyers are the sons of the judges.
Jordan Harbinger: [00:31:27] That's crazy to me that all of these suits are filed in the East Texas district. They will never let you leave because they'll never rule on it as a judge because they could get overruled. So they just leave it alone. They never dismissed the cases. They never grant legal fees. As I recall from the documentary, one of the people that you interviewed was told not to even ask for legal fees, dismissal, venue change because, and I quote, "It might anger the judge," which is something you should pretty much never be thinking about when you ask for something that's totally reasonable. That the judge might get angry because you're kind of affecting his friend's kids’ bottom line. I mean, that to me is ludicrous.
Austin Meyer: [00:32:06] Yes, it was Lee Chang, a lawyer for a Newegg who used to pay off the patent trolls because it was easier. But then he discovered that every time he'd pay off a patent troll, more patent trolls would come knocking. And so when he finally had to do was stand up to the bully. And he became an absolute expert on defense against patent trolls for Newegg. And as Lee Chang said -- and I'm the quote just a tiny bit more accurately – "Don't ask for your legal fees back. You don't want to piss off the judge." And I remember sitting talking with Lee in his office. I was interviewing him and he was saying, "You know, Austin, there are some things where if you say in court, it'll also cause you to lose your ability to have an appeal." And now we're getting illegal territory that I was like a normal mortal person can understand, but the idea of being caught in a court, we're the lawyers of the sons of the judges, you can't ask for justice or it might piss off the judge. And the statistics show that people like you are never allowed to leave. I mean, it's like being trapped in a Twilight Zone episode or so it seems to me.
Jordan Harbinger: [00:33:07] So there are two patent firms doing all the suits. The judges are the lawyers’ father. I mean, this to me is bananas. I know that there's been some recent legislation about this. Are you familiar at all with that?
Austin Meyer: [00:33:19] Some. So recently in the Supreme Court, a decision was made saying that if you're going to sue someone for patent infringement, you have to sue them where they are located. And this seems to me to be a clear attempt to solve the problem of the litigation in East Texas. And in that sense, I believe, if I'm not mistaken, they're succeeding. So this is something where the Supreme Court has made a decision that has been hugely beneficial. And the legislature should have done this a decade ago. They didn't. So the legislature has failed but it fell to the Supreme court. And I think they have largely addressed the East Texas problem by making sure that people are only sued where they live.
[00:34:02] And so now what we're seeing is a little bit of a shift in the patent trolling technique. Rather than suing small to medium-sized business owners in the Eastern District of Texas, they're going after smaller settlements where they can drop their case if it looks like they're going to be defended against because they know they'll lose wherever they're suing people for these small cases. But they still do what's called big-game hunting, where they take out the lawsuits against big companies like Apple and IBM.
[00:34:27] Apple was apparently ordered to pay a billion-dollar patent infringement award. I think just a few days ago. I think I saw in my email this morning or yesterday. That wasn't exactly to a patent troll. That was to -- I think a university in California that owned a patent and Apple is ordered to pay, I think like about a hundred million dollars to someone that's absolutely a patent troll that sued them. So patent trolling is continuing, but it's shifting slightly in its form based on Supreme Court rulings.
Jordan Harbinger: [00:34:54] And if you're still a national or multinational company, you're still on the hook, as you'd mentioned. So Korean tech giant Samsung can find itself hauled into court in Marshall, Texas, and it happens to them so often that the company now spends heavily to improve its image with local residents as I was reading because the local residents are the potential jurors. So they have scholarships, they've got donations in the city, which by the way, has 25,000 people. It sponsors a winter ice skating rink right in front of the courthouse. This company is spending all this money and people might be thinking, "Oh good, they're improving the town." But bear in mind, they're just bribing or attempting to bribe this particular town. And if you buy a Samsung Galaxy phone, one of your dollars is going to this ice skating rink in Texas so that they can get sued less, maybe. It’s just coming out of your pocket as a consumer. You bought a Samsung washing machine or TV, you're paying for that. It's not some big company that's got to do this, and it's adding to the landscape of American business. We are all paying for this. It's a tax. It's a tax on the devices that we buy.
Austin Meyer: [00:35:58] So it's been called by Lee Chang the toll of the troll. When the trolls come from the big companies, big companies raise their prices, and it could be Samsung, which was dragged into East Texas, over and over, or Apple, which has been forced to pay over a billion dollars in patent settlements, literally just in the last few days. That's just in my last couple of days of research. So we're paying now through Samsung and Apple for this $10, $20, $30 at a time.
Jordan Harbinger: [00:36:25] So what should companies do? If they shouldn't settle because they're just encouraging patent trolling, what can they do if they don't necessarily have money to burn through litigation?
Austin Meyer: [00:36:35] Okay. So luckily the Supreme Court ruling that says you have to be sued where you live gives you much more ammunition. And here's why. It's still three million dollars to defend yourself in court. And most people in small businesses aren't going to have that much money. But the patent troll knows now that if he is forced to go through an entire legal proceeding in your home state, he will probably lose. Therefore, if you receive what's called a demand letter, which is a letter saying, you have to pay us money for infringing on our patent, well, if it's a patent you've never heard of before if you didn't actually learn something from reading their patent, it's a patent that you've never heard of, an idea that you didn't learn from this person sending the demand letter, which has given me money. Then what I would do, and this is just me, I would just take the demand letter, put it in a Manila envelope, and put the envelope in my file cabinet to have it available for later if it ever goes further than that. I wouldn't answer it. I wouldn't talk to them. I just filed the letter.
[00:37:32] Now that's entirely different from a summons. A summons must never be ignored. If you receive a summons to court and you ignore it, you will lose by summary judgment. And once you've lost to summary judgment, you're going to find out that liens can be taken out against whatever you have. So when I would explain patent trolling to people on YouTube and whatnot, a very common comment was, "Oh, I would just ignore the lawsuit. The lawsuit is stupid so I would ignore it." You can never ignore a lawsuit or there will be a summary judgment against you and the next thing you know, you don't own your property anymore. A lien has been taken out without you even knowing about it. So it's like entering a Kafka layer of hell when all of a sudden you don't own anything because the post office box does now.
[00:38:10] So you can ignore a demand letter. And I believe, my personal opinion, you probably should, if it's a demand letter for a patent you've never heard of before. However, you must never ignore summons. You must get a lawyer to answer the summons. And if this is a patent where the patent actually describes something useful, where you learned from the patent to deploy your technology, then I would say you are honor-bound to work with this person to come up with an amicable distribution of the profits. However, the number of patents I've seen that actually give new information you can learn from equals zero. I have never seen this. And so when 100 percent of the cases I have seen the patent is nothing but a description of the widest vaguest possible use of already available technology so that someone can claim to own the work you're doing. And in those cases, you just have to get the lawyer and hope that the patent troll will stop knowing that he will ultimately lose when he sues you in court because the jurors will typically start to figure out what's going on.
Jordan Harbinger: [00:39:13] That makes sense. And I think a lot of times if you band together, so for example, if your tech company that's getting sued for uploading a file to the ethernet, or if you're a cafe, and this is a real example, if you're a cafe or a coffee shop that's getting sued for offering Wi-Fi in the coffee shop to attract business, you can band together because you'll either lose bigger alone because you'll have to settle or you won't be able to fight it all, but if you band together with 300 coffee shops in your area and everybody drops in a thousand or $2,000 in order to get rid of a bad actor, you can actually fight this and respond disproportionately to the patent troll. You know, sue them back, find out potentially who they are, what they are, go after them for malicious prosecution, that kind of thing.
Austin Meyer: [00:39:59] Right. So when I was sued for patent infringement, what we did, we received the summons. Ultimately, I did actually get the summons delivered to me by a process server. At that point, I knew the suit was real. We then found out all the other people who were sued. The troll who was suing us sued about a dozen companies all at once in the same lawsuit, including companies in England, by the way, including the makers of Minecraft by the way. Mojang was also named in the lawsuit. And so this one lawsuit has listed about a dozen different companies. We all found each other and we shared our legal defense fees. Now, we opened this interview by you asking what happened to me. And why don't I go ahead and answer that now as well? The answer is we proved that the claim and the patent that we were accused of infringing on never shouldn't have been approved in the first place because it had been in use for years before the patent was ever filed. So myself and the dozen or so other companies, we didn't spend over a million dollars collectively between us, this is definitely well over a million. I think it was something in the two million dollars ballpark. We spent about four years as our cost, it's about four years and two million dollars to prove that one sentence in the patent never should have been approved in the first place. And that one sentence was the idea of one computer talking to another to unlock software for use. So that was about two million dollars and four years to get the patent office to say, "Oh yeah, I guess somebody had thought of that before the patent was filed," and that was what it took to make the lawsuit just kind of die like a zombie in the road.
Jordan Harbinger: [00:41:22] To be clear, fighting a troll is different than fighting a regular competitor who has a patent because you can't drop the price on your item to harm the competitor. You can't switch to something that doesn't infringe or does something in a different way because the troll doesn't actually care if you infringe or cease infringement. They literally just want settlement cash. They don't care that you never put anything to market or that they never put anything to market. They literally just want a check by any means necessary. Whether that's scaring you into thinking you're going to lose your house or what they're not interested in actually protecting the patent itself. And I know that you won by banding together with other people. Didn't the troll come back with another claim saying like, "Oh yeah, you're part number 112 and 113 were invalid, but what about 101 or 102 or something like that?" Didn't they sort of try to do some technical stuff?
Austin Meyer: [00:42:14] Right. So here's one of the things you can tell when you look at these patents. The patent we were sued on as how I can recall had 113 claims. And every claim was almost the same. In other words, one claim would say a computer accessing another computer to unlock software, and the next thing would be software unlocked by one computer accessing another computer, and the next one would read if one computer access is another computer software on their first computer can be unlocked. It was just the same thing over and over 113 times phrased a little bit differently each time, and it's now in retrospect, completely obvious that the patent was written that way. Because since it took us four years and two million dollars to overturn one of those sentences, they had the same thing written down 112 more times, so they could put us through this for the rest of our lives, and they tried to, when we overturned one claim, they said, "Oh, well now we want to claim two additional claims. You've taken down one out of 113, we're going to claim two more out of the 112 we have in reserve." And the moment you see that, you know the litigation can go on forever. The judge said -- and this actually surprised me a little bit, that the judge is willing to rule this as we did -- the judge said, "If you want to sue for those two claims, you have to file a new lawsuit," and they elected not to file a new lawsuit on those two additional claims.
[00:43:28] Now, I'm not going to try and tell you or the viewers why they didn't re-filed the lawsuit because I can't tell what someone else was thinking. But I do know that we had demonstrated that if they had sued us for those two claims, we are going to overturn those next. And I'll make a general claim, a general claim is when you push back on the bully, the bully, find somebody else. I can make that as a general statement and I happen to believe that perhaps, maybe that's what happened here and it's why they didn't refile what the next two claims out of their 112 claims remaining.
Jordan Harbinger: [00:43:58] It sounds like -- and this is of course speculation just like anyone else -- but if they had refiled, you might have been able to win on summary judgment based on the previous ruling and then that would have just cost them money and then you potentially could have gone after them for malicious prosecution given that it would be obvious to the judge and the court at that point that they were just rephrasing their lawsuit and filing again and again, and then they were probably treading in dangerous water as far as ethics and things like that in the court, and I think that ethics complaints against attorneys can work because nobody wants to get disbarred when they've got a golden goose of extorting other people.
Austin Meyer: [00:44:35] Yeah. It may perhaps have gone down that way if they had refiled, but I think we have demonstrated that if anybody files against this, we're going to defend. And so it seems like history has shown that if you pay the patent troll, you get attacked by more patent trolls. If you overturn the patent that the patent trolls use to sue you, they do not come after you again. So history seems to show that in this case, the right move is to stand up to the bully or so history would seem to indicate to me,
Jordan Harbinger: [00:45:01] Right. And I've looked at some research from lawyers on this and they've said that things that have worked in the past are ethics complaints where appropriate, exposing the patent troll publicly -- but you've already spoken about the difficulty in doing that, given that there are shell companies involved or attacking, if you have the resources attacking the whole troll company, not just the patented issue. So what a lot of tech companies in Silicon Valley have done is simply filed countersuits against the actual company saying, "Hey, you have tons of patents that are actually not valid. We would like to go ahead and challenge a bunch of those because otherwise, you're just going to bully us to the end of time. Why don't we go and look at all of the patents that you have and see what you plan to enforce and then just chop them all down," and then the company goes, "Oh man, we're going to lose hundreds or dozens of patents that we're using to bully other people maybe we should just leave this big guy alone for now."
Austin Meyer: [00:45:51] You got it perfect. That's exactly it. And the final little icing on the cake, on your completely accurate statement here, is when the government approves the patent, it was done after about four hours of research from a single-patent examiner in some building somewhere. Once that four hours of research has been done and the patent has been approved, it takes four years and millions of dollars to overturn it. And for us, those four years and two million dollars to overturn one statement out of 113, those 113 statements were all approved in about four hours in some bureaucrats time. And so the idea of overturning patents to stop the threat, well, you're spending four years and millions of dollars to overturn something that the government will approve in four hours. So it's to say it's an uphill battle. How do computer programmers put it? It's an extremely inefficient attack, I think is the way we would phrase it. But it's like that's what we're left with at this point, and it's like the best we can do.
Jason DeFillippo: [00:46:46] You're listening to The Jordan Harbinger Show with our guest Austin Meyer. We'll be right back after this.
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[00:50:03] Thank you for listening and supporting the show. Your support of our advertisers keeps us on the air. To learn more and get links to all the great discounts you just heard, so you can check out those amazing sponsors for yourself, visit jordanharbinger.com/deals. And don't forget we have a worksheet for today's episode. That link is in the show notes at jordanharbinger.com/podcast. If you're listening to us in the Overcast player, please click that little star next to the episode. We really appreciate it. And now for the conclusion of our episode with Austin Meyer.
Jordan Harbinger: [00:50:32] Patent examiners are taking four hours per patent to approve because they have a quota and some of these really dumb patents are getting approved probably because someone's tired on Thursday or Friday. They want to go home early. They know they can make their monthly or weekly quota or their daily quota if they just rush something stupid through that takes less time because it's not complex. It's really broad. It's not very involved. So we see dumb but real patents for things like method of playing video games over the Internet, method of exercising a cat with a laser pointer, stick that a dog can fetch, method of swinging sideways on a swing. These are real patents and Apple's paper bag patent, it sounded dumb before probably I made this list, but look at least a paper bag that Apple has is folded in a certain way and it folds up really small and it's really strong and it can hold heavy things and it's thick and it's got string handles that don't break. Like, okay, kind of a silly patent, but at least it's a real thing. And it's not being enforced against other people that use similar bags, but exercising a cat with a laser pointer. So you're telling me that if I create some sort of device that exercises a cat with a laser pointer, I'm infringing on someone else's idea.
Austin Meyer: [00:51:46] The answer is definitely yes. Now, here's where it gets really annoying. In this country, the United States, it is -- as I understand it -- illegal to make money by suing people. In other words, when you sue someone, it's to recover a damage. If you've been hurt, you sue someone to recover the damage they did to you. This is the system that our society is supposedly based on. You don't sue people for profit. You sue people to recover what you lost. The problem is patent trolls make no money and then they have no business, and because they have no business and make no money selling goods or services, they cannot possibly have lost money by their victim running a business. Therefore, the damages that could possibly be awarded a zero. It’s because they have not been injured by anyone infringing on their patent because they're not losing any money for their patent being infringed on. And so this whole idea, the patent trolls are actually technically illegal before they even filed a suit because they're suing for profit, should have stopped this enterprise right at the get-go, but it didn't because they pretend that they have losses.
[00:52:47] Now let's look at your laser pointer with the cat thing. Could someone sue you? My initial answers, well, yeah, they can only sue you for zero because they haven't lost any money by having you play with your cat with a laser pointer. So sure, they could win, but the damage doesn't have to be zero. They haven't encountered any damage from you playing with your account with a laser pointer. However, even though that seems the obvious thing that anyone would say sure, we find for the plaintiff damage zero. Trolls sue for huge amounts of money, even though. They never lost anything by having their patent infringed on. In other words, they are suing for profit, which is against the most fundamental rules of the nation. Yet that is something that is just completely ignored by all of the actors in the system.
Jordan Harbinger: [00:53:34] If I make a cat -- because I have a cat and I have a cat toy, that's like a little motorized base and on the top of the base is a laser and it shoots the laser and kind of an unpredictable direction changes directions, that person who made that $30 cat toy is very likely getting sued by somebody who owns a patent for exercising a cat with a laser pointer. Maybe that's even why that patent was created in order to sue companies that do things like that. Unless they can demonstrate prior art. In other words, using it earlier, which they're unlikely to do, so they're probably just going to cut a check.
Austin Meyer: [00:54:06] I don't know. So it may be, when I've looked at a lot of these patents, a lot of these patents clearly look like they were made by people just kind of sitting at home that don't have jobs and were just kind of drawing crude images of things that they kind of drift across their mind and have little or no commercial application. And when I first saw the patent for playing with your cat with the laser toy, I just assumed there was somebody that was playing with their cat with the laser toy, assumed they were the first person on earth to think of it and filed the patent. They can have a good feeling about being the first person to think of this. And it's just nothing but a bit of self-delusion that doesn't actually hurt anyone. But if that patent has actually been brought to bear against people that are actually trying to make laser toys for cats, then yeah, that would, to me, appear to be a case of trolling, but I'm not sure if that's actually happened or not.
Jordan Harbinger: [00:54:53] Yeah, it's hard to say now. Things that are ridiculous are turning out to be true, so we really don't even know what we're dealing with now. Yes, there's probably some inventor at home that wants to say, "I have a hundred patents and my brother, the other inventor, he only has 54," so he's sitting at home every weekend patenting to things because he's wealthy already and just has a pissing contest with his cousin or his brother. But we also don't really know because, yeah, that's what I had imagined when I saw that. Now I'm like, oh wait, are they just looking for this latest as-seen-on-TV device knowing they can just get a check from them cause that company's already committed to marketing and manufacturing. Who knows?
Austin Meyer: [00:55:28] Right. So you make two fascinating statements here. One is they might be looking at whatever they see around them, patenting it, and then finding the patent infringement lawsuits against people that deploy the technology. And this is certainly the heartland of patent trolling that we've seen over and over. But you brought up another point that I think is really fascinating, which is we don't really know what's going on. And let me just back up from that, let me back the camera out and take a little wider look at this for a moment. The idea of the patent system working is pre dependent on the idea that the government can tell who was the first person to think of a thing. Can the human race say that whenever somebody thinks of something, we know that he's the first person ever to have thought of it? For that to be the case, we'd all have to have ESP. In other words, nobody knows what everyone else is thinking. Nobody can know that they're the first person to think of something. And so when someone says, "Oh, I thought of swinging the swing sideways," or, "I thought of a laser pointer to play with the cat," or, “I thought of a wheel." Well, I think with the wheel, they probably knew they weren't the first inventors, but these patents are formed by people that may believe that they are the first person to think of something. But if each person believing that they're the first person to think of something means that they own that idea and can sue everyone else -- well, the system can only work if we actually know who's the first creator of each idea. And I don't think we can know who's the first person to think of something.
[00:56:51] And I can promise you that in all the cases that I know of, and I interviewed quite a few people from my movie, there were sued for patent infringement. So I speak from some experience here. Zero of the people that were sued for patent infringement had ever even heard of the patents that they were accused of infringing. And in some cases. The patents were written after these people had started up their business. As the people started the business, somebody else decided they wanted to compete, wrote up a patent and described what their competitor was already doing, and then sued them for patent infringement saying, "You stole my idea."
Jordan Harbinger: [00:57:24] It's kind of despicable. Well, it's despicable to hear about this kind of behavior and why don't we hear more about this. You and I were talking pre-show about the NDA phenomenon, and I think a lot of people are like, this can't be that pervasive. How come it's not all over the place? How come? I don't know a ton of people who have been sued by a patent troll. And candidly, there was actually a patent troll suing podcasters saying they invented podcasting in like 2014 or something like that, or 2013 and the whole Internet and the EFF, the Electronic Frontier Foundation which is a non-profit, they had to come and help find prior art from like 1992 showing, "Hey, this has been used for a lot longer than this dumb company claims to have come up with the idea of playing audio in a playlist," which was what their patent was for. And they eventually got so much opposition that they invalidated the patent and I believe put the company out of business, but not before spending millions of dollars, but why don't we hear more about this stuff? And the reason is because there's NDAs. What's your take on that?
Austin Meyer: [00:58:28] Okay, so NDA stands for a non-disclosure agreement. Haven't we seen this with Stormy Daniels recently? She apparently had -- perhaps it was allegedly -- had an affair with Donald Trump, and then she couldn't talk about it and she's like, "Well, I can't tell you why or I can't tell you what happened." She was apparently under a non-disclosure agreement. And what a nondisclosure agreement says is, "You signed away your right to tell anybody what happened." And in the case of patent trolling, specifically, the patent troll comes after you and then says, "I'll let this attack stop if basically, two things happen. One, you give me money. And two, as part of the settlement, you signed a non-disclosure agreement, so you can never tell anybody what happened to you." And certainly, in my movie, The Patent Scam, I have a segment on this where I try to wedge information out to people on what happened to them, and they simply could not tell me in many cases what happened because they were under NDA. So a non-disclosure agreement is basically a way of stopping the public discourse so nobody can find what the troll is doing. You're not allowed to talk, and if you do talk about it and violate the NDA, then all of the settlement goes away and you're right back to where you started, which is getting sued again.
Jordan Harbinger: [00:59:38] This is particularly terrible because it stops the discourse. It stops people from finding out about it. It stops people from finding out how you solved your problem. It stops people from finding out about the bad actors. As a business owner, you refuse to deal with NDAs, correct?
Austin Meyer: [00:59:54] That's correct. I have never and will never sign an NDA.
Jordan Harbinger: [00:59:57] And why is that? What's your theory behind that? Why is that important?
Austin Meyer: [01:00:01] Well, because anytime you get into a lawsuit, this becomes a matter of public policy. It becomes a matter of public discourse. The whole idea of the lawsuit is it’s set up for people to work out their differences according to a public code or a common code that we all agree should be the law or the law of the land or the way we do things. And when you have a public thing, like a lawsuit that is supposedly based on the interaction between people in a manner that affects all other people, because presumably, lawsuits laid down policy for the next lawsuits that are similar. Whenever you say, "Oh, I'm going to act in this method that controls public policy of a lawsuit," but you're not allowed to tell anybody what happened. It's the clear proof that you're not actually acting to move society forward because you're trying to hide anything that anyone would learn from the experience.
Jordan Harbinger: [01:00:56] Right. So this is a kind of de facto -- you're a bad actor if you're asking for this NDA in these cases.
Austin Meyer: [01:01:03] Well, I'm going to try to avoid saying anything like that. That might be an overgeneralization and I try to be so careful about what I say to make sure I don't over-generalize or make a statement that might, in some case, you know, turn out to be false. But I can say that in the case of patent trolls suing people, they allow the lawsuit to stop if the person that is sued, A, gives them money and B, never tell anybody what happened to them.
Jordan Harbinger: [01:01:28] It's crazy to me because that's, you cannot do that for most situations, right? I mean, yes, you can ask for an NDA and illegal settlement generally, but anytime that you're attacked by somebody, especially in an unfounded way, they're really taking one of your only weapons off the table to keep it from happening to somebody else. It would be like not being allowed to report a crime in a neighborhood and then everybody thinks the neighborhood is safe because no crimes have been reported because nobody's allowed.
Austin Meyer: [01:01:53] That's exactly what it is. It's like saying that a criminal breaks in your house and is going to steal half your stuff, but you're not allowed to tell anybody I did it, or I'll come back for the other half.
Jordan Harbinger: [01:02:03] Right. Yeah. It's unbelievable. And there's societal damage to this. I mean. The example I think that was given in the movie by perhaps Lee Chang from Newegg was what if Steve Jobs was hit with this kind of patent stuff early on and just shut down? What if the company had shut down? Consumers are not getting products and companies are laying off staff to fight this stuff or they go bankrupt. And there's an example in your movie and your documentary where there's a woman whose company is being sued by another eyewear manufacturer. And she said, "Yeah, I think I laid off about nine people just to funnel the money towards this litigation." So there are nine people on unemployment or having to get other jobs, possibly being subsidized by the taxpayer, or at least having their career interrupted/ruined because she has to funnel resources to a patent troll litigation.
Austin Meyer: [01:02:51] Right. So that was Kate Doerksen of a company called Ditto. And I'm going to give you a little bit of behind-the-scenes information on that. That didn't make it into the movie because I couldn't find a way to edit it in there properly. So Kate Doerksen of the company, Ditto, ditto.com came up with virtual try-on glasses, where you sit in front of your webcam or something, and an imaginary glasses are drawn on your face according to the style you select, so you can see how they look from home without actually going on and trying them on. Once you find the perfect pair of glasses, boom, they ship them to you. It's pretty nice. 1800contacts.com which does business as glasses.com sued her for patent infringement, and it is my understanding that they purchase this patent after they use Kate services. So Kate came up with Ditto. Then as I understand it, glasses.com or 1800contacts.com which is the same as glasses.com saw what she was doing, purchased a patent that described what she was doing after they saw what she was doing and then sued for patent infringement, claiming to own the idea.
Jordan Harbinger: [01:03:49] So it sounds almost like they're doing this for a reason that might have to do with smoldering competition. We don't really know and we can't really safely speculate on this. It stifles innovation when this happens though. Why write software if you're just going to get sued? Just keep your day job. Don't be ambitious. You might get punished and being an entrepreneur is hard enough. Some of the people in your documentary, they have given up on writing software or innovating because it almost ruined their lives.
Austin Meyer: [01:04:15] Yup. So Eric Rosebrock of -- I think it was iDrumTech or DrumTech was the name of his company -- had his life so just pressed by this lawsuit that he was afraid to go out working on his own as an innovator after that. The stress was so high from that.
Jordan Harbinger: [01:04:30] So what can be done about this? You give some suggestions at the end of the film. Legislation needs to change, patent duration -- can you go over some of that? I think these are great ideas.
Austin Meyer: [01:04:41] Okay. So one of the things that would make sense is to shorten patent terms to about five years or so. Patents were initially started in like Medieval Times or something when like the king granted a knight the power to do a certain thing and no one else could do it. It was a patent granted by the king. That's literally when this whole thing started is basically just a destruction of freedom where only one person was allowed to do a thing because that's what the king granted. That's when the patent system started. The fact that it even exists today seems ridiculous to me because how does the government tell people what they're not allowed to do or who owns an idea. The whole system, if it were up to me, would just be tossed, scraped, thrown out and people would be able to do as they pleased with their life. But if we're not going to throw out the patent system or if we're going to continue to say that the government decides who owns what idea and no one is allowed to do the same thing that someone else claims to own, if that's what we're going to use as our starting point. Then I would certainly say things move a little faster today than they did in Medieval Times, and ah, maybe a patent duration of something like three years or five years would make sense. So at least they time out after a reasonable period of time.
[01:05:46] Another thing that will make a huge positive difference is if experts in the field could quickly weigh in on any given patent and say, "No, no, no. This is not a new idea that describes new information that's actually beneficial to people. This is only your restatement of an idea that has existed for years, and if experts in the field could quickly weigh-in, indicate that the patent is invalid, and then the patent was made invalid rather than this multimillion-dollar multi-year odyssey through the courts with lawyers that could, in theory, do a tremendous amount to quickly throw the bad patents in the trash and leave the good ones. And I'll repeat I've never actually seen a good pattern in my life, but they may exist. Allow the good patents to remain in force. So there are things you could do to limit the duration and the so-called over-broad and low-quality patents.
[01:06:36] Those would help make the system well, suck less, as we say in computer programming, it would suck less if we could do those things.
Jordan Harbinger: [01:06:42] What about method patents, software patents? Should these exist?
Austin Meyer: [01:06:47] Well. So software patents, I've never seen a useful software patent before. It's just someone saying that they own the idea of doing something a certain way, but they never actually have new source code in them. And so software patents seem to be nothing but a way to quickly capitalize on the confusion of a jury to collect a payment from someone writing software. Method patents are saying, "Oh, I own the method of exercising account with the laser pointer." So there’s apparently a certain type of financial patent that was filed. They used to be followed up in New York, some sort of financial patents, and they were starting to cripple the financial system. And I don't remember who it was. It may have been Mr. Schumer or Mr. Bloomberg. They saw it for what it was. They said, "Whoa, Whoa, Whoa. These people are just writing down obvious financial methods and filing the lawsuits. This is bringing up the freedom to run a good business around here. We're shutting it down." And they immediately stopped all those kinds of patents, no business method patents, business method patents, illegals, full stop, done. And the moment they did that, the problem instantly stopped. The government actually did something like work perfectly and immediately.
[01:07:53] Ironically, the way they did it is by stopping a thing the government was doing, which was enforcing patents. But if we were to do the same thing with say, method patents or software patents, the benefits would be equally huge, instant and free in those industries as well.
Jordan Harbinger: [01:08:07] What about shell corporations? I mean, do you have a stance on that? Whenever you hear shell company, you never think, "Oh, they are probably doing" --it's universally kind of like, "Whoa, what's going on here?" Nobody has ever made the case for shell companies being a good thing. I've never heard that.
Austin Meyer: [01:08:21] Right. I cannot imagine any purpose of a shell company either. Any time you set up an organization whose goal is to hide who you actually are -- to say that that is suspect is perhaps a little bit of an understatement. Certainly, it seems if you file a patent infringement lawsuit, you should have to show who you are and not be hiding behind a post office box in East Texas.
Jordan Harbinger: [01:08:43] And possibly limiting people to suing others for inventing technology, not just using it.
Austin Meyer: [01:08:49] Right. So right now that's something that would pass the smell test with anyone. As we were talking about earlier, somebody that owns or believes they've invented something to use in Ford motor cars is not going to go and sue all of Ford's customers. They have to take up the issue with Ford directly. And so if patent lawsuits, we're limited to the person that is actually creating or manufacturing the technology in use that would at least stop the patent lawsuits from leaking out from the manufacturer out to the consumers.
Jordan Harbinger: [01:09:19] Austin. Thank you so much. Is there anything that I haven't asked you that you're already included that you think should be included other than, of course, links to your film?
Austin Meyer: [01:09:27] No, I think that was a pretty thorough, fairly tight and concise, go over of the situation, so I feel like we've done a pretty tight, informative job there.
Jordan Harbinger: [01:09:36] Great. Thank you very much for your time. This is really interesting. Of course, we'll link to the film in the show notes. I think people should watch it again, as a business owner, it's a kind of nightmare field, but it's very interesting either way.
Austin Meyer: [01:09:46] Awesome.
Jordan Harbinger: [01:09:47] Thank you.
[01:09:51] Big thank you to Austin Meyer. He's got a movie called The Patent Scam, and we will link to that in the show notes. That's how I got introduced to all this. I just think this is absolutely fascinating. Links to his stuff will be in our website, of course. Also in the show notes, there are worksheets for each episode, so you can review what you learned here from Austin Meyer. We also now have transcripts for each episode, and those can be found in the show notes as well.
[01:10:14] Now, there has been some fortunate recent legislation that doesn't allow for trolls to just sue wherever they want. They can't just plunk you into the middle of Eastern Texas. It actually forces these trolls, well, anyone for that matter, to sue defendants where they do business. So if you're a company in California, they have to sue you in California but this doesn't solve the problem. National companies or multinational companies can still be sued in that Eastern District of Texas because technically they do business everywhere. And even if you're sued there and you know it's not the appropriate venue for the case, well, you still have to go down there and then make a motion to change the venue most likely. And if you remember what Austin said they will never approve that because the judges, allegedly, I should say, are in cahoots with the law firms to make sure that that never happens. Also, remember trolls, they don't want to go to court. Patent trolls do not really want to go to court. It's expensive, but it's more expensive for you. They're doing it at cost. If there is a law firm, they want to scare you into settling, so it will still cost you tens of thousands of dollars or more to fight a patent troll, even in your own jurisdiction, and even if you never even make it to trial. This is absolutely bananas. That's why it's such a grift.
[01:11:29] I reached out to a couple of attorneys, corporate attorneys, patent attorneys that work for tech companies. They came up with a few pointers here. Asserting that you have no authority to settle, but your company board told you to go to court. You're kind of what they call throwing the steering wheel out of the window. So if you're on a collision course with a patent troll, legally speaking, you get to come to sit down with them at a table and you say, "I don't have any authority to settle this case, but what I do have authority to do from my company board is just go to trial." Basically, you're saying, I can't swerve. The only people who can swerve are you, and then that might get them to either sweeten the settlement deal or figure out a way to just go away and bother somebody else. Obviously, that doesn't always work. Also, if you can, don't fight the patent, fight the infringement, which is easier to disprove, and your lawyer should know about this, by the way, but it's a strategy that many attorneys don't even think about. Make it clear to them from the beginning that either you don't have any money or you would rather spend the money with your attorney fighting the troll than actually giving them the money. And now this has worked in the past because patent trolls make a percentage off what they're able to recover in settlements. So if you decide to take them to the mat and go to court, often they'll just say, "Screw it. This isn't worth it. We're fighting some company that has money to deal with this," or, "We're fighting somebody who just isn't going to suffer our BS and they will go pick on somebody else."
[01:12:51] Now that sucks, of course, because it still costs you a ton of money and it just passes the problem off to somebody else where they can go get a ton more money and become empowered to either come after you again. Or just keep doing this over and over and over. These lawyers have advised to tell them, tell the patent troll, you're going to make sure that it's as painful and difficult as possible for them because they're looking for low hanging fruit. They're looking for easy victims. So if you have, if you're in the luxurious position of already having money, you can say, "We're not going to settle for this. We're actually going to spend 350 grand to get a 100 grand out of you by going for sanctions, dragging you through the mud, trying to pierce the corporate veil, dragging your client's name through the mud, et cetera, et cetera." Otherwise, they're negotiating with terrorists. And that brings me to the final point here. Don't negotiate with terrorists. Patent trolls have done more damage to the US economy than any foreign or domestic terrorists in history. And they do it every single year.
[01:13:50] To date, there's been at least $500 billion in lost wealth, lost value to defendants versus $123 billion in terrorist act. That includes September 11. Think about this, every single year we're losing a ton of money to patent trolls much more than we're losing to terrorists and to date half a trillion dollars in lost wealth. This isn't like, "Oh, well, I had to enforce the patents, so I gave it to another company and they're using it to invest in R&D. This is just gone. You're giving it to some fat cat turd, who decided to come and sue you because he knew he could get a settlement out of you. It's getting spent on cigars. It's getting spent enabling more of this behavior. It's getting spent on furniture in some fancy law firm. It's ridiculous, and it's time to nip this in the bud. Legislation hasn't quite handled it. It's making it harder and harder, but at the end of the day, the only time this is going to go away is if people stop playing this game, which is a lot easier said than done.
[01:14:50] I'm teaching you how to connect with great people and manage relationships using systems and using tiny habits over in our Six-Minute Networking course, which is free over at jordanharbinger.com/course. Don't do it later. Do it now. Dig the well before you get thirsty because once you need relationships, you're too late. Procrastination can lead to stagnation when it comes to your personal and business relationships. And you know that's true because it rhymes, right? These drills take a few minutes a day. I wish I knew this stuff 20 years ago. It is all for free at jordanharbinger.com/course.
[01:15:22] By the way, most of the guests on the show, they subscribe to the course and the newsletter. So come join us, you'll be in smart company. In fact, you can reach out to Austin. Tell him you enjoyed this episode of the show. I'm sure she would love to hear from you and you never know what might shake out of that. Speaking of building relationships, you can always reach out and/or follow me on social. I'm at @JordanHarbinger on both Twitter and Instagram.
[01:15:43] This show is created in association with PodcastOne. This episode was produced by Jen Harbinger and Jason DeFillippo, engineered by Jase Sanderson, show notes and worksheets by Robert Fogarty, music by Evan Viola. I'm your host Jordan Harbinger. Our advice and opinions, and those of our guests are their own. And yes, I am a lawyer, but I am not your lawyer. I'm sure as heck, not a doctor or a therapist. So do your own research before implementing anything you hear on the show. And remember, we rise by lifting others. The fee for this show is that you share it with friends when you find something useful or interesting -- anybody who's been sued or is dealing with a patent or runs a tech company and might be in danger of a patent troll, share this episode with them. Please also share the show with anyone you love and anyone you don't. In the meantime, do your best to apply what you hear on the show, so you can live what you listen, and we'll see you next time.
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