Why Red Hat Is Wrong That It's Better To Just Pay Patent Trolls Sometimes

from the that's-why-you-get-more dept

Last year, people got reasonably upset when it came out that Red Hat had settled one of many patent lawsuits filed against it, this time from patent troll giant Acacia. People were upset both at the decision to settle and then to keep the terms secret. Red Hat, after all, has spoken out many times against software patents and patent trolls. Slashdot points us to the news that Red Hat's CEO has explained that sometimes it's just easier to pay up. It's clear that he really doesn't want to and thinks the whole practice is distasteful, but there are times when he recognizes it's just cheaper to pay up:
"When it's so little money, at some point, bluntly, it's better to settle than fight these things out."
He does say that they fight on bigger cases or cases they feel are especially ridiculous. But, in others, it's just cheaper and easier to settle. I certainly understand the reasoning. And I definitely understand the short-term cost-benefit analysis. If you can pay off the patent holder for less than it'll take to fight the case, even if you win, that seems like a good deal. Except... in the long run, this may be penny-wise and pound-foolish, because as you build up the reputation as a company who will fold as long as the settlement demands are under a certain level, then all you do is encourage more trolling behavior, leading to more new lawsuits with more patent holders demanding a handout.

Again, I can certainly understand the basic reasoning for settling, and can't really begrudge any company that decides to settle to avoid a lawsuit, but it is a little disappointing that this just perpetuates the problem.
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Filed Under: patent trolls, patents, settlements
Companies: red hat

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  1. icon
    sheenyglass (profile), 6 May 2011 @ 10:48am

    Re: Re: RedHat's strategy can be reasonable

    An assumption is not a conclusion. "Assuming the threshold is set correctly" does not mean concluding the threshold is set correctly. I made no conclusions about what the threshold should be or whether RedHat had set it correctly. Rather, I made an assumption about something for the sake of argument because I had insufficient data on that point. Similarly, you assumed that "they" referred to trolls so that you could make your argument.

    RedHat's decision not to fight where trolls have a decent chance of success does not provide a disincentive to troll. It preserves resources to develop the products which are the company's primary purpose.

    The argument is that a strategy which involves fighting where there is a high chance of success (and therefore a high ROI in the form of trolling disincentives) and capitulating where the opportunity costs of fighting outweigh the potential benefit (meaning the lower chance of success is less valuable than product development) is a reasonable strategy. Otherwise you risk developing excellent disincentives to troll, but at the cost of losing the ability to create new tech.

    Additionally, trolls with good cases are less susceptible to intimidation through fighting back, as they have a chance of a payday through a verdict. So the troll-fighter will have decreasing gains in trolling disincentives as troll-cases get stronger.

    Therefore, if you create a disincentive to troll with BS cases while settling good cases, you maximise the bang for your buck in creating a disincentive to troll while minimizing the drag on resources you get from paying lawyers.

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