When something as mundane as using Wi-Fi in a coffee shop or making an online purchase with your smartphone provokes a lawsuit, it’s clear that the legal system is seriously flawed. Unfortunately, that’s the way things have been in the US for a number of years now, but with any luck, it might be about to change.

Recently, President Obama announced a series of measures aimed at putting an end to the most abusive acts of so-called “patent trolls,” but identifying who these trolls are could prove to be somewhat troublesome.

The term “patent troll” is slang for a company, more properly called a “patent monetization firm,” that owns a bunch of obvious patents – especially software patents – that in all likelihood, probably shouldn’t have been granted by the US Patent and Trademark Office in the first place. Patent trolls then attempt to “assert” their patents by threatening to sue any company or individual that infringes upon them, in most cases settling out of court for a sometimes-crippling license fee.

But is it fair to paint all such ‘patent monetization’ companies with the same brush? Do all of these companies really exist solely to leach off of others’ hard work whilst stifling innovation and productivity?

Trollin’ After the Little Guy

Robert Berman, CEO of CopyTele, is one such patent ‘troll’, and he remains unapologetic about what his company does. Not surprisingly, he rejects the notion that his company is a “troll” at all, instead insisting that CopyTele actually helps to protect the ‘little guy’ from larger corporations that often try to take advantage of individuals and smaller companies.

“In today’s economy, it is nearly impossible for a small company to bring products to market on its own,” Berman told me via email.

“Instead, it is often necessary for the company to “partner” with a much larger company that has manufacturing and distribution capabilities. Because of the difference in size and power between the 2 companies, these “partnerships” are often one sided, with the larger company attempting to take unfair advantage of the small company.”

According to Berman, this kind of ‘bullying’ by larger companies is widespread, particularly in the software industry. “CopyTele partnered with a multi-billion dollar company to bring products to market utilizing CopyTele’s patented technologies,” he told me. “Instead, the company tried to misappropriate CopyTele’s patented technologies and cause significant financial harm to the company.”

Can Trolls Innovate?

So to Berman, the patent system plays an important role in protecting small inventors from the predatory behavior of much larger companies. Basically, his position is that companies like CopyTele buy up patents from small inventors, giving them an opportunity to make cash that they’d probably never have by going it alone. By doing so, Berman argues that CopyTele can actually help to stimulate innovation rather than stifle it, even if they never bring their own products to market.

“We have transformed from a product based economy, to a service based economy, to now a knowledge based economy,” he explains.

“Patents are an important means of protecting knowledge, and will continue to be an increasingly important and valuable asset class. Public companies like CopyTele, that derive all or a large portion their revenue from patent monetization, give investors of all sizes the opportunity to participate in an asset class with huge growth potential.”

What Berman’s saying is that CopyTele basically provides a service for inventors:

“CopyTele often shares a significant portion of revenues generated from patents with the inventors, which serves as incentive for the inventors to continue to innovate. That is exactly the way that the patent system was intended to operate,” insists Berman.

Trolls Come In all Shapes & Sizes: Good, Bad & Ugly

CopyTele might insist it’s on the side of the investors, but various studies argue against those claims, concluding that they harm innovation in the US. One study in 2011 went as far as to claim that patent troll suits cost US corporations around $29 billion a year in legal fees. More recently, we’ve seen companies like Rackspace take a stand against notorious patent trolls like IP Nav, which refused to divulge the details of a patent suit it filed against Rackspace – not even the patent numbers or the patent owner – unless Rackspace entered into a “forbearance agreement”. In that case, Rackspace ended up filing a counter law suit against IP Nav, citing its questionable tactics to force a settlement without going to court.

The actions of companies like IP Nav have caught the attention of lawmakers in recent weeks, with bills like the one proposing the SHIELD ACT being introduced in Congress to try and stem the number of patent lawsuits – a clear sign from Washington that it sees patent trolls as a problem.

Surprisingly Berman welcomes such legislation, saying that there’s a difference between genuine patent monetization firms like CopyTele and those that attempt to abuse patent laws:

“Overall, the patent system works exactly as it was intended by the framers of the Constitution,” claims Berman.

“Instead of focusing on ways to eliminate allegedly abusive conduct (e.g. frivolous lawsuits), regardless of who initiates it, the administration is attempting to define and characterize all companies of a certain type (e.g. “NPE’s” or “Trolls”) as being bad.”

“As a public company, CopyTele generates revenue for inventors and creates value for our shareholders, without engaging in the types of abusive practices that have come into question. Just as it is unfair to characterize all big companies as monopolistic, predators that steal innovations from smaller competitors, it is equally unfair to characterize all NPE’s as initiators of frivolous lawsuits.”

So in other words, what Berman is saying is that not all patent ‘trolls’ deserve that label; rather, it’s just the case that a few abusive companies are tarring all of the others with the same brush. If so, then maybe what’s needed isn’t new legislation that makes it more difficult for patent trolls to operate, but rather a broader reform of the patent system itself.

“As the gate keepers for patents, the USPTO plays a crucial role in protecting innovation, and makes decisions with implications worth billions of dollars,” states Berman.

“Although the USPTO generates significant revenue, Congress re- appropriates much of that revenue for other purposes. A better funded USPTO would result in better patents, which would benefit everybody. By letting the USPTO retain more of the revenue that they generate, they would be able to hire and retain the talent that they need to produce a better work product.”