Patent Trolls Cast Shadow Over Ad Industry

The concern over patent assertion entities -- a.k.a. patent trolls --- in our industry hit new heights of hyperbolic rhetoric when the ANA fired back at the 4As with the position that agencies should indemnify advertisers for any patent infringement issues arising from projects created on their behalf. This was in response to the 4As position, published in June of 2013, that it is entirely the marketers’ responsibility -- and therefore the marketer should indemnify the agencies in the case of patent issues.

For anyone not following or who hasn't yet been confronted by a troll -- either when crossing a bridge or sitting innocently in your office trying to create groundbreaking work for marketers -- these entities simply wait in the weeds (or under a bridge) for someone to infringe on their property. The patent troll then either sues -- or threatens suit -- to extract a financial settlement. The presence of these entities is not limited to our industry. It's a growing cancer in all businesses, and was even referred to by President Barack Obama as "extortion." The government has yet to act, and I can understand why. It’s quite a difficult legislative confluence between protection of intellectual property and the abuse of legal remedies.



Our industry has particular exposure, as we are constantly trying to find ways to connect with consumers on behalf of marketers. Most of these executions are far-reaching and easy to discover by a troll just waiting to make a connection between a technology or technique they can somehow relate to a patent they own. Prevention is difficult, because there are not reliable sources to determine in advance how trolls might correlate their patents with certain technologies.

Agencies have articulated that marketers should be the ones responsible. Ultimately, the work is being done on their behalf, and they have final approval -- not to mention deeper pockets (and more comprehensive insurance to make for easier settlement). Marketers feel that agencies should be responsible. After all, they sold them the idea, and oversaw the creation. If an agency’s creative product violated (or allegedly violated) a patent, then it is the agency that should fully indemnify the marketer.

Meanwhile, in the trenches, many marketers have now come around to some of the agency thinking and have created a shared exposure model, either limiting the financial out of pocket for the agency, or splitting responsibility based on the circumstances. According to an ANA survey, about 25% have adjusted their agreements with agencies to provide for this type of thinking. It all seems pretty practical when entities find some reasonable common ground.

However, agencies have now almost universally bolstered the indemnification clause in their promulgated contracts with production companies to pass all liability to the production company if a patent troll comes calling. So much for their associations' upstream argument.

One thing is certain. Responsibility should be taken by any entity that has willfully or knowingly violated a patent. This goes for marketer, agency or production company. In a scenario where none of this is the case, it is entirely unrealistic to think that a small business, like a production company, can survive patent claims on behalf of all parties in the current environment, as agency contracts now dictate. They most certainly cannot. Production companies do not have the resources to either defend or settle such claims. It's also not realistic to think that pushing liability downhill will alleviate the exposure of the agency or marketer. It most certainly will not; the patent troll will always end up going for the biggest goat, no matter how many others they put out of business in the process.

There are fundamental legal concerns when these bottom feeders can be allowed to do what they are doing, and there needs to be protection built into the law to make distinctions between true patent violations and this sort of "extortion." In the meantime, we cannot continue to act in a way where each entity just pushes responsibility downstream onto vendors who will accept it because they don't want to upset their client relationships. It is simply not a sustainable solution.

In order to truly address new world problems like patent trolls we need to do so realistically and collaboratively. Marketers and agencies need to stop playing defensive “gotcha” and start working together to find a realistic solution, taking care not to cripple the executing entities that are engaged to push the creative envelope by saying “it’s not my problem. We are all working in the name of growing brands.  

2 comments about "Patent Trolls Cast Shadow Over Ad Industry".
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  1. Mike August from Adam Carolla Show, April 4, 2015 at 6:30 p.m.

    As recent survivors of a nasty patent troll action, the problem is not getting the defendants of these actions to pre-negotiate their liability... Instead, it is the the executive, legislative and judicial branches of the Federal govt that need to get their act together and pass the existing reform legislation that calls for patent trolls to pay the legal fees of defendants when they lose... This will stop the extortion like practices of trolls that Obama has spoken out against and leave the courts to litigate the actual infringements of intellectual property, not the mafioso like shakedowns by the bad actors who seek to twist a good system to their own bad ends..

  2. Ari Rosenberg from Performance Pricing Holdings, LLC, April 6, 2015 at 12:41 p.m.

    Hey Matt -- I wanted to chime in -- there is the "other side" to this story -- which is the inventor/patent holder who is out there trying to build a business on their novel breakthrough -- I live on that side of fence (I have earned 4 patents and license a technology etc) -- I am not a troll but someone trying to bring innovation to the market and patents help protect my right to do that -- thanks.

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