Get free daily email updates

Syndicate this site - RSS

Recent Posts

Blogger Menu

Click here to blog

Tom Scott

Businesses Beware – The Patent Trolls Are Coming For You

Tom Scott is Executive Director of California Citizens Against Lawsuit Abuse.

Does your company use a scanner to send documents? Does your company allow customers to make purchases through an online shopping cart?

If so, you could very well be the next target of a lawsuit by a patent troll. You may say: I’m too small, I’m just a local business. Or we will fight them, we have a lot of lawyers. It doesn’t matter. Patent trolls are targeting business of all sizes in all industries, and making lots of money doing it. Patent trolling, says the Washington Post, has now gone “mainstream,” and all businesses should be worried.

Here is how this works: A patent troll, also called a patent assertion entity (PAE), is a person or company whose business model focuses on buying obscure patents for things they didn’t invent, then threatening to sue companies that use the technology involved unless they pay a licensing fee. The threats often involve technology or practices users don’t realize are patented, and that aren’t clearly linked to the patent in question.

This manipulation of our well-intended patent system is costing businesses big time. In 2011 alone, patent troll activity cost productive companies $29 billion in direct payouts, and even more in indirect costs. Average litigation costs a small/medium business $1.75 million.

The root cause of the troll problem is low patent quality. Plentiful bad patents are like cheap lottery tickets, making it easy for trolls to accumulate and assert overbroad claims.

When trolls are taken to court over these types of patents, they lose 85% of the time. But the cost of challenging in court is too high for most businesses to fight back, encouraging trolls to simply threaten litigation to make money.

A recent op-ed in the LA Times laid out the ridiculous, but very real, threat these patent trolls are posing towards businesses and the growth of our economy.

Fortunately, federal policymakers and regulators are paying attention to this problem.

The Stopping the Offensive Use of Patents (STOP) Act (H.R. 2766), introduced by Representatives Darrell Issa (CA-49) and Chu (CA-27), helps companies defend themselves from patent trolls by 1) giving them a faster, cheaper alternative to litigation; and 2) expanding pro bono programs at the Patent Office for the benefit of end­users and small companies.

The STOP Act lets a company targeted by a troll with a low quality business method patent challenge the validity of that patent instead of fighting in court.  The bill accomplishes this by expanding the Covered Business Method (CBM) Program from its current, narrow reach of “financial services” patents to all business method patents.  An expanded CBM program would efficiently weed out the invalid business method patents that fuel troll litigation because, unlike similar programs in the Patent Office, it allows challengers to raise any patentability issue against existing patents.  This includes arguments that a patent is vague, overbroad or abstract — common problems with business method patents.  The CBM program also encourages courts to stay related litigation, so that the parties do not fight in two places at once, wasting their own resources and those of the court.

The STOP Act parallels S. 866, the Patent Quality Improvement Act, introduced by Senator Schumer in May and endorsed by the White House in June.

A broad range of trade groups and companies, including the Food Marketing Institute, National Retail Federation, Consumer Electronics Association, and the Internet Association, support these reforms. They just recently launched a radio and print ad campaign across the county encouraging businesses to support federal action.

It’s important that businesses of all sizes from all industries join this growing chorus of support though – write a letter to Representatives Chu and Issa letting them know you support their legislation, send them and other congressmembers a note of encouragement on Twitter, help spread the word on Facebook.

Working together we can drive the trolls away and ensure that the patent system does what it’s intended to do: promote and protect real innovation that benefits consumers.