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Web Essay: To Boost the Economy, Stop Patent Trolls

date icon August 15, 2013 category icon

Democrat & Chronicle
Web Essay: To boost the economy, stop patent trolls
Posted: 8/15/2013 12:03:00

It seems impossible these days to find an issue that brings together members from the Democratic and Republican sides of the aisle. Fortunately, bipartisan agreement is beginning to form around stopping patent trolls.

New York Sen. Charles Schumer has led the charge, introducing legislation to help start-ups and other small businesses fight back against patent trolls on a fair playing field. This bill is an important part of a comprehensive solution to the problem of patent trolls that plagues businesses in New York and across the country. Sen. Schumer’s bill has already garnered support from the White House, and last week a Republican congressman introduced parallel legislation in the House. With Schumer’s leadership, bipartisan support in Congress and a stamp of approval from the Obama Administration, this is a bill that could become law, and would be a boost for New York’s businesses.

Patent trolls – companies that do not create or sell anything – exist solely to threaten and intimidate other businesses for their own financial gain. Trolls use the threat of costly, drawn-out litigation to force businesses to pay them licensing fees, arguing that the companies have infringed on their patents.

Neither option is good for New York businesses. The average troll settlement costs a small or medium company $1.33 million, while a legal defense would cost the same company an average of $1.75 million per case. The result is a drain on the economy to the tune of $29 billion in direct payments to patent trolls. When legal fees and other additional costs are factored in, the total cost rises to $80 billion. That’s all money that could have gone into hiring additional workers, reducing the cost of products or developing new innovations.

Trolls often rely on low-quality, overly-broad patents for commonplace business methods, like online store locators, providing wifi in coffee shops and hotels, and emails that track package delivery. And they are targeting more and more businesses with frivolous suits.

And this problem is just getting worse. Since 2005, the number of patent troll cases has increased fourfold, making trolls responsible for a majority of all patent litigation in the United States. According to Patent Freedom, between 2006 and 2012, the number of New York companies sued for patent infringement rose 73 percent, to 288.

Sen. Schumer’s legislation, the Patent Quality Improvement Act, gives companies a faster, cheaper alternative to litigation by allowing them to challenge the validity of these patents at the Patent and Trademark Office instead of in court. This will make it more likely that businesses choose to fight back rather than simply pay a fee to make the troll go away. And once such a patent is proved to be invalid, the troll won’t be able to threaten other businesses.

In addition to this important change and since trolls face little risk and little deterrence when bringing frivolous cases. Congress should consider litigation reform such as shifting attorneys’ fees to the losing party to help level the playing field between the parties and discourage frivolous lawsuits.

Giving companies new tools to take on the trolls is an important first step, and one with broad bipartisan support. Congress should act on Sen. Schumer’s bill now to stop bad patents, stop the trolls and bolster New York’s economy.

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