Help Virginia businesses – stop patent trolls
The Internet has become the backbone of our economy — powering big technology companies, local stores and restaurants alike. Businesses across Virginia rely on the Internet to connect to their customers, whether through online advertising, e-commerce or simply providing maps to help potential customers reach them. These common tools, traditionally confined to the technology sector, have opened Virginia businesses to a new threat: patent trolls.
Patent trolls are companies that abuse our patent system to extract from productive businesses licensing fees and settlements — which often cost hundreds of thousands or even millions of dollars — under threat of litigation. Their claims are often unfounded, based on vague and overly broad patents on common business practices that are associated with web activity like using online shopping carts, providing shipping notifications or web-based store locators. Even though these claims are weak and frivolous, it’s often in a targeted business’s interest to settle because the average cost of defending against a patent suit in court easily runs into the millions.
Trolls target every type of business, from Fortune 500 companies and major retail and restaurant brands to coffee shops, mom-and-pop stores and technology startups. Major Virginia employers such as Lab Corp., AT&T and GEICO have been sued for using basic Internet-based business tools such as online store locators, live chat services and automated replies involved in marketing. In 2011-2012, 7,000 businesses were sued by patent trolls — four times as many as were sued in 2006. And in 2012, trolls sent out approximately 100,000 demand letters.
Counting direct payments to trolls, legal fees and other associated costs, troll litigation and intimidation costs productive companies $80 billion a year. And it causes real harm for Virginia businesses, from fewer workers hired to reduced investment in research and development.
As the scope and scale of the problem have grown, policymakers have taken action. The House Judiciary Committee, led by Chairman Bob Goodlatte of Virginia, has advanced legislation that would bring much needed transparency to the patent litigation system. It also would require losers to pay legal fees, so trolls think twice before bringing weak or frivolous lawsuits to court. These are important reforms that would stop much of the worst abuses, and we strongly support it.
Through Chairman Goodlatte’s hard work and leadership, the Innovation Act makes many needed improvements to the patent system that will help businesses in Virginia. Small businesses and entrepreneurs also want to see the root cause of troll abuse, bad patents, addressed. A disproportionate number of troll lawsuits are over patents on business methods. Troll suits involving business-method patents have increased on an average of 28 percent per year since 2004, and are nine times more likely to be litigated than other patents. That’s because many of these patents are low quality and should not have been granted in the first place.
To encourage companies to fight back against trolls and get these bad patents out of the system, businesses need a cheaper and quicker alternative to litigation. The Covered Business Method program provides such an alternative by allowing companies targeted by trolls to challenge the validity of business-method patents related to financial services at the U.S. Patent and Trademark Office rather than in court. We encourage lawmakers to add this provision before it reaches the president’s desk.
The fight against patent abuse is one of the few issues in Congress with bipartisan support. Goodlatte’s bill received strong support from both Republicans and Democrats, as well as the White House. The Senate appears poised to act on patent trolls as well. And President Obama has also voiced his support for stopping the trolls, making it likely that a bill will become law next year.
As businesses of all types in Virginia and across the country are burdened by the growing threat of patent trolls, relief cannot come soon enough. Congress must act to stop the trolls and weed out the bad patents that make their abusive practices possible.