Can We Stop the ‘Trolling’ of the American Innovation System?

12 Apr

This American Life ran a provocative program in 2011, ‘When Patents Attack!’, that brought the parasitic practice of ‘non-practicing entities’ (NPEs) or patent trolls into mainstream awareness. These activities have become a scourge on innovative companies, particularly in the technology sector. Newegg and Twitter have fought successfully against the trolls, and Rackspace is fighting back. But the problem of “patent privateering” is a serious threat to the livelihood of tech companies and the future of start-up community in America.

Research has shown that patent trolls launched the majority of U.S. patent litigation cases in 2012. “Patent privateering” costs the U.S. economy and the innovative ecosystem $29 billion in legal fees in 2011 with a substantial portion of costs incurred by small- and medium-sized firms. The costs incurred are diverted from company investments in hiring new employees, marketing, or R&D. These companies are not innovating, bringing novel inventions to the market, or contributing to economic growth in a meaningful way.

Google is trying to rally the tech community in an effort to end the parasitic practice. Others, like SVP and General Counsel Alan Schoenbaum of Rackspace, argue that legislation is the only way to fix the problem:

Until Congress reforms the patent laws, companies of all sizes and industries could – and likely will – find themselves in the crosshairs of a greedy patent troll looking for a quick cash-grab. No company is immune, and, sadly, small companies can’t afford to fight. If they don’t succumb to the troll’s demands by settling, they face certain ruin.

Our goal with this lawsuit is to highlight the tactics that IP Nav uses to divert hard-earned profits and precious capital from American businesses. This time, the patent troll should pay us.

Some argue that our patent system is broken and needs more meaningful reform than the America Invents Act provided in 2011. Congress has taken steps to curb the problem with the introduction of the SHIELD Act by Rep. Peter DeFazio (D-OR-4) and Rep. Jason Chafetz (R-UT-3). The bill forces patent trolls and NPEs to take financial responsibility for lawsuits brought forward and allows defendants to recoup money spent defending the lawsuits. You can read a more thorough analysis here.

This is an admirable step by Congress, although some would argue otherwise. If Congress does indeed move forward with the legislation, there also must  be a complimentary response taken by tech companies in their own legal strategies. Tech companies need to do more to promote innovation and step back from attempting to sue competitors into oblivion–the same practice they’re all in favor of ending.

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