Commentary: It’s Time for Congress to Take on Patent Trolls

Unethical lawyers are draining the economy of billions of dollars every year.

Innovation is the backbone of the American Dream. Our nation has always encouraged entrepreneurs to turn their inventive and problem-solving ideas into the successful enterprises that drive our economy and create jobs. But in recent years, unethical lawyers have latched onto that success like parasites, draining businesses -- especially startups and small companies -- of the resources they need to grow and be successful. It’s past time for the government to step in and protect American businesses and the U.S. economy from patent trolls.

Patent assertion entities, more commonly known as patent trolls, drain our economy of billions of dollars each year, forcing businesses to pay out settlements or expensive legal fees at the expense of creating new jobs or growing their businesses. In 2011 alone, patent trolls cost U.S. businesses $80 billion in wealth creation. That same year, businesses directly paid out $29 billion to fight patent suits. Patent suits brought by trolls made up 62 percent of all patent lawsuits filed in 2012.

Patent trolls tend to style themselves as modern-day Davids helping small companies stand up to big-business Goliaths. This is disingenuous to say the least. In 2011, 90 percent of sued companies were small or mid-sized businesses, with average annual revenues of $11 million. Patent trolls hit startup tech companies especially hard, with 40 percent of these companies saying the lawsuits have significantly hurt their businesses, stifling their ability to innovate and create new products.

Consider these examples:

  • In 2011, Innovatio threatened 8,000 businesses across the U.S. for offering Wi-Fi to their customers. Innovatio claimed the companies’ use of Wi-Fi violated patents it held, and raked in $2,300 to $5,000 per company in settlement fees.
  • Early this year it came out that Project Paperless, LLC demanded small- and medium-sized companies to purchase licenses, at a cost of $1,000 per employee, to scan documents and email them.
  • A company called Personal Audio has been sending licensing demands to podcasters and has sued Apple and other companies over the rights to create podcasts and playlists.

Patent trolls mooch off the legal system to increase their personal wealth. One recently profiled owner of a patent trolling company makes about $25 million per year. These trolls don’t actually produce anything themselves. Instead, they buy up old patents and file suits against any companies they claim are violating them. While most of the suits are frivolous, businesses settle out of court rather than fight them to save on legal costs. More than 97 percent of the suits are settled before trial.

Litigation pending in Congress would impose a “loser pays” system, which would require patent trolls to cover defendants’ court costs in frivolous lawsuits. With the cost of defending a patent suit typically between $2 million and $6 million, a loser pays system could have a significant deterrent effect.

It’s heartening to see the Congress united in working to reform patent litigation. The Consumer Electronics Association recently came out in support of the Patent Litigation and Innovation Act, introduced in the House by Reps. Blake Farenthold, R-Texas, and Hakeem Jeffries, D-N.Y. Reps. Darrell Issa, R-Calif., and Judy Chu, D-Calif., have introduced the Stopping the Offensive Use of Patents Act, which closely mirrors the Patent Quality Improvement Act introduced in the Senate by Sen. Charles Schumer, D-N.Y., in May. The SHIELD Act, sponsored by Rep. Jason Chaffetz, R-Utah, and Rep. Peter DeFazio, D-Ore., would make patent trolls pay court costs when they bring frivolous lawsuits. These are among the many proposals pending in Congress to help innovators fight this scourge.

Congressional leaders in both parties along with President Obama agree that the patent litigation system is broken and in desperate need of reform. Businesses drive our nation’s economy. They shouldn’t have to put off creating new jobs or expansion in order to fight bullies pushing dubious patent claims.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books, "Ninja Innovation: The Ten Killer Strategies of the World's Most Successful Businesses" (William Morrow, 2013) and "The Comeback: How Innovation Will Restore the American Dream(Beaufort Books, 2011). His views are his own. Connect with him on Twitter: @GaryShapiro.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.