OPINION

Patent trolls—the biggest threat to businesses

The deck is increasingly stacked against American small businesses.  With the explosion of federal rules and regulations, most of the blame falls on a federal government that appears willing to undermine the very companies that are the driving force behind the American economy.

One of today’s biggest threats to these businesses, however, doesn’t originate with the government.  It’s coming from private, litigation-obsessed citizens.  Patent trolls – often one or two individuals posing as a company – spend their days trying to find vague patents with the sole purpose of filing lawsuits against legitimate businesses and job creators who are committed to innovation and economic advancement.  Small business owners make up 50 percent of the victims of these predatory tactics.

Though patent trolls cloak themselves in glossy rhetoric and call themselves heroic “inventors,” do not be fooled.  They do not create new products nor do they have ownership of any ground-breaking innovations.  Instead, these trolls intimidate small business owners who are often operating on the margins to begin with in an effort to settle in court for hundreds of thousands or even millions of dollars.  On average, businesses pay $1.3 million to settle out of court with patent trolls.  These businesses can expect to pay about $1.75 million if they go to trial.

Given today’s uncertain economic recovery, the last thing our job creators need is legal costs to protect themselves from patent trolls.  The Founders created our patent system to put in place a method to safeguard the inventions and creations of every day citizens.  

Mattel, Apple and Disney all started in garages and succeeded through the hard work and grit of their founders.  But tomorrow’s Steve Jobs and Bill Gates are being stifled by patent trolls who are filing more and more lawsuits every day.  According to a report by Unified Patents, there was a 36 percent increase in district court patent cases from January 2014 to January 2015 – driven almost exclusively by an increase in litigation by ‘non-practicing entities,’ another name for patent trolls.  

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Congress is currently debating legislation that would ensure these anti-business tactics do not continue.  Introduced by U.S. House Judiciary Chairman Bob Goodlatte (R-VA), the Innovation Act would reform the patent litigation process by raising the standard required for a patent lawsuit and decreasing a troll’s ability to harass innovators with vague threats.

The bill also ensures that when a frivolous lawsuit is concluded, the losing party will be required to pay the legal costs of the entity that was unjustly attacked.  Critically, the Innovation Act does not make it harder for legitimate patent litigation, but instead limits the ability of these trolls to target America’s inventors.  Similar legislation was introduced during the last Congress, but the bill was unable to advance in the Senate after passing the House due to Harry Reid’s obstruction.  This session, it is imperative for Members of Congress to act on this bill and send it to President Obama.

America is fueled by the innovation of citizens who have the drive to create products that revolutionize our way of life.  Our representatives in Washington must ensure that as a nation we are able to continue to benefit from the intellectual capital of our people, which is why it is so important that the patent litigation system be reformed and the Innovation Act passed into law.

Allen Gutierrez is the national executive director of The Latino Coalition, one of the largest membership and advocacy organizations for Latino-owned small and midsize businesses.  It is based in Washington, D.C. and Irvine, California.

 

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