Posted by Kevin Tan at 11:55 AM
Over the past several years, Patent Trolls have been targeting small businesses with the hope of scaring these small businesses with threats of costly litigation by alleging that these businesses have infringed their patents. By avoiding litigation, these businesses could settle by paying a fee. According to Professor Bessen, there has been an increasing amount of lawsuits filed against these small firms: 800 lawsuits were filed in 2005; 2,900 lawsuits were filed in 2011.
But what are Patent Trolls? The term, coined by Peter Dektkin, is defined as people or companies who purchase old patent rights with no intent to sell or endorse the patent product. The purchasers would then sue or demand royalties from companies that are allegedly infringing on patents owned by the troll. Many have criticized this practice because it shifts the manufacturer’s resources from developing the products to defending the lawsuits.
In response to the trolling, many businesses have complained about these activities by meeting with other businesses to discuss about how to deal with patent trolls and to promote various reforms to limit their attacks. These companies include tech, software, advertising agencies, retailing, banking, grocery industries, and more, who have begun addressing their concerns to their government officials. Given the fact that these small companies are considered the new sleeping giant, some officials have acted on their behalf by introducing legislation that deals with patent trolls.
President Obama has also announced several executive orders “to protect innovators from frivolous litigation”, and have ordered the Patent and Trademark Office to require all companies to be more specific about what their patent covers and how it may be infringed. Furthermore, Obama has asked the Patent and Trademark Office to be more cautious of frivolous and broad claims.
Vermont has recently passed legislation protecting these small businesses from bad faith patent claims. Under this new law, passed this past May, patent trolls can be sued by businesses, customers, and by the attorney general, and could be forced to pay all of the victims’ legal fees and damages of up to $150,000.00. Several state Attorney Generals have initiated special investigations to determine whether the claims brought by plaintiffs of the patent infringement cases are considered unfair, deceptive, and frivolous.
Although there seems to be a lot of activity going on throughout the nation that is trying to limit patent trolling, the act of purchasing a patent and then claiming that it has been infringed is not new. In fact, as Profession Bessen notes, this sort of activity has been practiced since the late 1800s, where “patent sharks asserted dubious patents on mechanical devices. Then, as now, the problem arose because large numbers of poorly defined patents were granted, making it difficult for businesses to avoid inadvertently infringing.” Time will tell if what we are doing, will actually limit patent trolling.