What is a Patent Troll?
A company or person that acquires large amounts of patents while having no desire to develop products. Instead of development, these entities file patent infringement lawsuits against parties who violate the patents. A patent troll’s sole purpose is to identify infringers and engage in litigation.
Why Should You Beware of Patent Trolls?
2015 marked an all-time high of Patent Troll cases. The year was the biggest ever for patent lawsuits with 68% being filed by trolls. These parties use patents as legal weapons rather than for creating, generating and developing new ideas. With the exponential pace in which cases are now growing and multiplying, spreading awareness is extremely important. The total cost of patent troll litigation stands at $6.8 billion and the cost to U.S. companies is roughly $30 billion. George Washington University’s Master’s in Paralegal Studies Online program reported on the impact patent trolls are having on our business and economy. The purpose of the report is to raise awareness of patent misuse and patent troll activity. The program’s report included the following information on the dangers patent trolls present and what is being done to limit/prevent their damage.
Patent Trolls: Debilitating Innovation since 1993.
Identifying Patent Trolls: Non-practicing entities (NPEs), companies that do not engage in and type of research and development, attempt to enforce patent rights against accused infringers far beyond the patent’s actual value or contribution to the prior art.
Trolls use patents as legal weapons. Rather than actually creating new products or gathering new ideas, trolls litigate and threaten.
How Patent Trolls Work:
- They purchase discounted patents from struggling companies looking to monetize resources.
- After establishing these vague patents, trolls send threatening letters to anybody they can argue may be infringing on them.
- The letters threaten legal action unless expensive licensing fees are paid.
- Patent Trolls typically target small and medium companies that have limited resources
- 3,134 patent troll suits were filed in 2013 — more than half of all patent suits
- A Cost of $30 billion to U.S. companies from patent abuse for financial gain
- Patent Trolls or NPEs profited three times the rate of real companies between 2010 and 2013
- The median company sued in 2013 had only $11 million in revenues
- Responsible for 68% of all patent cases in U.S. district courts
- Trolls take advantage of justice system by identifying and filing suits in notorious jurisdictions
- Motions to kill abstract patents have 71% win rate nationally but only 27% in East Texas
Trolls go after Large Innovators
Evidence in the case against trolls shows that NPEs are in it purely for the money and have no interest in resolving legitimate intellectual property disputes.
- Mean Settlement cost in first half of 2015 was $1.3 million (Small companies) $7.27 million (large companies)
- Mean litigation costs in first half of 2015 $1.75 million (Small companies) $8.8 million (large companies)
- Total Cost of patent troll litigation in 2015 stands at $6.8 billion!
Slaying the Trolls: How Policy is Evolving to Weed out NPEs
In December 2013, the House of Representatives passed the Innovation Act in a 325-91 vote, which included several key provisions proposed by the White house in 2012.
Establish “Loser-Pays” rule for patent litigation: The administration wants to make it easier for winning defendants to recover legal costs from plaintiffs.
Require more transparency from patent owners: Patent trolls can create shell companies to hide the true owners of their patents.
Protect End Users from Patent Lawsuits: A popular tactic used is threatening technology users rather than manufacturers since customers are less likely to mount a strong defense.
Expand a Patent Office Program to Invalidate Low-Quality Patents: The so-called covered business method program allows defendants in cases involving financial patents to challenge them at patent office.
Original Report: https://paralegalstudiesmasters.online.gwu.edu/resources/infographics/the-impact-of-patent-trolls/.