Patent trolls aren’t imaginary monsters that live under a bridge (although they share some revolting characteristics). They’re worse … and they’re real.
A patent troll is a company or individual who owns or purchases a patent to charge other companies for infringing on their patent, making profit through settlements. Where patents were originally designed to prevent theft of intellectual property, it seems they’ve become a money-making weapon.
The worst part? It could be your money.
So, what harm does “trolling” really cause, and how can companies fight back?
The Trouble with Trolls
Settle or defend – both are expensive. Patent trolls cost businesses $29 billion last year in legal fees and licensing costs. The average amount companies spend on ending an NPE (non-practising entity) lawsuit ranges from $1.33 million for small companies to $7.27 million for large companies. (Source: Arstechnica)
Time is Money. The distraction and pressure of having to deal with trolls can be demoralizing, and productivity decreases as a result. Last year alone, this resulted in an indirect cost of about $83 billion dollars.(Source: Arstechnica)
Trolls Attack the Weak. A Boston University study concluded that 82% of defendants of patent troll litigations had less than $100 million in revenue indicating that smaller companies are at the greatest risk from trolls.(Source: Groklaw)
Number of Patent Troll Cases Annually
How to Fight a Troll
Check patents before you innovate. Be diligent, and check all patents and intellectual property before you begin development of a new product or service through existing databases (e.g. http://patft.uspto.gov/). If your search turns up find anything that raises concern, obtain opinions of invalidity (documents to support your company’s claim to your idea) to protect your company. This is a must for any entrepreneur and innovator as the consequences of being attacked by a patent troll can be devastating.
“Don’t fight the patent, fight the infringement,” says Drew Curtis, founder of fark.com. Essentially, this means you should protest “how” you have infringed rather than try to budge the perimeters of the patent. He also says to “make it clear from the beginning that you have no money at all or that you would rather spend money with your attorney, fighting the troll than actually giving them the money.”
Fight rather than settle. Never settle because you are too lazy to deal with the patent trolls. Many charges are actually illegitimate with no infringements to intellectual property actually present. Often the odds favour the defendant – unless of course, your company is in fact infringing on the patent.
Settle (if you must). In some cases, settling can cost less than fighting an infringement charge. But be warned: patent trolls are looking for companies that will settle almost immediately with them – their profitability depends entirely on settlements. Settling is definitely an option but it is not recommended unless your company is tight on time and money.
3 Ridiculous Patent Troll Cases
- VS Technologies sued Twitter because they owned Patent 6,408,309, which was on “Method and system for creating an interactive virtual community of famous people.” – Twitter beat the patent troll and did not settle.
- Innovatio has been targeting many small hotels and coffee shops for offering the service of Wi-Fi. They have sued many companies for relatively low prices; prices that are cheaper than hiring a lawyer.
- Uniloc has been targeting companies like Gameloft, Laminar Research, Electronic Arts, because of their Patent 6,857,067, which is for an online authentication system that enables users to verify and access data on a portable “licensing medium”.
No matter how carefully you tread, patent trolls will always attempt to force a settlement. If you are targeted, don’t be afraid (trolls can smell fear). Instead, remember to be diligent about potential troll cases, fight the infringement instead of the patent, and don’t negotiate unless you absolutely have to. Stand tall and fight on!
Do you have better pictures of patent trolls? Got an opinion on the rise of these trolls? Send us an e-mail at firstname.lastname@example.org or leave us a comment below.