- Posted on: Feb 11 2016
Imagine finding in your mail a certified letter from a company you’ve never heard of – or a law office you’ve never heard of – claiming that because you created and uploaded a podcast to the internet, you’ve infringed on a patent. That’s essentially what happened to podcaster and comedian Adam Carolla. After more than a year of litigation, Carolla reached a settlement in 2014 with a “patent troll” company that claims to hold a patent that covers commercially-available podcasting technology. In most cases, no patent claims are cited when you receive such a letter, and no evidence of infringement is offered, either. Nevertheless, the letter threatens to sue you for patent infringement unless you pay a “licensing fee” which in some cases is $50,000 or higher.
The “patent trolls” claim that they are conducting legitimate business by sending these demands. Others consider the practice vaguely dishonest – something that’s almost but not quite extortion. According to the World Intellectual Property Organization, patent trolls are now “wrecking public confidence in the U.S. patent system – and by extension, profoundly weakening the long-standing bedrock belief in the great economic benefits conferred by patent-protected inventions.” The law, of course, considers patent disputes on a case-by-case basis, and patent trolls have flooded the courts with lawsuits, particularly since the emergence of the internet. In 2014, the situation came to the attention of President Obama, who asked Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.”
EVERYONE IS A POTENTIAL TARGET
Patent disputes have increased substantially since the Leahy-Smith “America Invents” Act – the most recent patent law – was adopted in 2011. Most of the litigation has now moved from targeting tech companies to targeting restaurants, grocery stores, and other small businesses. The current law allows patent owners – including patent trolls – to sue customers and other end-users of a product that allegedly violates a patent, sometimes before suing the company that actually manufactures the product. MPHJ Technology, for example, which claims to own technology for scanning documents to email, demanded that companies using the feature pay nearly $1,000 per employee. Innovatio, the holder of a patent that it claims is Wi-Fi-related, targeted coffee shops and hotels that offer Wi-Fi access to customers and guests. Personal Audio demanded license payments from podcasters like Adam Carolla who used commercial, off-the-shelf software to create and distribute their podcasts.
In the fairy tales, trolls live under bridges and bully travelers into paying a fee to cross. Today’s patent trolls also appear by surprise, to threaten and intimidate the unwary. To be precise, patent trolls are companies that don’t invent or manufacture products but instead buy up patents for the sole purpose of collecting licensing fees and bringing lawsuits. If you receive a letter that accuses you of patent infringement and demands a licensing fee – or if you are sued by a patent “troll” for patent infringement – immediately contact an experienced patent attorney who understands and routinely handles cases involving the specific and specialized language of patent claims.
Without corporate reputations to protect, patent trolls can actively and aggressively file “nuisance” lawsuits asserting dubious patent claims. Since U.S. courts typically lack a “loser pays all costs” mechanism, there’s little to prevent patent trolls from filing as many lawsuits as they like. The ability to buy and sell patents is supposed to energize creativity, job creation, and economic growth. Patents are property, and patent trolls pay inventors, allowing those inventors to enjoy the profits they deserve and to create more inventions. Too often, however, patent trolls exploit patents that are only remotely related to another company’s products to demand settlements from small companies that cannot afford to defend themselves, or they demand licensing fees from larger companies who pay simply to make the troll go away. Fortunately, there are some ways to protect your company against patent trolls.
PROTECT YOUR BUSINESS
Due diligence comes first. If you have an idea for a product or a service, and if you want to go into business with that idea, have an experienced patent and trademark attorney help you with the research. Before you bring any product to market, conduct a comprehensive search with the U.S. Patent and Trademark office to determine whether or not that item – or something very similar – has already been patented. Business owners in particular should learn the definitions and basic legal rules regarding patents, trade secrets, trademarks, and copyrights. Still, it’s imperative to have the advice and insights of an experienced patent attorney.
You’ll also want to purchase intellectual property insurance, which can protect your company in case a patent troll takes you to court. It’s worth having. That insurance companies even offer intellectual property insurance as a product is an indication of how widespread the patent trolling problem has become. Once your idea or product is patented, don’t wait to purchase insurance. You need to have intellectual property insurance in place before anyone can take any legal action against you regarding a patent. For inventors, intellectual property insurance will cover their legal costs in case they have to sue an infringer, but for third parties such as small businesses, intellectual property insurance covers their legal costs in case they are sued for patent infringement.
Protect your documents and your research. Patent trolls comb the internet looking for virtually anything that can be twisted into a patent infringement accusation. Make certain that your research has the maximum protection from computer hackers and from anyone else who wants to snoop around and look at your confidential information. Don’t put anything on your public website that might interest a patent troll. Another suggestion – especially for new owners of startup businesses – is joining a professional or trade group. There’s strength in numbers, and the ability to share information and learn about the experiences of others is invaluable. Even after taking these precautions, you may still find yourself in a courtroom sitting opposite a patent troll. If you receive a letter demanding licensing fees or notifying you of a lawsuit, contact your patent attorney at once and get the answers to these questions as quickly as possible:
- Who sent the letter? Is the party known as a patent troll?
- Precisely, how have you supposedly infringed on that party’s intellectual property?
- What intellectual property laws apply?
- What deadline has been set for your response?
Don’t hesitate to speak immediately with an experienced patent attorney if you receive a threatening letter regarding a patent. Sometimes just one letter from your attorney can shut down a patent troll’s efforts; the troll may choose to move on to a less resistant victim. Do not let patent trolls or their threats keep you from moving forward positively with your own creative and business pursuits. Eventually the ongoing patent troll “flap” will fade, but only if businesses and not slowed down or intimidated. The way for small businesses to defeat patent trolls is to fight them aggressively and then keep doing what you do best – business.
THEN AND NOW
Patent law in the United States is designed to ensure that inventions are legally protected. It’s a system that’s worked well for centuries. The first patent law is generally thought to have been the Venetian Patent Statute of 1450. Patents were systematically granted in the Italian city-state and announced to the citizenry. The English patent system evolved from the Middle Ages into the first modern system of patent law designed to stimulate invention; it was the essential legal foundation that made possible the Industrial Revolution. The framers of the United States Constitution considered the ability of inventors to protect their inventions to be so essential to the prosperity of future generations that they included the ability to issue patents as one of the few enumerated powers granted to the federal government.
Frankly, it’s the internet that’s been indirectly responsible for the rise in the number of patent trolls. Patent trolling is predominantly focused on the software industry; software patents currently make up only 12 percent of all patents issued but constitute 74 percent of the patents that are litigated. Patents on computer software tend to be ambiguous, poorly worded, and difficult to understand. Ninety percent of software-patent defendants settle without going to trial, but among the software-related patent-troll cases that do go to trial in the United States, ninety percent are won by the defendants.
THE HELP THAT BUSINESSES NEED
If you’re threatened or sued by a patent troll, immediately obtain the advice of a good patent lawyer. You’ll need to be represented by a seasoned Washington, D.C. patent attorney registered to practice before the U.S. Patent and Trademark Office. Our experienced patent litigation attorneys at Dunlap Bennett & Ludwig have represented numerous clients – both plaintiffs and defendants – in infringement suits and declaratory judgment actions. Our patent attorneys have training and experience in a number of fields including science and engineering, business, and government, and we represent clients across the United States and around the world. Unfortunately, until the law changes, patent trolls have to be taken seriously. If you are threatened or sued by a patent troll, you need to take action – and contact an experienced Washington, D.C. patent attorney – as quickly as possible.