Thursday 21 March, 2013

Patent Trolls and How They Kill Technological Innovation

There’s a new threat to technological innovation – patent trolls. Actually, they’re called patent assertion entities (PAE). These are companies that specialize in taking people to court for alleged patent infringement. They go after tech companies that make or in some cases simply use supposedly patented technologies and threaten them with costly lawsuits.

How Patent Trolls Work

Patent trolls buy up patents from bankrupt companies or deceased inventors. These entities don’t make anything at all but simply buy up old patents. Then, they construct convoluted arguments about how your small tech start-up is infringing on the patents they own.

When a patent troll is on your trail, they start by sending a threatening letter to your company. The letter will often be worded ambiguously or use difficult patent terminology that the trolls know you don’t understand. But what you will understand is that they’re planning to take you to court for a lot of money.

Why the Scam Works

This scam works because of weaknesses in the patent system and lack of protection for companies that fall prey to patent trolls. If the case goes to court, your small business will face high court costs that most can’t afford to pay. The troll actually as no case against you, but they can tie you up in court and drain your financial resources.

Instead, most companies settle with patent trolls out of court. This is how they make their money. Cases rarely go to trial, where the troll would end up paying a great deal as well. Scared and confused companies that don’t understand patent laws (who does?) would rather fork over a cash settlement. The troll then looks for its next victim.

The Ridiculous and Frivolous

Here’s a quick sampling of just how insane this practice is. A patent troll contacted a small tech start-up called BlueWave Computing with a letter that said the company was violating a copyright by scanning a document and emailing it as a PDF document. The letter said BlueWave needed to pay $1,000 per employee.

In February 2013, a troll got ahold of a patent that supposedly covered the technology of podcasting. It began threatening small podcasters with big lawsuits that if carried out could have ended podcasting entirely.

A company ironically called Innovatio even attacked coffee shops that offered free WiFi for supposed patent infringement.

According to an article in Business Insider, the worst 8 patent trolls are:

*  Acacia Technologies

*  Tessera Technologies Inc.

*  Rambus

*  Wisconsin Alumni Research Foundation

*  Interdigital

*  Rockstar Consortium LLC

*  Round Rock Research LLC

*  Intellectual Ventures

Click on the above link to learn more about them.

What You Can Do about It

If you’re threatened by a patent troll, it doesn’t feel like there’s much you can do. Patent law is difficult and they know it better than you do. The best thing to do is seek legal counsel and get ready for a fight. One thing you should definitely do is to spread the word. Publish it on your website, blog or social media and tell others what’s going on. Seek the help of a growing community of other companies that have been victims.

The practice of patent trolling may come to an end soon. Lawmakers are trying to pass legislation that would protect companies. One piece of legislation is the SHIELD Act, which would force trolls to pay millions in court costs and legal fees if they lose. This would make it much riskier for them.

Bob Steele

Bob Steele is an entrepreneur, software developer, marketer, and author living in the Denver metropolitan area. He’s an avid outdoorsman who loves skiing, hiking, fishing, boating, and just plain having fun. His interests include games, space, technology, physics, cooking (well eating actually), economics, business, internationalism, and team sports. With over thirty years of professional consulting experience, Bob has been exposed to many diverse business models and has gained a sensible approach to life. Bob’s company, WaveCentric is focused on commerce, marketing, and entertainment related products.

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