Are Patent Trolls Chilling Innovation and Will Reforms Stop Them?

patent, patent trolls, reformsOne of my clients has a business that has research and development as one of its core practices. It is always fascinating to hear of some new cutting-edge idea that may be a product or a piece of product. So, as you can imagine, he is very protective of his patents. Protecting one’s patents has always been important but my client’s business is right in that demographic that the patent trolls are targeting. It’s a small business.

More than just software

You are probably familiar with patents on software, the smartphone litigation between Apple and Samsung as well as on the infomercial products featured on late night television. There has been some discussion about patents on medications ( good example of this is Viagra) expiring and companies re-engineering the medication to protect the patent. There are patents on genes for plants and, until recently, breast cancer genes.

Expensive blight

Patent trolls (also known as patent assertion entities) are business entities whose sole purpose is to gain ownership of patents and then sue anyone who infringes on them. Now there is a temptation to oversimplify and focus mainly on any company that sues for patent infringement as some kind of troll. There are examples of shell companies who sole existence is about buying patents and then waiting for infringement. Other companies partner with inventors and co-own patents or outright buy them from the inventors. The questions arise when there is some disparity between the percentage of patents owned by a company that are developed in-house and the ones that were purchased.

As entrepreneurs and small business owners go forward with what they think is an invention and/or innovation that is different from anything else, these patent trolls, or PAE’s, swoop in with threatened litigation. Small organizations typically don’t have the resources to fight back so there are a lot of settlements. Some businesses simply close their doors because there is nothing left.

Talk that the patent system is “broken”

In the US and around the world, there has been talk that the system has to be fixed. According to Rachael Lamkin, it isn’t really the system but how entities can use the courts to harm innovation and even consumers. This perspective does make sense. But there is also the observation that ideas are getting patents and the argument follows that ideas are not inventions. No matter what your perspective, there has to be some kind of change made to the patent system.

Legislation being introduced all over the world

It isn’t simply that businesses are being handicapped or ruined, consumers lose out when things are discontinued or costs increase. According to a Boston University study, patent trolling cost the US economy $29 billion in 2011. These problems are not exclusive to the US. There is a law that came into effect in April 2013 in the UK. Other reforms are being looked at as well. There is discussion about overhauling patent laws in Europe and maybe introducing a universal patent law.

This does affect all of us. We could very well work for a company that is sued. Farmers are being sent warnings that they are infringing on genetically-modified plant patents when seeds they did not plant are growing in their fields. These costs get passed onto consumers, clog up the court system and perhaps create a chill for inventors, entrepreneurs and small business owners.

Join the Twitter chat, #KaizenBiz, this Friday, June 28th at 5pm GMT/12pm ET/9am PT to discuss patents, patent trolls and innovation.

Are patents being filed for new inventions or to create a (temporary) barrier in the marketplace?

How are patent trolls affecting innovation?

What kinds of protections could legislators put in place to limit or eliminate patent trolls?

What kinds of protections can entrepreneurs and small business owners put in place to protect their patents?

How do you see patent reforms affecting innovation?

image: iStockphoto by mwookie