Patent Troll Lawsuits’ Effect On SMEs

patent troll lawsuitsTrolls, trolls, trolls! Everywhere you look these days, litigation trolls – with their greedy little paws and Smegel-like sensibilities – are pouncing onto the scene out of nowhere – frightening visionaries, harmless bystanders, and small business owners, alike. And if you ask me, the increase in trolls, coupled with an outdated patent system, is creating perfect conditions for an innovation-killing storm.

At the risk of sounding hyperbolic, could we be heading into an era where mega-corps are actually the “big brother” they themselves warned against in their start-up days? Is the current trend in patent litigation unfairly and disproportionately favoring big-business, so much so that it may thwart digital innovation and market competition?

Intellectual Property Trolls & FRAND

For the past couple of years, copyright trolls have received the bulk of the attention, but patent trolls are on the prowl now too. One of the more alarming aspects of patent trolling is how Fair, Reasonable and non-discriminatory terms (FRAND) – also known as RAND – seem to be an after-thought for many trolls and the attorneys who do their bidding, which is a huge mistake in this lawyer’s opinion, considering that the standard should be a paramount factor in modern-day technology patent negotiations.

In brief, FRAND is a required licensing obligations rule, established by standard-setting organizations (like the IPO), whose job it is to “address the needs of a wide base of adopters” and ensure interoperability of devices that are manufactured by different companies.

In other words, if you develop widget X, there are certain standards you need to meet if you want to bring your product to market, so as to ensure cross industry compatibility. If one of those standards is associated with a patent, the rule of thumb is that it must be able to be adopted by other parties on “reasonable and non-discriminatory terms.”

In many of today’s patent lawsuits, however, the FRAND standard is either over-looked or the facts of the case are manipulated and presented in a misleading way. If, as an industry, we’re committed to reforming the nation’s tech intellectual property statutes, it’s important that we push for clearer FRAND guidelines that are uniformly enforced.

The Cost Of Patent Troll Lawsuits On Small Businesses

Greed-based lawsuits only lead to clogged courts and intimidation litigation, which severely damages small- and medium-sized businesses – especially tech businesses. According to the Electronic Frontier Foundation, in 2011 alone, patent litigation cost approximately $29 billion. $29 billion!

If that figure didn’t shock you, what James Bessen and Michael Meurer revealed in their book, “Patent Failure” should be cause for alarm:

  • 62% of software patent lawsuits brought forth by non-practicing entities (a.k.a., trolls)
  • Small businesses end up paying disproportionately higher legal fees than larger corporations with in-house legal teams.
  • Small businesses, when faced with patent litigation, have to divert funds from R&D and marketing, making them less competitive.

The bigger tragedy is that many small business owners choose to just pay troll’s settlement fees out of fear, even if they think they have a strong case. As such, it can be argued that the current patent statutes allow for extortion camouflaged as legitimate litigation.

Current Patent Lawsuits & Working Groups To Watch

As of late, there has been a lot of discussion surrounding the software patent issue. Several high-profile patent lawsuits and cases are making news, like Apple’s recent acquisition of “The Mother of All Software Patents.” On the opposite end of the software patent spectrum is Judge Richard Posner, who recently threw the Motorola/Apple case out of court, but not before censuring both parties for failing to prove damage. And today, Samsung and Apple will be facing off in court in what is shaping up to be a hard-fought technology patent showdown.

In addition to the throng of lawsuits, the Electronic Frontier Foundation has also created a website dedicated to the topic of United States patent reform – defendinginnovation.org. On it, they outline their suggestions for patent reform in the United States. Anyone interested in the topic should make time to check it out.

If you’re a small business owner looking to avoid future legal headaches, it’s important to get your intellectual property house in order from the beginning. An AV-rated firm that is also on the EFF’s list of recommended copyright troll defense litigators, Kelly / Warner is who to call when looking to register and protect your intellectual property. For those embroiled in a software patent lawsuit nightmare, we know a vast network of troll-fighting lawyers, with whom we can pair you, based on your specific needs. Contact us today to begin the conversation.

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