The proper patent troll repellent must be potent

  • Article by: JOHN GRAY
  • Updated: May 2, 2014 - 6:53 PM

The abusers have it too easy. Congress must make their actions onerous.

 

At some point in our childhoods, we found out that trolls aren’t real and that we don’t have to worry about them hiding in our closets and under the bridge. It turns out we were mistaken.

There are trolls threatening advancement of technology and innovation in Minnesota today. Whether you refer to them as patent trolls, patent assertion entities or nonpracticing entities, they have one goal: to buy broad or vague patents and use them to threaten real businesses with frivolous patent infringement lawsuits. Trolls never intend to manufacture a product or service: They exist only to sue companies that do.

Trolls have claimed to own patents on everything from online shopping carts to podcasts to Wi-Fi to the technology inside ATMs.

If a patent assertion involving a troll goes to court, things get worse, even if you have done nothing wrong. A defendant can face millions of dollars of court and legal fees, regardless of the outcome. To further entice companies to settle these meritless cases, trolls often will offer settlements that are just below the costs of litigation. It usually costs less to pay them off than to “win” in court. Trolls are hurting consumers and are increasingly going after small businesses, hampering innovation and reducing competition.

But why should an average consumer be concerned about patent trolls?

• Because patent trolls make the prices of products we all purchase every day higher. The costs of frivolous litigation or settlement payments are eventually passed on to consumers.

• Because money wasted defending against patent troll lawsuits could otherwise be spent on research and development to create new innovations.

• Because the resources going into lawsuits to defend against patent trolls could be used to employ more engineers and other professionals at Minnesota facilities like those of Oracle.

Oracle’s more than 1,000 Minnesota-based employees work every day to innovate, to create hardware and software that work together to help our thousands of Minnesota business customers add value for their customers. But that is harder to do if our attention and resources are constantly being redirected toward combating abusive litigation with patent trolls. Patent troll litigation has skyrocketed, increasing fourfold since 2005. By some estimates, it has cost the U.S. economy nearly $500 billion over the past two decades. When trolls win, we all lose.

The U.S. Senate soon will vote on legislation to fix the problem. The strong reforms needed to stop trolls while keeping a level playing field for all inventors include limiting the excessive discovery costs that trolls leverage to abuse the system. Discovery is the most expensive part of patent litigation, and the burden falls almost entirely on patent defendants. Our patent laws should enable the courts to determine what a disputed patent covers before allowing broad-ranging, expensive and potentially irrelevant fishing expeditions. This will prevent trolls from driving up costs in order to gain leverage in litigation, while not hurting legitimate patent holders.

Today, when filing a patent lawsuit, the only information a troll must disclose is the fact that there is a suit being filed about a patent. Plaintiffs are not required to disclose the nature of the infringement, or even which of the defendant’s products are at issue, so it’s very difficult for the defendant to make an informed decision about whether to fight in court or take a settlement offer. Most of this necessary information is not made known until well into the legal proceedings, after the parties have engaged in an expensive discovery process.

To remedy this, more information should be required in patent infringement complaints. This will force plaintiffs to divulge the information necessary to enable a defendant to conduct a reasonable investigation and make an informed decision about the best legal path forward.

Without the threat of end-of-case “fee shifting” acting as a deterrent to frivolous cases, patent trolls have almost no disincentive to pursue frivolous claims. A fee-shifting provision in favor of a prevailing party, while maintaining the court’s discretion to deny fee shifting if the losing party’s actions were objectively reasonable, would force trolls that lose their lawsuits to pay the defendant’s lawyers’ fees.

Common-sense remedies like these have been negotiated in a compromise reform package between Republicans and Democratic leaders of the Senate Judiciary Committee in Washington. In this era of partisan gridlock, the need to reform the patent litigation system and stop patent trolls may be the only major piece of economic legislation with a real chance to be passed by Congress and signed into law by the president.

Minnesota companies and small businesses need relief from trolls now. Sens. Amy Klobuchar and Al Franken and the other members of the Senate Judiciary Committee have been champions of patent reform, and now need to advocate for the strongest possible reforms.

 

John Gray is chief technology officer and vice president of Oracle’s Minneapolis-based Retail Global Business Unit.

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