Obama takes on the trolls… but who will win?

In his State of the Union address at the end of last month, President Obama again raised the issue of patent trolls; something that both houses have been in agreement over for some time… but as yet, little has happened.

obama-patent-trollPatent trolls are ‘non-practicing entities’ (NPEs) which prey on companies that have little understanding of patent laws, and there is a growing trend of trolls targeting SMEs as well as large tech companies which have been there focus for many years. It is thought that now more than 50 per cent of lawsuits are against companies with less than $10m in annual revenue. This trend is having a dramatic effect on the US economy and the landscape of innovation within business in the US, with one study stating companies paid out almost $30m in unnecessary lawsuits (2011).

Trolls attempt to sue businesses for use of intellectual property that has entered the mainstream and is in use by most organisations such as online shopping carts, WiFi technology, even ATMs. Their attempts should be futile, because as NPEs they have no connection to the product or service patented, but instead the complex and intricate network of laws surrounding the issue of intellectual property allows such lawsuits to take place with exceedingly high costs to the business accused.

The House of Representatives passed the Innovation act in December 2013 to get the wheels in motion to allow businesses wrongly accused of such law infringement to stand up against the trolls and this has gained support from a number of industries. This act however, must also pass through Congress with additions from the Senate, and despite a large cross-party consensus, the details of how this should be tackled are still under great contestation from both sides of the house. Basic provisions include fee shifting, evidence presentation, and other methods to complicate the process for the trolls to dis-incentivise their relentless persecution (one troll can send up to 800 accusatory letters per annum according to a 2013 Whitehouse Report).

Measures currently under consideration are preventative to a certain degree, but they do not address the complexities of existing patent laws which are where the problem lies. Instead of adding legislation, true reform should be the aim of the game, and furthermore provisions should be put in place to help companies better understand their rights when it comes to the still grey area of intellectual property.

The whole debate over the issue seems somewhat one-sided, with tech companies being the main body of consultation for the politicians leaving out those SMEs who are increasingly the most at risk from patent trolls. These are companies who are also more likely to have their own patents infringed by bigger companies and ambiguity in this area could prove equally destructive. NPEs aren’t the only bad guys, Daniel Papst, MD at Papst Licensing said: “very bad large corporations [also] use and misappropriate technology that they didn’t come up with themselves”. There is a fear among some democrats that this legislation could further distance SMEs from the legal system which should be there to protect them.

It seems Obama is first aiming for a change in attitude towards the issue, and this is where transparency and democratisation of intellectual property could go a long way to challenging patent trolls. Trolls exploit the ambiguity of the legislation for personal gain which must be stopped, but wider consultation with all those affected is needed to create lasting change rather than the piecemeal we can see at the moment to appease the tech fat cats.

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