Patent trolls, which are corporations that own patents not to manufacture or design products but solely to sue productive companies, have become a major drag on the American economy. Ars Technica reports:
[T]here is a very real, and very negative, correlation between patent troll lawsuits and the venture capital funding that startups rely on. A just-released study [PDF] by Catherine Tucker, a professor of marketing at MIT’s Sloan School of Business, finds that over the last five years, VC investment “would have likely been $21.772 billion higher… but for litigation brought by frequent litigators.”
Patent trolls prey on companies that can’t afford the costs of an extended lawsuit and so cough up the cash to settle instead. Tucker found that when confronted with patent trolls, start-ups often had to resort to layoffs or abandon projects. In short, patent trolls are quashing the next, nascent wave of tech innovation.Recent legal developments show promise in combating this practice. A Federal court in California handed down down the first ever “extraordinary” fees punishment to a troll this month. This type of ruling, in which the troll is forced to pay all the legal fees of a successful defendant, was upheld by Supreme Court in 2013. Legislative solutions, on the other hand, have been harder to come by. Congress is considering several bills that address the problem, notably the “Innovation Act”, sponsored by Representative Bob Goodlatte (R-VA), but designing laws that stop trolls but don’t trample the rights of true innovators has proven trickier than expected.Protecting intellectual property while promoting innovation is a difficult balancing act, one which is becoming increasingly important not only in our domestic economy, but also in foreign affairs. Recognizing, and hopefully punishing, the damage done by patent trolls is a needed first step.