In announcing recent actions by the White House to combat patent trolls and strengthen America’s patent system, Gene Sperling, director of the National Economic Council and assistant to the president for economic policy, succinctly observed, “It’s no small deal that the president of the United States chose to make a call for patent reform legislation in his State of the Union address.”
Mr. Sperling is exactly right — it’s not a small deal. And not just because the White House has put the platform and power of the presidency behind this effort, but also because it is an increasingly serious problem that is harming America’s economic growth and must be addressed by Congress as soon as possible.
As Mr. Sperling noted in his remarks, patent troll suits increased from 29 percent to 62 percent of all infringement suits in just a two-year period, and trolls threatened more than 1,000 companies last year alone.
Trolls increasingly target small and medium-sized business, often for doing completely normal business practices — such as scanning and e-mailing documents and accepting job applications online — simply because they were done on the Internet. Trolls send letters to businesses giving them a lose-lose choice: pay thousands of dollars or face the trolls in court. Both options cost businesses hundreds of thousands, or even millions of dollars. That’s money that can’t be used to hire workers, or invest in new innovation.
On behalf of the Internet industry, we applaud the president for his leadership on this issue and we are encouraged by these first steps — but there is no question that more can and should be done.
The seriousness of this problem, and the bipartisan support for addressing it, highlight why Congress must pass meaningful patent reform legislation this year. The Innovation Act passed by the House of Representatives in December offers a good foundation on which to build, but members of the Senate Judiciary Committee now have a critical opportunity to strengthen and perfect the targeted reforms required to deter the abusive litigation practices of patent trolls and promote innovation and economic growth.
Patent quality is also an area that needs to be addressed. Business method patents fuel a growing and disproportionate amount of patent troll litigation. New York Senator Charles E. Schumer, D-N.Y., correctly observed at the Judiciary Committee’s hearing in December that passing a patent reform bill without addressing low-quality software patents would be “treating the symptoms instead of the disease.”
This is an issue that is affecting businesses and workers in every state across the country.
In Connecticut for example, major companies like Sikorsky, ESPN and Foxwoods have all been sued by patent trolls. But so too have small businesses, like Southeastern Employment Services, a company in Old Lyme that finds jobs for people with disabilities. The company received a letter from a patent troll threatening a lawsuit for using the scan-to-e-mail function on its business copier. The patent troll demanded a licensing fee for each employee — a cost totaling more than $75,000.
In Iowa, a patent troll threatened to sue the Hy-Vee grocery chain simply for using software that allows a text message to link someone to the store’s website, even though countless stores throughout the country use that exact same technology.
And in Vermont, state Attorney General Bill Sorrell filed a first-of-its-kind lawsuit against a patent troll last year. The troll had allegedly been sending threat letters to small businesses in Vermont, which contained deceptive statements and a demand for $1,000 per employee in return for a license to its patents.
These are but a few examples of the way that patent trolls use low-quality patents to pursue nuisance-value settlements from legitimate businesses of all sizes. Patent trolls know they can exploit imbalances in the current patent litigation system to ratchet up litigation costs while facing no responsibility or risk for doing so.
The time to act is now. We are encouraged by President Obama’s actions and hope the Senate will soon take advantage of the strong bipartisan support to address meaningful patent reform this year.
Michael Beckerman is the president and CEO of The Internet Association, a Washington D.C.-based trade association representing the leading global Internet companies.