Like many a boy and girl in the ’90s, I loved Troll dolls (a.k.a. Treasure Trolls)—you know, the ones with the bejeweled belly buttons and stick-straight, vertical mane of super soft, brightly colored hair. The dolls weren’t necessarily cute, but they weren’t at all scary like the man-eating or bridge-blocking trolls of ancient lore. The dolls were fun—and oh-so-collectable—toys, and I had earrings, pencil tops, and stuffed animals to go with my several classic dolls. In the ’90s, trolls were cool. Not so much anymore, though, thanks to the Internet.
Now an Internet slang term, “trolls” are individuals who intentionally start arguments, stir pots, and upset people by posting offensive, inflammatory, obscene, and off-topic comments in online forums, such as blogs and discussion boards. Their mission? Provocation and disruption. “Trolling” is the verb for this behavior, and its origin most likely stems from the fishing technique of “slowly dragging a lure or baited hook.” By and large, when it comes to trolls, the best advice is to ignore them. That’s easier said than done, though, when it comes to patent trolls.
That’s right; the word has taken on another meaning yet again. As Wikipedia so succinctly puts it: Patent trolls—a.k.a. patent assertion entities (PAE)—are individuals or companies that enforce “patent rights against accused infringers in an attempt to collect licensing fees, but [do] not manufacture products or supply services based upon the patents in question.” Essentially, they’re economic rent-seekers. Patent trolls have been making headlines as of recent, most notably with Personal Audio suing Adam Corolla over podcasting. In fact, according to Huffington Post, the majority of all patent litigation now consists of patent troll cases.
Patent trolls do not fuel innovation, but rather stifle ingenuity. And that’s not me just being angry that trolls are no longer cool. In an August 2014 report titled, “Patent Trolls: Evidence from Targeted Firms,” researchers found that “companies that don’t manufacture goods or products but sue companies that do threaten innovation and economic growth in the United States,” according to Phys.org. And Catherine Tucker, a marketing professor at MIT’s Sloan School of Business, has released a new study on patent trolls, and it found that in the last five years alone, venture capitalist investment “would have likely been $21.772 billion higher…but for litigation brought by frequent litigators.” According to the Harvard Business Review, “most patent trolls target firms selling less than $100 million a year.” The article cites a 2012 study out of Santa Clara University that found 41% of software startups must change strategies or exit business lines due to “significant operational impacts” from patent troll lawsuits. Furthermore, as ArsTechnica reports, trolls cost the US economy $29 billion annually in direct legal costs. Perhaps that’s why the FTC just received the budgetary approval to launch a patent troll study. (And in response, a patent troll sued the FTC, although the suit was decisively slapped down.)
Now, some of you—including myself—might be wondering: how much research is required for the government to take legislative action against these innovation snuffers? Well, the Senate Judiciary Committee had a patent reform bill going, but it failed due to lack of bipartisan support. (Where’s Frank Underwood when you need him?) According to Gigaom, “The failure of the patent reform bill, which passed the House of Representatives by a wide margin and had the support of President Obama, is a victory for troll companies like Intellectual Ventures, which have lobbied hard to stop the reforms.” On the bright side, though, is the US Supreme Court’s ruling on Alice Corp. vs. CLS Bank International. According to R Street, “The ruling invalidated a patent held by Alice Corp. on how computers can settle financial transactions through a third party,” and since that ruling, the federal courts system has invalidated several patents for function that are not novel. In fact, some of these inventions, like the concept of “upselling,” have been around since ancient times, reports R Street.
While Alice and several other recent court rulings have certainly delivered some effective blows to patent trolls, they still exist, waging war on American ingenuity and plaguing the psyche of innovators and inventors. So, what are entrepreneurs, startups, and small businesses to do? I’ve scoured the interwebs for advice, and in my next post, I’ll provide you with a concise guide to avoiding patent trolls and a free way to sign up to have some help if you are hit by a patent troll.Stay tuned.
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