Are patent trolls smothering innovation?

Battling the Trolls: Defensive Strategies and Patent Reforms

In response to the patent troll threat, large companies have purchased their own patent portfolios. For example, Apple, Microsoft, Nokia and others paid $4.5 billion for the patents of the bankrupt company Nortel. The patents help them to fight suits and can be used to threaten other companies to ward off litigation. However, this defensive strategy does little to promote new ideas. It might even tempt these corporations to engage in troll-like behavior themselves [source: Salmon].

To curb the actions of NPEs, people like Daniel McCurdy, chief executive of Patent Freedom, a company that researches NPEs, have advocated for patent-related reforms [source: McCurdy]. These reforms include the following:

  • Better patents. When patent suits actually come to trial, 40 percent of patents are invalidated by courts [source: Raustiala]. That means they should never have been issued in the first place. They aren't original, aren't specific enough, or cover ideas that are too obvious. If the Patent Office set higher standards, patent trolls would be less able to bring suits based on vague patents with little merit.
  • Compulsory licensing. Reformers have advocated rules requiring patent holders to license an idea for a reasonable fee if the holder fails to develop it after a certain amount of time. This would prevent a patent troll from waiting until a product was profitable before jumping in with a suit. And target companies could take out a license to avoid a suit.
  • Loser pays. Some patent troll critics have advocated requiring a plaintiff who loses a patent suit to pay the defendant's costs. This would put a serious damper on those suits that lack merit but that might be settled to avoid litigation expenses.
  • No jurisdiction shopping. NPEs tend to bring suits in jurisdictions, like the federal District Court for the Eastern District of Texas, that have a record of favoring plaintiffs [source: Joyce]. Banning this practice could reduce the leverage of the trolls by giving target companies a better chance of winning lawsuits.

These reforms might help to slow down the NPEs and speed up innovation, but they're not on the immediate horizon. And the patent reform legislation passed by Congress in 2011 addressed few of them. For the time being, it seems patent trolls will continue to lie in wait under the bridges of technology, ready to exact their fees.

Read on for more information about patents and patent trolls.

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