Concept Technology
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Protect Your Business From Patent Trolls

Published on Jun 27, 2014 at 2:05 pm in Tips & Tricks.

This post also appeared in The Tennessean, where Concept Technology has a bi-weekly feature in the Business section.

patent-trolls.jpgAs a country, we’ve seen a dramatic uptick in patent litigation over the past 10 years.

So it should be no surprise that we’ve also seen more and more complaints about “patent trolls” in our headlines. As companies spend massive amounts of corporate resources on patent troll litigation — money that could be spent on research and development — patent law remains very much in flux.

I recently asked Brian Iverson, an attorney with Bass Berry & Sims, a few questions about patent trolls to gain a greater understanding of the issue.

Here’s more of what I learned:


Who qualifies as a patent troll?

The term “patent troll” typically refers to companies that buy up large tracts of patent portfolios and make a business out of suing people. This is big business. Some of the biggest trolls in the country have billions of dollars in assets.

One is the best-known patent trolls is MPHJ Technologies, a non-practicing entity that contends its patent portfolio covers “a patent on scanning documents and sending them from the scanner to a computer through a network.” MPHJ Technologies has sent out thousands of “demand letters” to businesses claiming patent infringement and asking for about $1,000 per employee to license its technology. In another example, PersonalAudio is suing podcaster and comedian Adam Carolla, two other podcasters, Fox, CBS and NBC for infringing on is patent on “downloaded playlists.”

Under the broadest definition of a “non-practicing entity” described above, though, most technology household names (IBM, Microsoft, etc.) also would be considered patent trolls, as would most other companies that invest significant portions of their budgets into R&D.

Take, for example, Research in Motion, the company that manufactures BlackBerry. RIM has an extensive patent portfolio and it isn’t necessarily practicing all of its inventions. Does that mean a company like Apple could go out and infringe on any of the patents that RIM isn’t practicing? No.

In another example, take an individual inventor who has a great idea and doesn’t have the resources to market that idea as a product — patent law protects this inventor from anyone else who may have the resources and the desire to steal that idea. These practical examples of entities that do not practice their patented inventions give some context to the policy questions that are challenging our legislators in trying to find a solution to the patent troll problem.


Currently, where does the law stand on patent trolls?

In general, patents are a matter of federal law. Congress introduced a dozen or so different bills dealing with patents during its current session, the latest of which the Senate Judiciary Committee recently tabled. Though the vote has been taken off the calendar for now, much of the federal legislation deals with the need to plead patent infringement with greater specificity, reducing the cost of patent litigation, etc.

Approaching the issue from a consumer protection perspective, many states also are considering legislation to curb patent litigation abuse.

On May 1, Tennessee Gov. Bill Haslam signed into law a bill that gives Tennessee recipients of bad faith demand letters sent from patent trolls the right to file a private suit to seek actual damages, punitive damages (up to three times the amount of the actual damages) and litigation costs from the patent troll. Additionally, the statute gives the Tennessee Attorney General the right to sue patent trolls that send bad faith demand letters to Tennessee recipients.


What should business owners do to protect themselves against patent trolls?

Your defense needs to be three-pronged:

  1.  If you’ve received a demand letter from a patent troll, it may seem quicker and easier to pay off a troll than to call in an attorney, but your first call should always be to your attorney. Find out your rights before giving in to a demand.
  2.  Throughout your R&D process, make sure you understand what patents already exist in the area of technology.
  3.  Use patent or trade secret law to protect your own R&D investment.