Today, patent trolls account for a great deal of the patent litigation in the United States, and this issue is only becoming more severe. In fact, research shows that trolls have cost the U.S. economy half a trillion dollars between 1990 and 2010, and over $320 billion was lost to trolls in just the last four years. Every day, across the nation many businesses face the prospect of complex, multimillion-dollar patent litigation battles, which can lead to cutting jobs and driving up prices of the most innovative products.
Recently, the entertainment capital of the world has fallen victim to patent trolls. Casinos and resorts along the Strip in Las Vegas are staple industries to Nevada’s economy, known for their innovative and creative use of technology in all aspects of their operations. But several of these have recently become caught up in legal battles over patented technology.
In one of the lawsuits, Email Link Corp. sued Treasure Island, Hard Rock Hotels and other casino operators for violating the terms of their patents when they sent emails containing links to websites. Another was filed by Texas-based Webvention LLC against Las Vegas Sands and several nongaming companies - ranging from Campbell’s Soup to Toyota. The suit accused them of violating Webvention’s rights on a patent for “structures and methods for organizing, presenting and accessing information.”
Both patent trolls, Email Link Corp. and Webvention, are companies whose business models consists of buying patents and enforcing them through licensing. Trolls exploit flaws in the U.S. patent system by asserting vague patents against a range of businesses — patents that should never have been issued.
These days, the rise in patent troll activity is an issue of importance to the Nevada Resort Association, the American Gaming Association and the Consumer Electronics Association. Many member companies have been hit with frivolous patent lawsuits, or the threat of lawsuits, claiming that they are violating patents as part of their marketing efforts.
Ironically, most companies targeted by patent trolls are small businesses even though the patent system was originally created to protect small businesses. In 2011, 90 percent of companies facing patent suits were small businesses making on average $11 million per year.
Not only are patent trolls harmful to small businesses, they are also taking a toll on the judicial system. One study from Boston University estimates that in 2011, more than 2,100 companies were forced to mount 5,842 defenses in lawsuits from patent trolls, up from 1,401 in 2005, at a cost of $29 billion—a $22 billion increase.
Leaders from both parties in Congress have spoken out against patent litigation and are demanding change. They have joined a growing number of voices that include President Barack Obama and Sens. Patrick Leahy, D-Vt., Chuck Schumer, D-N.Y., Mike Lee, R-Utah, John Cornyn, R-Texas, and Orrin Hatch, R-Utah. Last month, the U.S. House of Representatives came together in a rare display of bipartisanship by voting in support of the Innovation Act - a bill that offers several solutions to abusive patent litigation.
So, now it is up to the Senate to bring patent reform to a vote, so that innovators can stop padding the pockets of patent trolls.
Interested in learning more about how states are dealing with the patent troll problem? Join the AGs from Vermont, Missouri and Nebraska, as well as GCs from Rackspace, duPont and Walmart for a roundtable discussion. The event will be take place on February 4, 2014 in New York City. To register, click here.
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