Stopping Patent Trolls: Op-ed in Crain’s New York Business
I recently had a chance to talk to lawmakers in Washington about patent reform, something I know more about than I'd like to. This morning Crain's New York Business published a letter I wrote about our experience with patent trolls and how we can rewrite the rules to stop them from using the law for what amounts to extortion. I know too many of you have experience with this issue – if you’d like to get involved, please reach out to me so I can plug you into the dialog. This is what I wrote for Crain's:
Congress has the chance Thursday to advance legislation that would free innovators from frivolous lawsuits. Here are five easy ways they can help startups in New York and around the country.
Washington has been moving this year on patent reform, with Congress, the White House and the Supreme Court all acknowledging the patent troll crisis. I couldn't be happier: Two lawsuits from patent trolls cost my Internet company more than $4 million to win—equivalent to 5% of this year's revenue.
Problems with the patent system plague tech companies and threaten end-users, such as coffee shops offering Wi-Fi or retail stores using a store-locator map. In 2011 patent trolls, firms that buy up broadly written patents not to use them but instead to make infringement claims against other businesses, cost U.S. companies $29 billion, not including the rerouting of resources, delays or inefficiencies that come with a claim.
The time is right for patent reform. The House has passed a solid bill in December; now it's the Senate's turn. After months of delay, the Senate Judiciary Committee on Thursday plans to mark up its companion legislation, the Patent Transparency and Improvements Act.
Here are five easy ways to greatly improve U.S. patent law:
1. Review and strike low-quality or broadly applicable patents. The Patent Office frequently struggles with which patents to grant, and what constitutes something "novel and non-obvious." This is understandable. Software and method patents are often abstract and confusing. The best way to do this is to expand the post-grant review process to cover all patents, as Sen. Charles Schumer has proposed in corresponding legislation, the Patent Quality Improvement Act.
2. Only a product's maker—not its users—should be held responsible. Patent trolls send "demand letters" to thousands of innocent users, essentially extorting money under threat of litigation for using a routine office machine which might be infringing on a patent. This predatory harassment should be stopped.
3. Limit patent length for software and method patents to two to three years. Today's utility patents that extend 20 years for relatively simple software innovations don't make sense in a marketplace where product lifecycles are 18 to 24 months. Patents that live far longer than the products they were designed for no longer protect inventors; instead they hamper innovation by allowing patent trolls to misapply outdated patents to new, unrelated products, making it harder and riskier to develop new ideas.
4. Limit initial discovery and expert witness work to first determine what a patent actually does, before getting into issues of potential infringement or damages. Identifying whether a patent is even applicable before spending time to explore the consequences would produce quicker settlements.
5. Discourage frivolous lawsuits by holding losing plaintiffs accountable for some or all of the defendants' expenses, requiring them to post bond to prove their ability to pay.
Mr. Schumer and many of his colleagues recognize that when entrepreneurs start a company, they shouldn't expect to find themselves in a courtroom fighting baseless litigation. I've been there. Congress should act this year on patent reform and be as bold and comprehensive as possible.
About Matt Blumberg
Matt Blumberg founded Return Path in 1999 because he believed the world needed email to work better. Matt is passionate about enhancing the online relationship between email subscribers and marketers so that both sides of the equation benefit. It is with great pride that he has watched this initial creation grow to a company of more than 400 employees with the market leading brand, innovative products, and the email industry’s most renowned experts. Before Return Path, Matt ran marketing, product management, and the internet group for MovieFone, Inc. (later acquired by AOL). Prior to that he served as an associate with private equity firm General Atlantic Partners and was a consultant with Mercer Management Consulting. He holds a B.A. from Princeton University. You can learn much more about Matt by reading his email marketing and entrepreneurship blog Only Once – one of the first CEO blogs on the Internet. Last year he wrote a book, Startup CEO: A Field Guide to Scaling Up Your Business.