Utah’s technology dependent economy makes current efforts in Washington to reform patent policies all the more important to the state’s future, and our elected leaders are among the most vocal in Washington. Patents exist to protect intellectual property and the investment businesses and individuals make in it. Unfortunately, the last decade has seen a rise in patent assertion entities including patent "trolls."
These entities don’t manufacture or market products or goods. Their exclusive goal is to accumulate huge portfolios of patents, then watch out for news about any innovation remotely similar to a patented idea they own.
They then sue, claiming ownership of the original idea and often earn profits through settlements out of court because the threat of costly legal bills can be enough to compel potential defendants to pay
Nationally, 7,000 businesses were sued by patent trolls in 2011 and 2012 — four times as many as were sued in 2006, according to The Internet Association, a trade group representing U.S. Internet companies. Counting direct payments to trolls, legal fees and other associated costs, troll litigation costs U.S. businesses $80 billion a year.
Foreign governments have even gotten into the business of trolling. Lured by the dual motives of money and protectionism, South Korea, Taiwan and France have formed state-sponsored patent pools that are bent on acquiring all the patents they can, regardless of where the patent was filed or who the filer is, in order to extract settlements or block market entry from alleged infringers. Taiwan’s Industrial Technology Research Institute holds more than 18,500 patents and has been aggressive in asserting them in U.S. courts.
Government sponsored patent trolling is the 21st century version of protectionism. By taking over management of private-industry patents, ITRI, and France Brevets have made patent trolling a tool for national industrial policy. Government-sponsored trolls can use public resources to attack foreign competitors, and then use settlement awards to subsidize domestic players.
France Brevets, for example, was given control of two key patents originally granted to Inside Secure, a French-based chip supplier. It’s France Brevets, as an arm of the French government, that is suing LG Electronics of Korea and HTC Corporation of Taiwan — in U.S. courts — alleging infringement on these patents.
But foreign state-sponsored trolls also have to contend with competition from private trolls overseas as well. Italy’s private-sector trolling goliath, called Sisvel, is a veritable army of patent assertion, controlling the access to 12 different technology standards pools operating out of multiple offices in 7 countries.
Given the role new investor patents have in powering Utah’s dynamic economy, it’s good to see that both Utah senators have joined bipartisan efforts to counter patent trolling.
Last year, Sen. Mike Lee, along with Sen. Judiciary Committee Chairman Sen. Pat Leahy, D-Vt., introduced The Patent Transparency and Improvements Act of 2013 (S.1720), a bill aimed at addressing patent trolls. Sen. Orrin Hatch, the former Senate Judiciary Committee chairman, also introduced legislation aimed at addressing patent trolls called the Patent Litigation Integrity Act (S. 1612). Leahy’s bill, which may end up incorporating elements from Hatch’s, is expected to come to the Senate floor before the summer recess. If it passes, it will likely be reconciled with a similar patent reform bill that has passed in the House.
Unfortunately, the legislation does not directly address problems related to government-sponsored patent trolls and the issue may fall under the jurisdiction of trade agreement negotiations between allies. However, by addressing the general problem of patent abuse, a new law would go far to rein in the power groups such as Sisvel, ITRI, and France Brevets command over Utah’s budding technology sector.
Steven Titch is an independent policy analyst based in Sugar Land, Texas. His work has been published by the Reason Foundation and the R Street Institute.
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