Do you remember putting quarters into those classic arcade machines like Pac-Man or Donkey Kong? If so, you probably realized very quickly that no matter how good you were at the game, you never had enough quarters to actually win. 

Today, “patent trolls” are taking this notion to a whole new level. These trolls – more formally known as “non-practicing entities” – can drag you into a game that’s impossible to win, but even worse, you never even wanted to play. 

ADVERTISEMENT
This legalized extortion racket has drawn the attention of Congress. This week, the Senate Judiciary Committee and Small Business and Entrepreneurship Committee both held hearings on patent reform. This is important because patent wars are no longer just a game that big companies play.

Patent trolls and their “slip-and-fall” trial lawyers have created an extortionate business model in which they send out scads of threatening letters to businesses large and small, alleging patent infringement. Simply put, it’s a numbers game of throwing everything against the wall to see what will stick. 

There really is no downside to this model for the patent trolls – as the law now stands, they have nothing to lose and everything to gain. Most often, the patent trolls don’t even want to go to court. They want the small businesses they sue to pay a licensing fee and not put up a fight. In other words, just give them the rest of the quarters in your pocket.

The good news is that legislation is now pending in Congress to change the current dynamic, making it more difficult for the trolls to extort legitimate small businesses. I know firsthand that we absolutely cannot let this bill languish.

In 2013, my three-person company TMSOFT was sued by Lodsys, a privately held “patent monetizing firm” based in Marshall, Texas. Why? We created an app called White Noise that plays relaxing sounds to help people sleep. It also connects to the Internet, which somehow violated one or more of their patents. They brought patent-infringement lawsuits against numerous other app developers as well, claiming unlicensed usage of Lodsys’ patents.

I discovered my company was being sued when a patent lawyer from Texas emailed offering to defend me in this case. I thought this was clearly a mistake – why would a troll come after my small company? But as I talked to other business owners, I learned I wasn’t alone. Their most common piece of advice? “Just settle. It’s not worth the fight.”

Although the lawsuit was clearly frivolous, I was forced to defend myself and my company in the court system. The patent troll was quick to offer me a way out – just wire them $3,500 and they would drop the lawsuit. Most companies would take that deal without hesitation and, trust me, I thought about it for days. But I also heard that by settling, companies then open the floodgates for other bottom-feeding patent trolls to come knocking. It’s like signing up to get trolled or stacking your quarters on top of the arcade game.

Dan Ravicher from the Public Patent Foundation, a nonprofit organization whose mission is to represent the public’s interest in the patent system, agreed to fight these troll bullies pro bono. Understanding that we were not going to roll over and would fight to the end, Lodsys dismissed its lawsuit. If every frivolous lawsuit came with a free patent attorney, patent trolls wouldn’t exist. But that almost never happens. Ravicher estimated the combined 280 billable hours he and an associate spent on the matter would have cost my company $190,000 – and that was before we even set foot in court!

Ignoring patent trolls and hoping they’ll go away is not a solution. The patent troll business model is low-risk and high-reward. When they say it’s not about the money, don’t believe it. It’s all about money – a lot of money! Since the House passed patent reform legislation in 2013, patent trolls have bled more than $100 billion from the U.S. economy – and they drain another $1.5 billion every week. Small- and medium-sized businesses make up 80 percent of trolls’ targets, including one of every three startups. I guess you could say it’s “Game Over” for small business, because we don’t have enough quarters to keep playing. 

That’s where the Innovation Act, now before Congress, comes in. Introduced by Reps. Bob GoodlatteBob GoodlatteLawmakers grapple with warrantless wiretapping program House votes to crack down on undocumented immigrants with gang ties House Judiciary Dems want panel to review gun silencer bill MORE (R-Va.) and Peter DeFazio (D-Ore.), and co-sponsored by numerous members of both parties, H.R. 9 would give patent troll victims much-needed relief. Among other things, the bill requires patent owners to do more research before filing suits. As it is now, trolls can threaten to sue without even determining whether the defendant is actually infringing a patent. The bill would also make those who sue, and lose, reimburse the legal fees their targets have incurred defending themselves. 

America’s entrepreneurs and small businesses can’t afford to wait any longer for Congress to make patent-infringement lawsuits a fair contest. The Innovation Act changes the game, forcing patent trolls to think twice about targeting small businesses, letting our country’s real innovators get back to building great products that people love. That’s exactly where I want to invest my quarters.

Moore is the founder of TMSoft LLC, a developer of mobile apps and games, and co-host of the Tech 411 podcast.