Small tech companies, as opposed to huge companies like Google or Microsoft, tend to be the most common target of litigation brought by patent trolls. One study conducted by Boston University showed that 90 percent of the companies sued by patent trolls were small and medium-sized technology companies.
“It’s something that keeps me up at night,” SparkFun Electronics chief executive Nathan Seidle told the House panel, describing the harm a potential patent troll lawsuit could do to his 145-person educational technology company.
In most cases, the accused company in the patent troll lawsuit can prove their ownership through the process of “prior art,” where the patent office makes sure that any publicly available information relevant to the invention has not pre-dated its creation. Despite their assured innocence, the high costs of patent troll litigation has made many companies balk at defending themselves.
“Even if you’re right, the costs of getting there can kill your business,” said Lindberg.
Lindberg asked the panel if there was anything they could do to address litigation abuse posed by patent trolls. The Rackspace general counsel explained that patent trolls use the cost of litigation as a “club” to extort technology companies and force them to settle.
"If there's something you could do to encourage innovation [it's] to stop the patent troll problem and to really help us with this litigation abuse,” said Lindberg.
Two bills circulating in Congress would clamp down on patent trolls.
Senate Judiciary Committee Chairman Patrick LeahyPatrick LeahyThe Hill's 12:30 Report The Hill's 12:30 Report Passing US-Canada preclearance would improve security and economy MORE (D-Vt.) and House Judiciary Committee Chairman Bob GoodlatteBob GoodlatteOvernight Tech: Last-ditch effort to get Dem FCC commish confirmed | Facebook's Sandberg on fake news | Microsoft completes LinkedIn deal House rejects GOP rep's push for vote on impeaching IRS head Overnight Regulation: Biz groups push reg reform in new Congress MORE (R-Va.) promised to introduce a bill this week that will lasso in the federal courts system and the U.S. Patent and Trademark Office (USPTO), as well improve upon the Leahy-Smith America Invents Act that went into effect earlier this year.
Last week, Reps. Darrell Issa (R-Calif.) and Judy Chu (D-Calif.) introduced the STOP Act, which would ask the USPTO to re-examine patent litigation related to financial services. The White House also announced a series of executive orders on patent troll litigation back in June.
The open-source nature of many technology companies left some lawmakers perplexed over what role the government had in enforcing intellectual property ownership, when many companies seemed happy to give it away. Other than a few patents to defend itself against litigation, Lindberg noted that Rackspace freely licenses its technology out to other companies.
Other technology companies have taken the path of least resistance.
“We encourage people to copy or ‘pirate’ our products because it leads to shockingly fast innovation,” said Seidle.
Seidle told the House panel that his tech company has released more than 700 new products in the past decades without securing a single patent.
On average, Seidle said it took about 12 weeks after a product’s release before it was copied by another company.
“Many companies would find this threatening and seek legal recourse. We do the opposite and use this pressure to focus our efforts on innovation. Because we know our products will be copied, we focus on creating the next new feature, the next major release, the next big thing,” said Seidle.
This attitude toward intellectual property might only be shared by the technology industry. Lawmakers expressed doubt that easing intellectual property protection would do much benefit to content providers, for example. Members of the creative industries testified to the same panel last week, saying that copyright infringement posed a major threat to business.
“Can you acknowledge that your approach isn’t something that works for everyone?,” Rep. Ted Deutsch (D-Fla.) asked the tech executives, referring to the open-source philosophy.
Jim Fruchterman of Benetech, however, said that fewer restrictions on dissemination helped creative industries as well.
“The enemy of the average artist is obscurity and not making a living,” said Fruchterman, arguing that lesser-known works had much to gain from unlimited exposure.
Rep. Howard Coble (R-N.C.) said that when Congress first drafted in the Digital Millennium Copyright Act (DMCA) in 1996, it was “impossible to comprehend” how the law would keep up with the pace of technology. The chairman of the House Intellectual Property panel agreed that government should not stand in the way of innovation, but stood by the values of the DMCA.
“I’m old-fashioned, and I generally think our copyright laws should be...based on common sense,” said Coble.