A plan to shield against patent trolls

Imagine this: You own a small business with 30 employees. In a struggling economy, you work to grow that business and create well-paying jobs in your community. Then imagine receiving a bill for $30,000 — or $1,000 per employee — simply because your business uses a scanner and you scan documents to email. That bill comes with a threat that a failure to pay up front would result in a lengthy, costly lawsuit that will drain you of the vital resources you need to keep your business alive.

The people threatening you want to sue for infringement because they purport to own a patent on the act of plugging that scanner in and scanning something to email. They didn’t create the scanner. They didn’t create the email program. They are patent trolls that exist solely to hoard overly broad, generic patents on products they didn’t create and then sue people and businesses for infringement.

Nearly every industry has been victimized by patent troll lawsuits. One Luxembourg-based troll has been suing municipalities and transit agencies across the country over bus and train tracking systems. Another is threatening local grocery stores, coffee shops and restaurants that offer free Wi-Fi to their customers. The airline industry was sued for giving customers the option of choosing seats on an online seat map.

I had never heard of a patent troll until I visited a small technology company in my district more than a year ago. The company was thriving, growing quickly and ready to hire new employees when it was hit with a lawsuit. As a result, the company had to pay the troll instead of hiring new employees.

Patent trolls pad their pockets by using a tried and tested strategy: acquire a very broad patent, send letters to as many businesses as possible claiming infringement and kick back as the settlements roll in.

They have hidden in the shadows for years, avoiding attention and scrutiny while silently sucking billions of dollars from the economy and from fledging startups and small businesses. A Boston University study found that patent troll lawsuits cost American companies more than $29 billion in 2011 alone. And the problem is getting worse. Patent trolls we responsible for 62 percent of all patent lawsuits filed in 2012, according to a study conducted last year by a Santa Clara University patent law professor. This is up from about 29 percent just two years earlier.

Last year, I started to work on legislation that would address a central question: How do we help small businesses targeted by patent troll lawsuits fight to defend their creations and deter those trolls from filing flagrant lawsuits in the first place?

With the help of a significant number of tech start-ups, consumer groups, and legal professionals from all across the country, I worked with Rep. Jason Chaffetz (R-Utah) to craft the SHIELD Act.

The legislation is simple. If a troll brings a patent lawsuit and loses, the SHIELD Act makes sure that the troll pays all costs and attorney’s fees associated with the case. Unsurprisingly, patent trolls lose their case 92 percent of the time according to a recent report by the Congressional Research Service. Our legislation would help businesses fight for their creations and force patent trolls to take financial responsibility if they lose their claim of infringement.

Over the last year, members of Congress have drafted at least five proposals to deal with this problem, with more to come. Last month, President Obama offered a serious and comprehensive plan to deal with trolls and stop the financial and economic damage they cause. Specifically, he asked Congress to make it easier for courts to force trolls to take financial responsibility for their lawsuits.

That’s what the SHIELD Act will do.

In a welcome break from the partisan dysfunction that has plagued the last few Congresses, there is motivation and momentum on both sides of the aisle and in both chambers to address the problem of patent trolls. In the coming months I am confident that Democrats and Republicans will be able to come together to pass a comprehensive plan that will protect the Americans bold enough to create and innovate, and stop the people who hijack their ideas to get rich quick. We cannot afford to allow extortion that squeezes billions of dollars from the people and business that fuel our economy.

DeFazio has represented Oregon’s 4th congressional district in the House of Representatives since 1987. He sits on the Natural Resources and the Transportation and Infrastructure committees.