The problem of patent abuse is rampant in our country. Weak and overly broad patents are turned against businesses that have little choice but to pay. It is essentially legalized extortion. To some, they have earned the moniker of “patent troll.”
For most companies facing litigation from patent trolls – in particular entrepreneurs, startups and small businesses – the outlook is grim. Our broken patent system allows trolls to leverage vague patents into extortive settlements with their victims – the average cost to settle a case is $1.33 million – and the threat of even more enormous damage awards leads many companies to settle cases before the meritless patents can be tested. If a small or medium company does opt to go to trial, they face average legal costs up to $2 million to defend against these frivolous claims.
These options present difficult choices for any entrepreneur or small business owner who wishes to protect their business and continue to innovate and grow. However, two years ago an important ruling by the Supreme Court handed patent defendants a critical tool that has helped me and many other companies defend ourselves against these harmful cases.
On New Year’s Eve 2013, I was sued for patent infringement. It regarded a set of weak and notorious patents that somehow had gotten approval by the U.S. Patent and Trademark Office. You see, I built a simple website where people could find their photos. Hardly rocket-science. The plaintiff was the first to try to patent this simplistic idea, and it involved six rejections by the USPTO, until they finally relented.
The patents cited in the complaint were absurdly vague and lacking in any innovative technology. One claimed to have patented “a process for providing event photographs for inspection, selection and distribution via a computer network,” while another patented “a method for providing on-line event photographs includes the steps of capturing multiple photographs during an event, and associating identifying data with each photograph taken.” Not only were these functions in use long before these patents were filed in 2000 and 2005, respectively, they also did not introduce any innovative technologies and should not have been granted by the USPTO.
Luckily, on June 19, 2014, the Supreme Court made an important ruling in Alice Corp. Pty. Ltd. v. CLS Bank International that threw a lifeline to companies facing these types of vague patents. In its unanimous decision, the Court held that patent claims that simply add “do it on a computer” to an abstract idea are not eligible for patent protection under U.S. patent law. In its opinion, the Court made clear that abstract ideas that utilize generic computer methods are not something our patent system was designed to protect.
This ruling provided the support Capstone needed to mount a successful defense against our accuser. We argued that the patents at issue should be invalidated for not satisfying U.S. patent law as defined by the Alice decision. Nearly a year after the litigation process began – a federal judge ruled in our favor. She invalidated all three patents at issue in the suit, finding that the ideas they catalogued were abstract ideas and ineligible for patent protection.
In a patent system where 55 percent of companies targeted by patent trolls have annual revenues of $10 million or less, the Alice decision provides a vital tool companies can use to fight back against frivolous patent litigation. Its clarification of what is eligible under our patent system should be upheld and protected for the help it provides to companies like mine that are defending themselves against meritless patent claims. Without the Alice decision, it is unlikely that I could have afforded the long fight necessary to invalidate the patent on other grounds.
This result is certainly a victory, but it is hard to feel like my company won. Capstone spent 10 months on litigation and $100,000 in legal fees – equivalent to a year’s worth of profit for my small business – to defend ourselves. The financial toll was devastating, and included laying off 60 percent of my workforce. All our resources were diverted to a battle we should have never had to fight in the first place, instead of to job creation and further innovation in my field.
The Supreme Court’s decision in Alice was important, but so much more still needs to be accomplished to reform our patent litigation system, from making the process more efficient, to requiring that a losing party who brings a frivolous case pay the other side’s attorney’s fees, to ensuring patent trolls can’t go “venue shopping” to bring their cases in the friendliest courts that are most likely to grant them astronomical damage awards. Now that the Supreme Court has made it easier for small businesses to defend themselves against vague patents, Congress must do its part to pass comprehensive patent litigation reform to ensure fewer small businesses experience this type of litigation in the first place.
Michael Skelps is the General Manager of Capstone Photography.