Vermont hardly stands out as a hotbed for so-called “patent trolls” compared to the rest of the country. But the state’s senior senator, governor and attorney general have made their voices heard in a national conversation that’s getting louder.
An anti-troll advertising campaign hit Vermont this week, urging residents and business owners to lobby for federal reforms preventing bogus patent infringement lawsuits. Patent trolls lay claim to overly broad patent rights and threaten businesses with lawsuits if they don’t pay exorbitant fees for alleged infringements. It’s often cheaper and easier for businesses to settle out of court, which generally just encourages the trolling behavior.
The ads, scheduled to run through the end of the week in 15 states, are coordinated by the Internet Association working alongside the National Restaurant Association, the National Retail Association and the Food Marketing Institute.
The coalition reflects broader targeting by nonpracticing entities, the official name for those who wield patents rights without actually exercising the innovation behind the patents. Alleged patent rights include such ubiquitous functions as emailing scanned documents, placing a store locator application on a website, or doing just about anything “on a computer,” said Internet Association president and CEO Michael Beckerman.
Some firms acquire patent portfolios, for example, and make money solely by suing others for violating their patent rights. They collect money from people who either are frightened into payment or who know it’s cheaper to settle than prove themselves right.
Sen. Patrick Leahy’s role as chair of the U.S. Senate Judiciary Committee likely played a role in the organization’s choice to run ads in Vermont. Leahy co-authored the American Invents Act of 2011, a roster of patent reforms, with Rep. Lamar Smith, R-Texas. The pair also wrote intellectual property legislation known as Stop Online Piracy and Protect IP acts in 2011. (Both measures failed to overcome a groundswell of popular opposition.)
The Internet Association’s Beckerman praised Leahy’s leadership and “clout” in the Senate and said Leahy has indicated his support for continued anti-trolling patent reforms. Beckerman is hoping that, with Leahy’s help, Vermont’s traction on fighting patent trolls will translate to the federal level.
“Vermont … has been a leader when it comes to stopping patent trolls,” Beckerman said. “State action is great, but we need to see legislation at the federal level.”
He’s referring to Vermont Attorney General William Sorrell’s lawsuit against MPHJ Technologies, filed earlier this year. It’s the first known case that takes a patent troll to task on the basis of consumer protection laws.
MPHJ has challenged the very premise of the suit, arguing it’s a federal patent law issue that should be tried in federal court. The case is now in U.S. District Court, where a judge may decide by the end of the year whether to keep the lawsuit as a federal case or send it back to Vermont courts as a state issue.
Meanwhile, Gov. Peter Shumlin and Vermont legislators added another “quiver” to Sorrell’s arsenal with the signing of H.299. The bill makes a civil offense out of bad-faith assertions of patent infringement and allows victims to seek actual and punitive damages for their troubles. The idea is to discourage bogus lawsuits by threatening legal action against patent trolls.
Vermont’s new law, unique in the nation, matches the goals of the Internet Association members and their counterparts in the tech world, the Application Developers Alliance.
“We want to interrupt and eliminate the business model of trolling,” said Alliance president Jon Potter. “The frightening part of trolling is that it’s a successful business model.” Without potential repercussions, he said, there is little to dissuade a patent troll.
A federal Government Accountability Office report, released in August, estimated that fighting patent trolls can cost up to $5 million in court and legal fees alone. A study by Boston University professors estimated that patent trolling took a $29 billion toll on American business in direct legal costs — a figure that jumps to $80 billion when extrapolated to include the indirect costs of opportunity loss from that diversion of capital.
Soon after the Internet Association’s ad campaign draws to a close, the Application Developers Alliance will wrap up a 15-city tour in Washington, D.C.
The event’s timing coincides with the two-year anniversary of Leahy’s American Invents Act. Potter said about 15 businesses are scheduled to attend to share their stories with congressional members.
Correction: This article was updated on Sept. 5, 2013, at 9:50 a.m. to indicate the estimated direct and indirect costs of patent trolling are $29 billion and $80 billion, respectively.