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Why Patent Trolls Could Be an Increasing Threat to Your Company

John Chambers and Myron Ullman, CEOs of Intel and JCPenney, raised eyebrows recently by co-writing a Wall Street Journal op-ed piece in which they called for Congress to approve legislation that would “break the business model” of “patent-assertion firms,” otherwise known as patent trolls, which collectively cost the two companies more than one-third of a billion dollars in legal expenses over the last five years.

Patent trolls are entities that don’t make products or sell services and instead collect and own patents and trademarks and sue companies over alleged infringement of them.

In another recent case, a patent troll scored a $16-million verdict against Samsung after a jury ruled that the Korean electronics company infringed on Bluetooth-enabled product patents owned by Rembrandt IP.

“This litigation is overwhelmingly a tax on innovation and does nothing to promote the deployment of new technology.”

But more companies of all types and sizes are being threatened by the rise of patent-sapping exertions, and so more CEOs are calling for meaningful patent reform in Washington, D.C.

In January, 449 patent suits were filed in U.S. district courts, according to a new report from United Patents, a 36% increase over the same year-ago month. Patent trolls filed more than half of the month’s cases. And, noted the Electronic Frontier Foundation, there were more cases filed by patent trolls in January than during the entire year of 2004.

A 2012 study by Boston University researchers estimated that companies spent upward of $29 billion a year defending patent lawsuits. In that, more than 3,600 companies and named defendants were sued by patent trolls in 2014, triple the number of 2006, according to RPX Corp., as reported in the Journal.

As the numbers grow, patent trolls are likely to broaden their reach beyond the Fortune 500 set and put more mid-market firms under the microscope. The smaller ones, of course, have fewer resources to defend themselves in court and so may even be disproportionately affected by the scourge.

“This litigation is overwhelmingly a tax on innovation and does nothing to promote the deployment of new technology,” wrote the Electronic Frontier Foundation, a nonprofit which defends civil liberties.

A group called United for Patent Reform is backing a bill in Congress that would, for instance, require disclosure of the actual basis for claims at an earlier point in the legal process. Such “reforms would help level the playing field to ensure that suits that actually have merit go forward and be resolved through the courts, while those that are frivolous and abusive are deterred, denied and diminished.”




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