Fear-Mongering About Foreign Patent Trolls

* This article was written by Edison Nation CEO, Louis Foreman and was originally posted by RollCall.com.

USPTO sealAs was highlighted at the recent nomination hearing for Michelle Lee as the next director of the U.S. Patent and Trademark Office it is important to take a look at the patent landscape and the talk of more legislative action on our patent system under discussion in Congress.

I have been in the invention business my entire adult life. I have 10 patents of my own and have started nine successful companies. And as the CEO of Edison Nation, I work with hundreds of aspiring inventors to bring their ideas to market. The success of my companies and of the independent inventors we work with is based on a strong patent system that protects our inventions and creates investment incentives for financial partners.

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But I’m concerned independent inventors, small businesses and the property protections we all depend on are about to become collateral damage as Congress once again tries to crack down on “patent trolls.” The popular definition of a patent troll as used in the congressional debate is a company that doesn’t make any products itself, but that owns patents and tries to make money by accusing other companies of infringement.

No one would ever intentionally call an inventor a “troll,” but the truth is that most inventors don’t manufacture the inventions they patent. Some don’t have the capital for manufacturing, while others don’t have the desire or expertise to run operating companies.

Unfortunately, as far as current reform proposals are concerned, this means inventors who license their technology will be treated like “trolls” as legislation would make patent licensing more difficult, and would make it prohibitively expensive to hold infringers accountable when a patented invention is used without permission. That would tilt the playing field to big corporations that have the deep pockets to bury small players in expensive legal proceedings or through intimidation.

This state of affairs has come about in part because corporate PR machines churn out an endless stream of articles spreading fear of the patent troll threat; spurring lawmakers to take action despite objections from small inventors, universities and others. Now, these patent critics are rolling out a new, even scarier villain: foreign trolls — government backed ones, no less.

“Government-sponsored patent trolls amass patents and assert them against companies from other countries, including American firms,” warned James Bessen and Michael Meurer, two prominent patent-reform advocates, in a recent column for the Boston Globe.

But make no mistake: This is yet another argument aimed at spreading fear to score political points and push legislation that poses a serious risk to independent inventors, backed by no evidence at all of any real threat to American firms.

Bessen and Meurer, the ones now warning about “foreign patent trolls,” are the same two people who famously warned that lawsuits by patent trolls cost the United States $29 billion a year. Patent-reform advocates constantly cite their estimate as a hard cold fact, but their claims, their logic and their “evidence” are riddled with inaccuracies and misleading extrapolations.

The biggest hole is that they define a “troll” as any entity that holds patents but doesn’t manufacture anything. By their definition, the vast majority of independent inventors are trolls. Edison Nation, despite never filing a patent lawsuit, falls into this basket; because we help inventors license their ideas and share in the profits.

This isn’t a small discrepancy. By one careful analysis, between 20 and 30 percent of “troll” lawsuits actually came from individual inventors protecting their hard earned patent rights. If the $29 billion estimate sounds misleading, it’s nothing compared to the whopper they are telling about “foreign trolls” that are “frequently active in U.S. courts.”
Joff Wild, the editor of Intellectual Asset Management Magazine, dug into this. For starters, he found that the so-called foreign trolls have been all but absent from American courts. A French company cited by Bessen and Meurer has filed three lawsuits in the United States since 2011, and those weren’t even against American companies. Japan’s alleged troll is an R&D venture involving 26 companies, most of which have a long track record in R&D, and it hasn’t filed any lawsuits in the U.S.

The Taiwanese “troll” doesn’t even faintly resemble a patent-assertion company. It is nonprofit R&D powerhouse that’s been around since 1973, and has 6,000 employees, including 1,300 Ph.D.s. It does occasionally defend its patents in court. But that hardly makes it a troll. As Wild puts it, “Basically, we are talking about a world-class R&D entity that owns a lot of patents because it does a lot of R&D.”

Personally, I wasn’t terribly worried about foreign patent trolls in the first place. But I am worried about the use of scare tactics to push through laws that will cause great harm to independent inventors and America’s invention ecosystem.

I won’t stand by quietly, and neither should anybody else who cares about inventors and keeping America the world leader in groundbreaking invention. These are complicated and nuanced issues and while I take some comfort in comments by nominee Michele Lee that “we need to proceed with caution” on any patent legislation we all need to take into account the precarious future of our patent system and act accordingly.


 

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