The patent system was established in order to promote innovation in the United States, rewarding new ideas by protecting exclusivity in exchange for shared information that can benefit everyone. Patents grant holders the ability to bring legislation against anyone who is infringing on their intellectual property.

However, like most things, this idealistic system can be twisted in order to serve those who are only looking for personal gain, rather than contributing innovation and economic stimulation to the country. Some entities operate entirely through extracting money via infringement lawsuits, claiming that operative businesses have stolen their ideas.

What Are Patent Trolls?

Patent Trolls are sometimes more tactfully called NOE’s (Non-Operating Entities) or PAE’s (Patent Assertion Entities). These companies use their patent portfolio (often bought from operating entities and universities) solely as a litigation machine. Rather than pursuing business development and operation of their intellectual property, they leverage these documents to bring suits against operating entities.

Who Needs to Guard Themselves Against Patent Trolls?

Many small-to-midsize businesses don’t worry too much about patent trolls, believing that they’re too small of a target for PAE’s to bother. However, according to a 2013 study by GAO, 50% of companies who are sued by PAE’s have an annual revenue of under $10 million per year. In fact, another study from Stanford University showed that 16% of startups served with a demand letter from a PAE had under $100,000 in yearly revenue.

Small-to-midsize businesses are easy targets, hastily settling out of court before they’re completely sunk by court fees. Moreover, suits like this can hurt more than just your wallet. News that you’re dealing with legal disputes over IP can easily make investors and potential partners turn tail and run, leaving you with utterly stagnated growth potential.

What Can You Do to Guard Against Patent Trolls?

If you’ve ever done a prior art search, you know how easy it is to infringe on another’s idea without ever meaning to. In fact, when you look at the complexity of your business operations, it’s easy to see that virtually anyone could be a target of patent trolls.

1. A Freedom to Operate search can guard you against the most obvious patent infringement issues, helping inform you about what kind of prior art is already on the market and within patent literature. This will help you better determine whether expanding your business operations will open you up to possible lawsuits.
2. There are many patent pools or networks that work together to fight this very issue. In patent pools, operating entities join forces, granting each other immunity to infringement lawsuits that could be brought against each other by granting permissions to each other for their patents. The collective genius comes into action when patents are sold to potential PAE’s but immunity against litigation is still maintained by anyone within the patent pool. LOT is an excellent example of a patent pool that can greatly help businesses who want protection for their IP portfolios. There are, of course, other options available out there. It’s in your best interest to aim for one that most matches your field of operation.
3. Patent insurance is a recent development in the IP landscape. As such, it’s hard to determine just how much power it will have year over year, and what exactly it will be able to cover. However, if you determine that your potential risk of infringement lawsuits may be high, insurance can add to your defensive arsenal against patent trolls. Make sure to thoroughly research your options and your risk.
4. Remember that patent reform that can counter problems like patent trolls starts in Congress. There are numerous bills presented every year for your representatives to weigh in on. Many organizations, such as the American Innovators for Patent Reform, or the EFF, actively raise awareness about new issues on the ballots and inform inventors and business developers about what they can do to strengthen America’s patent system and thereby support American innovation.

Are you properly guarded against patent trolls? Consultation and patent search from Global Patent Solutions can help you better determine how to decrease your liability and maximize profits. Call us to learn more about what we can do to help you make informed, strategic moves that support your business’ future.