The greatest long-term threat to the U.S. patent system does not come from its professional opponents – those large businesses and their political allies who stand to profit from enfeebled patent rights. A deeper harm is caused by unscrupulous patent trolls who use extortionist “demand letters” to victimize small businesses. This practice, we believe, is wrecking public confidence in the U.S. patent system – and by extension, profoundly weakening the bedrock belief in the great economic benefits conferred by patent-protected inventions.
Yet even as damage caused by demand letters spreads, most legitimate patent licensors whose businesses depend upon continued legislative and public trust stand idly by, doing little or nothing to address it. Well-insulated within the patent industry’s cozy professional bubble, we are, in effect, fiddling like a modern-day Nero while innovation’s Rome burns.
Why the disconnect? Most people in the patent licensing industry understand that patent troll demand letters are a significant economic problem for U.S. small business community, costing millions of dollars in settlement fees and legal costs annually. What’s not grasped is that phony demand letters are an even greater political problem for our industry and for the patent system as a whole. Let’s quickly review the problem.
Patent trolls, typically operating through shell companies, send form letters to dozens, hundreds, or even thousands of apparently random small businesses at a time, claiming with little or no evidence that they are “infringing” the troll’s patents. The senders demand so-called “licensing fees” ranging from $1,000 to $50,000 or more (depending on the size of the business) to avoid a patent infringement lawsuit that could cost these businesses far more to defend against in court – even if the business owner is innocent of any infringement.
It’s true that comprehensive, nationwide data on the extent of the demand letter problem and its economic impact is hard to come by or doesn’t exist. But there is mounting anecdotal evidence that the deluge of demand letters is at the very least harming one of the nation’s most critical job creation sectors, small businesses and startup companies. The reported impact usually takes the form of hiring delays, reduced R&D spending, or a negative change in product or business strategy. One study reported that 70 percent of 200 venture capitalists surveyed had invested in startup companies that later received extortionist demand letters.
Simply looking at the aggregate economic impact of patent troll demand letters, however, or advocating for more study of the issue before acting, misses their fundamental emotional impact – the intense popular rage that they generate. To understand that, you’ve got to put yourself in the shoes of a small business owner who is victimized by a patent troll.
At Conversant, we believe it’s time to step up and help deal with the scourge of patent troll demand letters. So we’ve launched a “Stand Up to the Demand” campaign designed to help small businesses identify and respond to extortionist patent demand letters. We’re not doing this for practical business gain, because small businesses are not our partners or licensees. Rather, we have launched this campaign because it’s the right thing to do, and we hope it will help restore public trust in our industry and in our patent system as a national engine of economic progress and competitiveness.
To learn about it and help us advocate against patent trolls, visit www.standuptodemand.com.