Patent Trolls Abusing The Courts Pose Major Economic Threat

troll3How well do you remember the fairy tales you were taught as a child? More importantly, do you recall any of them having a hidden lesson about tort reform?

If you heard this week’s edition of “Let’s Be Fair!,” you know that the story of Billy Goats Gruff does indeed have a hidden lesson that can be used to understand a diabolical new kind of character known as a patent troll.

In the story about the billy goats, a troll who hides under a bridge threatens to gobble up anyone who tries to cross over it. In modern-day America, so-called patent trolls are abusing the legal system to gobble up the hard-earned money of entrepreneurs who, the troll argues, are a infringing on their patent. This is no fairy tale, though, and victims of the trolls include both large and small businesses, so almost no one is safe from the lawsuits.

What exactly is a patent troll? An excellent article in Forbes describes them this way:

“a ‘patent troll’ is, by definition, any person or entity that owns a patent but does not produce the patented product or practice the patented method. Instead, the so-called ‘troll’ exacts a toll, in the form of a license fee, from other persons or entities the “troll” believes infringes (or do infringe) the patent.”

So, what’s the problem? If someone owns the rights to a product or process, why shouldn’t they be entitled to payment? It’s the American way, right?

Well, if someone has a legitimate patent and another party is genuinely infringing on it, then yes, the patent owner would have the right to demand payment. However, the problem today is that many of the lawsuits being filed by patent trolls allege infringements of their patent that are so vague that they amount to nothing more than fishing expeditions, and their victims have to either settle out of court to cut their losses or spend tens of thousands of dollars fighting them.

These trolls are exploiting current law which does not require that a patent holder explain how a patent is infringed, or even identify the product involved. This makes it nearly impossible for someone who has been sued to evaluate the case and decide how to proceed.

Victims of patent trolls have included everyone from a famous comedian and a popular website to small home builders and large consumer product makers. Click here to see a short video of a home builder in Oregon explaining how he was targeted by patent troll and how homebuyers across the nation would have to pay more for their slice of the American dream if the lawsuit were successful.

A few years ago, I appeared on John Stossel’s program on FOX with the creator of a popular website who was also sued by a patent troll. His name is Drew Curtis, and despite huge odds, he fought back. He eventually won, and later, he gave an excellent TED talk on his experience that I highly recommend. You can see it here.

Certainly, patents are important to our economy for many reasons, not the least of which is that they give incentives to inventors to be creative. However, in the hands of unethical trolls, they’ve become nothing more than assault weapons for hold-up artists.

A diverse and well-organized coalition of job providers called United for Patent Reform has mounted a national campaign to end this form of legalized extortion. Find out about their effort here.

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Look at our free Legal Liability Toolkit Tutorials while you’re here!

Welcome to all the new visitors who viewed today’s Forbes.com article!

The article features our annual Wacky Warning Label Contest and the American lawsuit crisis that makes these labels necessary. I hope you enjoy some of the stories below about wacky labels and loony lawsuits.

But after the laughing stops, people get mad! What are we going to do about this?!

There’s a terrific, practical program developed by the Center for America to help you avoid lawsuits in the first place. We’ve talked about the problem over many years – now, CFA has developed an easy, and, might I say, entertaining, way to help you deal most effectively with decisions you have to make that may expose you to legal liability.

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