PATENT
LAWSUITS AND THE ECONOMY
A recent trend is for "Non-Practicing
Entities" (NPEs) also known as "patent trolls" to buy
patents, and then sue other companies on the patented technology. Who
does this benefit?
The cost to defend a patent lawsuit as of 2004 was typically $1
million or more before trial, and $2.5 million through trial and
appeal(s). According to a recent Forbes article, a high stakes patent
suit today can cost $10 million to defend, the median patent damages
award is $3.8 million (from 2001 to 2007), and fifty seven percent of
trials are won by patent holders. Patent litigators can
get as much as $1000 per hour.
A study by Boston University (BU) law school found that "There
are a lot of big losers from NPE litigation..." Only the patent
litigators and of course the patent trolls win. Unfortunately, this
creates a disincentive to innovate. Why? If you create a new company
and/or a new product, you run a significantly greater risk of a
patent suit. The targets are generally in the software and electronics
industry. The recent patent reform act does nothing to stop
these suits.
What can be done? We could limit patent damages for NPEs. The U.S.
Court of Appeal for the Federal Circuit (which hears all patent
appeals) has already acted to help limit damages that could be
obtained in patent suits under the "reasonable royalty"
type of damages. NPEs will always fall under "reasonable
royalty" (rather than typically much greater "lost
profits") because NPEs by definition are non-practicing. They have
no profits from the sale of patented product. We can also reform
patent litigation in general to streamline it. Perhaps we can use
domain name registration as an example. When you register a domain
name, you agree to arbitration in the event of a domain name dispute.
Can we set up a system whereby you agree to arbitration when you
apply for a patent, should your patent issue, and should you decide
to pursue an infringement?
Sincerely,
Law Offices of David L. Hoffman
28494 Westinghouse Place, Suite 204
Valencia, California 91355