Small Businesses May Benefit From Patent Troll Hunt

Impending legislation and state enforcement actions could help smaller firms fight back against companies that misuse patents as a business strategy.
Marielle SegarraJanuary 14, 2014

Just over two years after patent reform legislation passed Congress, new reforms may once again be coming down the pipe. Under the America Invents Act, which went into effect in 2011, the United States shifted from a first-to-invent to a first-to-file system, and it also allowed companies to pay a fee to speed up their applications.

Opponents have long said the America Invents Act favored big businesses and lacked the teeth that would allow the government to come down on so-called “patent trolls,” individuals or shell companies that patent broad technologies so that they can demand licensing fees critics are now advocating for something more: reform that would crush patent trolls, or as Timothy B. Lee recently wrote in The Washington Post, address “frivolous patent litigation.”

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English: Troll Federlandese

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They may not have to wait much longer. In late December, the U.S. House of Representatives passed another reform bill, called The Innovation Act, by a vote of 325 to 91. The White House has signaled its support for the legislation, and the Senate will vote on it soon. The Washington Post explainer has a really useful outline of what’s in the bill. Among the changes: it would require more specific lawsuits from patent plaintiffs (who are sometimes “trolls”). It would require plaintiffs to name any person who has a financial interest in the patent, so they couldn’t hide behind shell companies. And it would allow technology vendors, like the manufacturers of WiFi networking equipment, for example, to fight lawsuits against patent plaintiffs on behalf of their customers. That could be a huge help for small businesses that use the equipment (offer free WiFi access to customers, for example), because patent plaintiffs often sue end users rather than take on bigger manufacturers.

It looks like the federal government isn’t alone in its desire to crack down on patent trolls. On Tuesday, New York Attorney General Eric T. Schneiderman reached a civil settlement that will require Delaware patent firm MPHJ Technology Investments to pay back all the money it collected in licensing fees from small businesses in the New York area. MPHJ, which owns the patents on certain email and scanner technologies, used “deceptive and abusive tactics when it contacted hundreds of small and medium-size New York businesses in an effort to strong-arm them into paying MPHJ for patent licenses of dubious value,” the Attorney General’s office said in a statement. MPHJ will also be barred from sending those kinds of threatening letters in the future.

Minnesota, Vermont and Nebraska’s attorneys general have also filed lawsuits against MPHJ.

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