Does Your Business Need To Be Concerned About Patent Trolls?

Patent trolls have been in the news a lot the past few years. Perhaps you have heard about. A patent troll is one type of entity that is referred to as a non-practicing entity (NPE). And NPE is an organization that owns a portfolio of patents but that does not make use or sell the inventions described in its patents. Patent trolls make money by licensing patents in their patent portfolios to other companies. Patent trolls are called “trolls” because they frequently, or almost always, induce companies to license their patents by threatening to sue them for patent infringement.

Responding to Patent Trolls

A patent troll can hijack your small business!

Many businesses have been surprised when they received a cease-and-desist letter in the mail from a patent troll. In these letters the patent troll claims that the business is infringing one or more of their patents. The troll than typically demands that the business license one or more of their patents from the troll in order to continue to do business. The troll will threaten to sue the business for patent infringement if the business does not license the trolls patents (on what are usually not particularly favorable terms).

Businesses threatened by patent trolls have a few options to respond to such cease-and-desist notices:

  • they can ignore the cease-and-desist letter and hope the patent troll does not sue them;
  • they can pay the demanded licensing fee;
  • they can attempt to negotiate a lower licensing fee;
  • if it doesn’t greatly affect their business, they may stop using anything resembling the patent the troll is asserting against the business and hope the troll doesn’t sue them for their past use; or
  • they can just shut the business is down.

None of these options are particularly attractive. Many people have been trying to get new laws passed that will greatly restrict the ability of patent trolls to see people over questionable patent claims, but right now the law tends to favor the trolls. So, at least in that sense, patent trolls are a concern for every business.

Does This Even Concern You?

Are patent trolls a concern for your business?

But how likely is it that your business will be threatened by a patent troll? First, note that patent trolls are most active in the realm of software and electronic technology. So, if you’re in a business that does not make, use, or sell software or electronic devices, you’re much less likely to be threatened by troll. Second, if you’re a very small organization, you most likely do not deep pockets and are not likely to be of much interest to a troll small organizations can’t pay high licensing fees, and if they are sued in a patent infringement action they might well file bankruptcy.

Patent infringement lawsuits are expensive, typically costing hundreds of thousands or millions of dollars for both sides. So if you’re a patent troll, you might sue Apple or Microsoft, who can afford to pay that much in legal fees, and who can afford to pay millions in damages, but you’re not likely to sue a company that only generates a few hundred thousand dollars a year in revenue.

Potential Solutions

How can you stop patent trolls?

That being said, it’s always a risk. The bigger you get the more money that you make, the more visible you are, and the more attractive you may be to a troll. If your company can afford the expense, one thing you can do is hire a patent attorney to search existing patents your business may be infringing. If said attorney can identify any such patents, you can take preventative action to ensure that you are not infringing anyone’s patent.

Another thing you can do, is obtain patents on any technology that you are making, using, or selling that is eligible for a patent. Having a patent on the technology is no guarantee that you will not be sued for infringement, but it helps you defend yourself in a lawsuit, and may even give you counterclaims against someone who is suing you.

Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later.

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