Imagine dreaming up a great new invention, patenting it and then seeing company after company steal the idea without giving you a cent. Now imagine trying to run a business only to be slapped with a huge lawsuit from someone who claims that you've "infringed" their vague patent.
That's the basic conflict around "patent trolls." To the trolls, they're unappreciated inventors watching their ideas get copied over and over again. To everyone else, they're money-grubbing opportunists who only trade in lawsuits that crush innovation. They sap money from the economy and the will to innovate from inventors, critics argue. Alleged trolls have sued over podcasting, e-mailing scanned images and bus-tracking systems. And there are at least five congressional proposals from lawmakers in both parties to address the issue, while President Obama today announced a raft of measures—five executive actions and seven legislative proposals—of his own.
Trolls, also known as "patent-assertion entities," have accounted for much of the growth in patent cases over the past few years. One intellectual property analytics company estimated that more than half all federal patent lawsuits last year were from trolls. And in just the last two years, lawsuits from trolls have jumped by nearly 250 percent, with as many as 100,000 companies potentially threatened last year alone, according to a White House report on the industry.
Some researchers estimated that such suits cost as much as $29 billion in 2011. But one entity's loss is another's gain—a redistribution of wealth—right? Perhaps not. That same year, another trio of researchers found that from 2000 to 2010 a group of patent trolls earned $7.6 billion, while the corporations they sued lost $87.6 billion. In other words, their actions translated to roughly $80 billion in lost wealth.
Patent trolls, they argue, discourage innovation. Last year, for example, Google and Apple spent more on patent suits and big-ticket patent purchase—a way to protect against suits—than they did on research, according to The New York Times. In 2011, Google alleged that there was "a hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents."
The administration thinks it may have some ways to curb the practice. It plans to introduce some transparency to the process by making it clearer who the true patent owner in a lawsuit is and increase education and outreach to the types of businesses targeted, for example. It's also urging Congress to pass a law that would let courts sanction abusive patent-holders.