Litigation by patent trolls, often called Patent Assertion Entities (PAEs), has exploded in recent years:
Felix Salmon explains why this is a major problem:
Go to any technology conference these days, and you’re likely to find VCs who say that there are entire sectors they refuse to invest in, just because the waters are so troll-infested. Google and Apple might be able to do interesting things in wearable computing, for instance, but a single lawsuit could easily wipe out a startup in the same space — even if it was entirely frivolous. Even the 3D printing industry seems to have boiled down to a handful of companies, despite the fact that most of the patents in the space have expired, because it seems to be all to easy to get patents on tiny improvements to established technology. Technological innovation is increasingly a game that only the largest technology players can indulge in; every VC has a story of a portfolio company which gets sued for patent infringement and then gets a lowball acquisition offer from the plaintiff. Either sell out to us, is the message, or we’ll destroy you with legal fees.
Timothy B. Lee worries that focusing specifically on patent trolls will prove ineffective:
Legislation that focuses on defanging patent trolls won’t do anything to stop non-troll firms from abusing the patent system. And it may not even do much about the trolls.
For example, one popular anti-troll proposal, sponsored by Rep. Peter DeFazio (D-Ore.), creates a “loser pays” rule for patent trolls. But it’s hard to draw a principled distinction between abusive lawsuits filed by “trolls” and those filed by other types of entities. The DeFazio bill defines a troll as someone who is not engaged in the “production or sale of an item covered by the patent.” In many cases, it would be trivial for a troll to evade this requirement by producing a token number of units of a product covered by its patent.
Drum thinks fixing the patent system will fix the troll problem:
[I]s a firm with lots of legitimate patents a patent troll? Nope. Whether we acknowledge it or not, the stuff that strikes as trollish is almost always related to firms with lots of patents that seem kind of bogus. If we want to reform our patent system, that’s where we need to start. Limit patents much more stringently than we do and, perhaps, place common sense licensing rules on them. If we do that, we’ll no longer care who owns the revenue stream.
The Dish 