In today’s economic climate, America’s small businesses are under attack. Not only must they comply with onerous government regulations, but they increasingly face lawsuits filed by patent trolls, who work with trial lawyers to target innovators with claims of infringement on dubious grounds.
Rather than create new products and technologies themselves, trolls abuse our patent system to extort businesses into settlements that can cost upwards of a million dollars. Using vague, low-quality patents that should never have been granted by the U.S. Patent and Trademark Office, trolls destroy the incentive for American entrepreneurs to create new businesses one frivolous lawsuit at a time.
Fortunately, the Innovation Act (H.R. 9) has been proposed in the U.S. House of Representatives to guarantee that certain safeguards are implemented that place the litigious burden on patent trolls to prove their claim — thus protecting hard-working job-creators and the foundation of our country’s economic integrity. The Innovation Act introduces several key reforms to our patent system that will close the loopholes that allow trolls to thrive.
Unfortunately, some conservatives are impeding the passage of these crucial reforms by spreading claims that H.R. 9 primarily benefits China and not the American economy. These assertions have no basis in fact. H.R. 9 will not make it any easier for foreign companies that infringe U.S. patents. Any suggestion to the contrary is at best a misinterpretation and at worst unsupported fear-mongering.
What the legislation will do is help provide relief to the thousands of American businesses that are victimized each year by trolls that profit from our broken patent system at increasingly high rates. This year is on pace to have the highest number of patent lawsuits ever filed. Suits by patent trolls account for nearly 68 percent of the more than 3,000 lawsuits filed in the first six months of 2015 alone.
What’s more, these trolls have a clear track record of going after the little guy. More than half of the firms targeted by patent trolls have less than $10 million in annual revenue. Small or medium sized companies that have decided to fight a troll in court pay on average $1.75 million in legal costs, compared to just over $1 million on average for those that settle out of court. Faced with these punishing consequences, it’s no wonder that many enterprises opt to settle and save themselves years of litigation and skyrocketing legal costs.
Unfortunately, this predatory litigation has consequences beyond the bottom lines of small businesses. The money spent litigating these frivolous lawsuits could be better spent investing in research and development for new products, lowering prices for existing products and hiring new workers. In today’s economic climate, characterized by a slow slog away from the brink of recession, the impact of this diversion of funds cannot be overemphasized. In this environment, we must place the highest priority on protecting and fostering innovation on the road to economic recovery. That is why passage of the Innovation Act — and the defense mechanisms it brings with it — is so critical to our future prosperity.
Conservatives understand that innovation and invention, driven by the free market, are the keys to our future growth as a nation. A careful examination of the facts makes it clear: Efforts to hold abusive trolls accountable benefit all Americans, whether they are inventors, business-owners, workers or consumers. It is time that conservative legislators dispensed with unsubstantiated criticisms of the proposals before us and took a stand for American businesses.