Patent protections are designed to cultivate innovation and reward entrepreneurs, and we have all benefited enormously. From the incandescent light bulb of the 19th century to today's smartphones, our patent system has advanced technologies that have improved the quality of life. Unfortunately, as the system has grown increasingly complex, broad patents are now increasingly being used to extract financial concessions. The ongoing Apple-Samsung legal feud that a jury ruled on late last week is just the most recent example of the overly litigious patent environment of today.
In recent years, companies have begun to engage in patent trolling, gobbling up and holding hostage patent rights. These entities don't create anything, or participate in any productive way in the economy. They exist for one reason alone: to leverage their otherwise meaningless patents to file abusive patent lawsuits and extort payments from companies that are actually innovating. Sound destructive? It is.
Instead of being used to foster progress, so-called patent trolls have flipped the system around, and are using it to stifle innovation. By exploiting loopholes in our patent system to file abusive patent lawsuits against inventors, patent trolls have cost American entrepreneurs billions of dollars.
These lawsuits force entrepreneurs to divert precious resources away from research and development to pay for their massive legal bills. We need to reform our patent system to stop this abuse and allow entrepreneurs to do what they do best: innovate and make new and better products.
Here's how abusive patent lawsuits come about: after rolling out a new product, an inventor receives a notice from a company they've never heard of before claiming that the product infringes on one of its patents. Although the lawsuit is meritless, the company demands a settlement, threatening to bankrupt the entrepreneur with legal fees from a protracted lawsuit if they do not pay. Inventors across the nation are forced to choose between two awful options: give in and pay an expensive settlement, which may cost thousands of dollars, or fight the patent claim in court, which may cost ten times as much, or more.
Take, for example, the large patent-holding firm, Intellectual Ventures, which has accumulated considerable patents and actively uses them to go after other companies they claim infringe on those patents. Several major companies like Microsoft, Apple and Sony have been connected to Intellectual Ventures, which some have called a patent troll.
On top of it all, current law does not require patent trolls to explain their patent claim in detail until midway through the litigation process. Just understanding the nature of the patent can be devastatingly expensive for inventors. It is heads patent trolls win, tails innovators lose, and no matter what, the lawyers and the trolls get paid.
To the average American, many of these claims may sound ridiculous. Take for example the shopping cart function on countless websites; sites that use the function run the risk of patent infringement, even though every online shopper is familiar with it. Document scanners, common to nearly every office, fall into the same category: if you use one, you may be sued.
Like all forms of lawsuit abuse, it's the lawyers who profit, but the rest of us who end up footing the bill. Consumers ultimately pay higher prices for goods and services when innovators are forced to incorporate the cost of lawsuits into their prices.
Consider the seemingly endless litigation Apple has engaged in with Samsung. Apple aggressively pursued long-drawn-out patent-infringement charges, despite receiving $930 million in damages in a previous court case. Ultimately, this new jury found -- as is often the case with complicated technology -- that both Apple and Samsung used each other's technology. It was a mixed ruling that could have ended better without a costly trial. So at some point, one has to ask, when will these companies return their focus back onto their products?
Executives of companies like these, and of countless others tangled in patent lawsuits, should be allocating their resources to development labs rather than the courtroom. They should well know shareholder value -- the bottom line -- increases when they are creating products, not through corporate chess matches and stalwart litigation as Apple has embraced recently.
We all benefit when companies constantly innovate to meet market demands. That's capitalism at its finest. It's well past the time for policymakers to reform the patent system so we can create jobs, not lawsuits.
Tom Scott is the executive director for Citizens Against Lawsuit Abuse