How Patent Trolls Affect the US Economy

Patent trolls — companies that hoard patents, not to innovate, but to sue — are at it again. This time a company called Freedom Patents has introduced something new Litigation wave Complaints target tech giants including T-Mobile, Samsung and Cisco.

This is Liberty Patent’s second campaign against wireless antenna technology. The grounds for its lawsuit rest on three expired Mitsubishi patents, and the company is trying to get a larger settlement from mobile communications companies to avoid a lengthy and expensive court process.

Independent patents exemplify the „patent enforcement agency” model, where companies exist only to obtain patents and file infringement lawsuits. The complexity of smartphones is all around 250,000 patents, making them a prime target for patent trolls.

The claims were filed in the Eastern District of Texas, which is notorious for being friendly to patent trolls who want to exploit the legal system for profit. Ultimately, this Court heard 40 percent of all patent cases In America.

It’s no coincidence that the Liberty Patents are located in the small town of Tyler, Tex., along with Marshall, the heart of the Eastern District Court of Texas. In 2021, Tyler’s city manager agreed Patent litigation has helped the city’s economy, boasting the district’s „rocket docket” — a term that refers to the court’s speedy handling of cases through rules that set speedy procedural schedules. to the jury.

Current lawsuits target innovative technology companies, which only increases costs for these manufacturing companies. Research from Harvard In 2014 patent trolls cost defendant companies $29 billion a year directly out of pocket and destroyed more than $60 billion in corporate wealth annually. In today’s dollars, that comes to $38 billion in direct costs and $78 billion in lost wealth.

Recent congressional testimony underscores the toll these costs continue to take. Consultant at GPS company Garmin He told a House committee A lawsuit can cost $10 million to argue against.

In addition to the Eastern District of Texas, patent trolls take advantage of the International Trade Commission (ITC), which is supposed to protect real American industry against intellectual property theft. ITC has the authority Under the Tariff Act of 1930 To prevent the importation of goods infringing US patents, the case would affect the relevant domestic industry and would not be contrary to the public interest.

Unfortunately, patent enforcement agencies can wield this power to threaten innovative technology firms with severe product bans unless they agree to massive settlements. For example, if just one of the patents on a smartphone is found to be infringing, no matter how minor, the entire product can be banned from US shelves. Since the US courts will not allow this disproportionate settlement, the trolls are approaching the International Trade Commission to obtain this ridiculous and lucrative foreign exchange.

Stopping innovative technology, especially in mobile communications, could harm Americans who rely on smartphones every day. For some, it is an important means of online access. A quarter of Hispanic adults „Smartphone only” Internet users rely solely on their devices for online access. When patent trolls attack the technology companies that produce these essential goods, they limit access and drive up prices for consumers.

In our current economic competition with China for technological supremacy, we must encourage the private sector to continue to innovate. The billions of dollars and time companies spend fighting trolls in courts in Texas and the ITC divert resources from better uses like faster connectivity, better security, or continuous cost improvements.

If we want to accelerate innovation and reduce unnecessary economic drag on manufacturers, we need to reduce the ability of patent trolls to misuse patent litigation to wrest emerging settlements from manufacturing companies. It begins with the International Trade Commission, an agency under the direct oversight of Congress. Act as Advancing America’s Interests Act offers a solution. It seeks to reorient the ITC’s focus so that it actually considers the public interest (the Commission last used this power to reject an exemption order in 1984), as well as ensure that the affected domestic industry is not a patent troll but an entity. It actually creates products and wants to take action.

By reforming our patent system and reining in agencies that harbor patent trolls, we can protect inventors, remove burdens on the economy, and ensure the continued advancement of technologies that will drive the future of American innovation and improve our lives.

Daniel Sanzalari is an assistant professor of economics at Seton Hall University.