Patent troll poster child

Lodsys is a company that doesn’t make anything. It doesn’t sell anything. It doesn’t provide any services, it doesn’t have any customers, and, so far as we know, it doesn’t have many employees.

Lodsys is a patent troll. It is one of many currently taking advantage of loopholes in the patent system to go after the very innovators we rely on to invent exciting new technologies and create new jobs. Their business model is not illegal, but it is unethical. It must be stopped. It is exactly the sort of patent troll poster child members of Congress should take a hard look at when they want to know why legislation like the  Innovation Act, sponsored by House Judiciary Committee Chariman Bob Goodlatte (R-Va.), is so critical.

{mosads}This particular patent troll owns four patents and nothing else. It uses them to sue and threaten lawsuits. Sometimes it finds itself facing large, well-resourced parties like The New York Times Company, Best Buy, and Adidas. But Lodsys has made a name for itself by rolling out a truly innovative model of trolling: preying on app developers, arguably our society’s most vulnerable technology creators.

Patent trolls like Lodsys take advantage of the fact that litigating patent cases is notoriously complicated and expensive. Even when they lack any real intention to actually sue, patent trolls often threaten lawsuits—which can last for years and cost many millions of dollars—leaving their targets more likely to pay to license the troll’s questionable patent than to fight in court, even if they have a great case that the patent is invalid or that they don’t infringe. Taking these early licenses and settlements feeds the troll, continuing a dangerous cycle.

Technology firms—both established and particularly smaller start-ups—bear the costs, to the tune of nearly $29 billion a year, according to one study. And that’s just the direct costs on litigation. The larger burden on the U.S. economy as a whole is estimated to exceed $50 billion.

These are dollars that are not used for research and development (indeed, 2011 was the first year in which Apple and Google spent more money on patent costs than on crucial R&D), nor are they used to hire new employees, release new products, or grow a business. Instead, they’re used to pay lawyers.

This was not the intention of the patent system as originally conceived. The Constitution gives Congress the power “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

In the past 20 years, that system has seen a sharp increase in the number of software patents. (In fact, until the 1990s, one could not get a patent on software in the United States.) Those patents are notoriously vague and hard to understand, stumping many engineers, computer scientists, and lawyers, and leaving the public without any real understanding of what they can or cannot do without infringing someone’s rights. They make the perfect tool for patent trolls.

Trolls like Lodsys benefit from the failures of the patent system that let these patents exist to begin with. Imagine you are an app developer, creating games or other programs for smart phones. You do it in your spare time, probably because you like the work and you might even have dreams of creating the next big hit. Apple and Google provide you with certain technology so customers can buy your app in their respective app stores. You’ve seen moderate success and you’re excited about your prospects.

Then, in the mail comes a letter from Lodsys. It’s a thick package, including a proposed license full of legal terminology and a copy of an 89-page patent, which claims to cover a “component capable of managing the interactions of the users in different locations and collecting the results of the interactions at the central location.” In other words, Lodsys claims it owns the technology Apple and Google provided you to collect payments, and now Lodsys thinks you owe it money for using that technology.

You know Lodsys has actually sued app developers before, and likely will again. You know Google and Apple have tried to protect their developers in court and at the Patent Office, but those challenges could take years to sort out. Your options are to pay up, put your head down and hope Lodsys disappears, or take your app out of the U.S. market. None is a particularly appealing choice.

What Lodsys and others like it are doing does not inspire confidence in the U.S. marketplace. It does not incentivize young inventors to be more creative, nor does it spur young companies to release new products and hire new employees. It does not promote the progress of useful arts and sciences.

Patent trolls are a tax on innovation and they must be stopped.

Samuels is a senior staff attorney and the Mark Cuban Chair to Eliminate Stupid Patents at the Electronic Frontier Foundation. She is also a board member at Engine Advocacy.