Our legalized extortion racket: Congress must take on patent trolls

There is no doubt we are living in turbulent times, fraught with controversy and anger. One of us is a Democrat, the other a Republican. Yet when cooler heads prevail, we find ourselves in agreement on many issues. Perhaps it’s time we focus on the common good, rather than what divides us. And regardless of political affiliation, patent reform is something we should all support.

Patents serve to safeguard American ingenuity and ensure our nation’s entrepreneurs have the legal protection they need to continue to invest in innovation, create jobs and bolster our economy. Yet through legal loopholes, patent assertion entities — companies that own patents but never use them to make anything, better known as “patent trolls” — increasingly use patents as weapons to extort businesses.

Each year, these trolls file thousands of baseless patent infringement claims, most targeting startups and smaller businesses. The trolls’ goal is to leverage a quick settlement, knowing that victims do not have the resources for a prolonged and costly court battle. Indeed, the cost of getting a frivolous lawsuit thrown out of court can be well over seven figures, often making it impossible for innocent victims to recover.

This legalized extortion racket siphons $80 billion from the U.S. economy every year. These wasted dollars could be used to create new jobs, develop useful and life-enhancing new technologies and ensure that the U.S. consumer technology sector remains a global leader.

This is an issue that harms small businesses like ours in every congressional district. We need legislation to close the loopholes exploited by patent trolls and remedy this form of brazen extortion. While there have been several bipartisan bills that could have made headway in battling patent extortion, nothing has advanced beyond committee since 2015.

Meanwhile, these kinds of patent suits have skyrocketed 500 percent over the past 10 years. In 2015 alone, patent trolls were responsible for two-thirds of all patent lawsuits filed.

The Supreme Court recently cut back on patent abusers’ ability to pick and choose troll-friendly jurisdictions for their lawsuits. But there is more work to be done. Patent plaintiffs should be required to specify what patent they believe is being infringed before going to court. They should also be required to specify the owner of the patent, so they can’t hide behind deceptive shell companies.

Patent trolls don’t make products, offer services or solve any problems. Many just buy patents at auctions of companies undergoing bankruptcy, without any intention of using the patents for their intended purposes.

It takes extensive planning, significant investment in resources and capital, and development of some of the latest hardware and software applications for new products to reach the market. Trolls do nothing but take advantage of loopholes in our patent system. Their business strategy is incredibly damaging to companies of all sizes, from small businesses and startups to large enterprises.

Having worked on a myriad of new products in the consumer technology space, we know the grit, dedication and courage it takes to create something. We know what it takes to hire people and the pressure that comes with being responsible for their livelihoods, as well as your own family. Months of planning, development, revisions and testing go into releasing a new product or service into the market in its best possible format.

Common sense tells us that organizations created to prey on companies through what amounts to legalized extortion have no place in America. We are a nation that protects innovators and entrepreneurs — not legal loopholes for economic predators. Let’s end this extortion and allow American entrepreneurs to do what they do best: Develop the next great technology breakthrough that may better our lives and our world.

If you care about job creation in America, reach out to your member of Congress and ask him or her to support comprehensive patent reform.

Frank Parrotto is COO of MATRIX ADVISORS, LLC, a global consulting group specializing in new technology development and commercialization.

David Kaplan has worked at an executive level encompassing the complete commercial cycles of the high technology industry and is principal consultant at Custom Business Solutions, a strategic consulting and business development firm.

The views of contributors are their own and not the views of The Hill.