Taking on Patent Trolls to Protect American Innovation
http://www.whitehouse.gov/blog/2013/06/04/taking-patent-trolls-protect-american-innovation?utm_source=060413&utm_medium=photo&utm_campaign=daily
Our patent system — as enshrined in our Constitution — is
meant to encourage innovation and invention. It was designed to reward
Americans for their hard work, risk-taking and genius. It has spurred progress
that has driven economic growth and transformed the way we live, work,
communicate, and stay healthy. But in recent years, there has been an explosion
of abusive patent litigation designed not to reward innovation and enforce
intellectual property, but to threaten companies in order to extract
settlements based on questionable claims.
There are a growing number of companies, commonly called
“patent trolls,” who employ these litigation tactics as a business model —
costing the economy billions of dollars and undermining American innovation. In
the last two years, the number of lawsuits brought by patent trolls has nearly
tripled, and account for 62% of all patent lawsuits in America. All
told, the victims of patent trolls paid $29 billion in 2011, a 400% increase
from 2005 — not to mention tens of billions dollars more in lost shareholder
value.
Today we are releasing a study on the issue that documents
the significant toll this issue is taking on our economy and on innovation, and
we are excited to announce both Executive actions the Obama Administration is
taking, and the legislative measures that we are calling on Congress to pass to
protect American innovators.
Last February during his Fireside Hangout, the President
explained that patent trolls (known more formally as Patent Assertion Entities,
or PAEs) “don’t actually produce anything themselves. They’re just trying to
essentially leverage and hijack somebody else’s idea and see if they can extort
some money out of them.” This type of abusive patent litigation is a major
problem.
It’s also important to know what we’re not talking about
here. We aren’t trying to make it harder to pursue legitimate intellectual
property rights, or vigorously defend valid patents. Indeed, the United States
has the best intellectual property protections in the world, and our system
rightly ensures that these innovators are compensated for their creativity. The
problem is when rogue companies make a business model out of exploiting and
abusing the system, using it not to protect invention but to bring frivolous
lawsuits to extract settlements from companies trying to serve American
consumers. Bad patents in the system (such as those issued with broad or vague
language) only compound the problem, and the issue extends far beyond any one
industry.
This is a problem we’re hearing a lot about, from
multinational corporations and venture capitalists to garage innovators and
small-town café owners. Businesses of any size are vulnerable to these tactics,
whether you’re a software giant designing complex applications or a mom-and-pop
store using a technology product you purchased over the counter.
How big of a problem are patent trolls? Consider this: last
year we estimate that patent trolls sent out over 100,000 demand letters,
threatening everyone from Fortune 500 companies to corner coffee shops and even
regular consumers to pay a settlement or face a day in court. The number of
these suits has exploded in recent years.
But this is about more than just the company bottom-line:
when businesses need to constantly worry about abusive patent litigation they
are able to put less of their efforts into creating new products and serving
customers. Today, some of the largest innovators in high-tech spend more money
on patent litigation and acquisition than they do on research and development
for new products. Smaller companies are getting hit just as hard, and 40% of
technology startups targeted by patent trolls reported a significant impact on
their business operations due the suit or threat thereof.
It’s clear that the abuse of the patent system is stifling
innovation and putting a drag on our economy. The trolling has gotten out of
control, and it’s time to act.
We are excited to announce these steps to give innovators a
fair fight in the legal battle against patent trolls, bring clarity to the
high-tech patent space, and protect the everyday citizen against their abusive
tactics. We look forward to, with your support and the input of everyone
affected by this issue, helping make America an even better place to
innovate.