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“Patent Trolls” – What You Need to Know

Thomas Kading Attorney at Fargo Patent & Business Law, PLLC

You no doubt have heard of trolls before on the internet and social media. But did you know that there are so-called patent “trolls” who make a living suing for patent infringement? To understand this phenomenon you first need to understand what a patent is.

A patent gives you a legal monopoly over a product. The right to get a patent is enshrined in the Constitution and Congress has enacted laws to protect inventors’ ideas and products. A patent forbids others from making, using, selling or offering to sell a product without authorization that is similar or identical to the patented product. A patent usually lasts for 20 years. Who can infringe a patent? The short answer is nearly anyone can infringe on a patent. The list includes manufacturers, importers, wholesalers, retailers and even consumers if they use a product/process without authorization. Sometimes authorization is given by licenses or other methods. But the bar is not very high when it comes to an infringement analysis.

There are different types of infringement as well. One type is literal or direct infringement. This type of infringement is remarkable because there need not be any proof that the infringer was aware of the patent in the first place. Another type of infringement is contributory infringement. In this case a person aids a direct infringer by selling a component of the patented invention. This type of infringement does require knowledge of the patent, however. Lastly, there is something called induced infringement. In this case a person can be liable if he or she actively induces someone to infringe on a patent.

You can buy a patent, and many companies and individuals do that very thing. Once you own a patent you can stop others from infringing on the patent by starting a lawsuit. This is where patent “trolls” come in.

A patent troll is a company or person who threatens to sue or does actually sue for patent infringement. The troll uses the patent infringement lawsuit as a way to win court judgments for a profit or to limit and stifle competition. A troll usually doesn’t produce anything and is usually not marketing a product. A troll may own multiple patents. The troll usually has some claim that the patent is being infringed in some way, often in a questionable fashion. Of all the lawsuits filed in the federal courts per year, some 5,000-6,000 are for patent infringement and many are from patent trolls. One company is particularly bad.

From 2010 to 2019, it filed 460 lawsuits for patent infringement. In 2019 alone it filed 44 lawsuits.

Business owners and companies, if they are in operation for any length of time and produce products, are targets of patent trolls. One estimate is that about 10,000 companies have been sued at least once by a troll. Worse, these are usually small companies. About 50% of companies sued for patent infringement make less than $10 million dollars. This hurts the company financially because going to court is expensive and lengthy. While about 95% of cases are settled out of court, getting to that point costs a lot of money. The average cost for patent cases is between $2.3 to $4 million. Worse yet, it takes upwards of three years to have a case heard by a jury.

Awards by juries have also increased over the years. For example, in 2010 the median award by a jury for patent infringement was 1.9 million. In 2017 that number was 10.2 million. In 2020 some estimates have the amount awarded by juries as $4.67 billion. That’s a lot of money.

These cases are on the rise for obvious reasons. Patent troll lawsuits grew 500% over the last decade. They show no signs of slowing. The types of companies that get sued have narrowed somewhat. In 2020, roughly 65% of companies that are sued are in the technology sector.

Patent trolls usually don’t file their lawsuits in a convenient court location. Because of the nature of patent lawsuits, some judges have begun to specialize in these cases. Texas and Delaware courts are two examples. In 2022 there was a 216% increase in filings in Texas. It has gotten so bad that companies are trying to influence potential jurors in the community. The best example of this is a skating rink. Samsung was getting sued so often in Texas that it built an outdoor skating rink in one community to gain favor from the residents. While this might not be such a big deal in North Dakota, in the heat of Texas it is quite an undertaking.

Resolving these types of lawsuits can happen in a number of ways. A company may choose to purchase a license for the product from the troll. This is often the least expensive option. Another option is to settle with the troll for the cost it would take to defend against the lawsuit. A third option is to vigorously defend against the troll. This is the most expensive way, however. The troll is counting on not having to go to court and spend the money they would need to spend in a lawsuit. The company, if it is financially secure, may choose to defend itself as a deterrent to other trolls.

There’s no doubt this type of litigation is unsavory. Instead of producing something and marketing it, trolls seek to gain a financial advantage by threatening to sue or actually suing. The best way to respond to a troll is to contact a lawyer who has experience in patents and intellectual property. They can counsel you on the best way to respond and hopefully resolve the claim for the least amount of money. Our system certainly needs more legislation from Congress to discourage trolls from filing these types of lawsuits. Unfortunately, until that happens, trolls are not going away.

The information provided in this article does not and is not intended to constitute legal advice. All information, content and material is for general informational or educational purposes only. Information provided may not be the most up-to-date legal information, and it is recommended that readers contact their attorney to obtain advice on any particular legal matter.

Fargo Patent & Business Law, PLLC
Phone: 701.566.7571
Email: [email protected]
Web: fargopatentlaw.com

Written by Tom Kading

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