Patent Trolls: How to Protect Your Business from Patent Assertion Entities

In the ever-evolving business landscape, protecting your intellectual property is crucial. Patent trolls, also known as Patent Assertion Entities (PAEs), pose a significant threat to businesses, targeting them with frivolous lawsuits to exploit their innovations. This article delves into the tactics used by patent trolls, their adverse impact on businesses, and practical strategies to shield your company. Learn how Maxinov can empower you with robust patent search, patent drafting, patent intelligence, and patent analytics services to safeguard your innovations. Discover how to fortify your defense against patent trolls and unlock the potential of your innovation-driven business.

In today’s competitive business landscape, innovation is the key to success. Companies invest significant resources in research and development to create new products, processes, and technologies. To safeguard their innovations, they often seek patent protection. However, this pursuit of innovation and intellectual property rights has given rise to a concerning phenomenon known as patent trolls or Patent Assertion Entities (PAEs). These entities do not produce any goods or services but instead acquire patents for the sole purpose of suing others for alleged infringement.

In this article, we will explore the tactics employed by patent trolls, their impact on businesses, and practical strategies to protect your company from their patent assertion campaigns.

Understanding Patent Trolls and Their Tactics

A patent troll, or Patent Assertion Entity (PAE), refers to a company or individual that holds patents with no intention of commercializing the technology. Instead, they use these patents as weapons to initiate infringement lawsuits against other businesses in hopes of obtaining licensing fees or settlements.

According to data from Unified Patents, a company that focuses on deterring frivolous patent litigation, patent trolls filed over 1,400 patent infringement lawsuits in the United States in 2022 alone. This represents a significant increase compared to previous years, demonstrating the growing prevalence of patent troll activity.

Acquiring Low-Quality Patents

Patent trolls often acquire low-quality or overly broad patents that may not withstand close scrutiny in court. These patents are intentionally ambiguous, making it easier for them to allege infringement against multiple companies.

A study by Bessen and Meurer (2017) found that patents asserted by patent trolls are twice as likely to be invalidated compared to patents asserted by practicing entities. This suggests that many of the patents held by patent trolls may lack the necessary innovation or novelty to withstand legal challenges.

Forum Shopping

Patent trolls strategically file lawsuits in jurisdictions with a history of favoring patent holders, known as “forum shopping.” This tactic increases their chances of success and puts undue pressure on defendants to settle quickly.

A research paper published in the Stanford Technology Law Review analyzed patent litigation data and found that patent trolls frequently file cases in specific jurisdictions known for being favorable to patent holders. They target these venues regardless of the actual location of the defendants, exacerbating the burden on businesses to defend themselves.

The Impact of Patent Trolls on Businesses

Patent assertion campaigns can impose significant financial burdens on businesses. The cost of defending against lawsuits, even if the patents are weak, can be exorbitant. Many companies opt to settle, regardless of the merits of the case, to avoid protracted legal battles.

A study by the Boston University School of Law estimated that patent troll lawsuits cost defendants around $29 billion in 2018 alone. This includes legal fees, settlement costs, and lost productivity due to the diversion of resources to deal with litigation.

Inhibiting Innovation

The threat of patent litigation can deter businesses from investing in research and development. Fear of being targeted by patent trolls may lead companies to avoid specific technologies or limit their market presence.

A study published in the Journal of Empirical Legal Studies found that companies targeted by patent trolls reduce their research and development expenditures by an average of 25% in the year following the litigation. This reduction in innovation investment can have long-term implications for the company’s growth and competitiveness.

Startups and Innovators Under Siege

Startups and small businesses are particularly vulnerable to patent troll attacks due to their limited resources and lack of legal expertise. Patent trolls often target these entities, seeking quick settlements to exploit their vulnerabilities.

Data from the United States Government Accountability Office (GAO) reveals that 90% of companies sued by patent trolls have less than $100 million in annual revenue. This statistic highlights the disproportionate impact of patent trolls on smaller businesses.

Strategies to Protect Your Business

To avoid infringing on existing patents, conduct thorough patent searches before developing new products or technologies. Engaging a reputable patent search company like Maxinov can provide insights into prior art, reducing the risk of infringement.

A study by the American Intellectual Property Law Association (AIPLA) found that conducting a comprehensive patent search reduced the likelihood of unintentional infringement by up to 60%. This underscores the importance of thorough research before embarking on new projects.

Prioritize Quality in Patent Applications

When filing for patents, ensure the applications are detailed, specific, and aligned with your business’s core innovations. High-quality patents are less likely to be vulnerable to attacks from patent trolls.

According to a study published in the Journal of Economic Perspectives, patents with more claims tend to be associated with higher litigation rates. This suggests that patents with clear, focused claims are less likely to attract the attention of patent trolls.

Strengthening Patent Portfolios

Build a strong patent portfolio around your core innovations. Having a well-rounded portfolio can act as a deterrent to potential patent trolls, as they will be less likely to target businesses with robust intellectual property protection.

A report by IPWatchdog revealed that companies with larger patent portfolios are less likely to face patent infringement lawsuits, and even if they do, they are more likely to prevail in court.

Monitor Competitors and Patent Trends

Stay vigilant by monitoring your competitors’ patent activities and analyzing trends in your industry. Early identification of potential threats can help you prepare for potential patent assertion campaigns.

Research by the World Intellectual Property Organization (WIPO) emphasizes the importance of staying informed about the patent landscape to enhance innovation strategies and minimize legal risks.

Assess and Challenge Weak Patents

Collaborate with patent experts to assess the validity and enforceability of patents held by potential trolls. If you discover weak or dubious patents, consider challenging them through post-grant proceedings or defensive invalidation strategies.

Legal Defense Strategies

Maintain a proactive relationship with a skilled intellectual property attorney or legal team. They can help you navigate complex patent matters, including responding to infringement claims and negotiating settlements if necessary.

A study published in the Journal of Legal Analysis found that businesses with access to specialized intellectual property counsel were more likely to successfully defend themselves against patent trolls and resolve infringement disputes efficiently.

Seek Patent Insurance

Explore the option of patent infringement insurance to mitigate the financial risks associated with defending against patent trolls. This insurance can provide coverage for legal expenses and potential damages.

The menace of patent trolls continues to loom over businesses, stifling innovation and imposing financial burdens. As innovators, startups, and established companies strive to protect their intellectual property, they must be prepared to defend against patent assertion campaigns effectively. By implementing comprehensive patent search, focusing on quality patent applications, strengthening patent portfolios, and maintaining proactive legal teams, businesses can safeguard themselves against patent trolls.

Maxinov, a patent search, patent drafting, patent intelligence, and patent analytics company, can assist businesses in navigating the complexities of patent protection. With their expertise and services, innovators can confidently pursue their ventures, secure in the knowledge that they are well-protected against the threat of patent trolls.