Louis Foreman, CEO of the Charlotte-based product development firm Enventys and creator of the reality TV show “Everyday Edisons,” doesn’t want inventors to be discouraged from defending their intellectual property. But Foreman believes a bipartisan bill in Congress called the Innovation Act could do just that by requiring those who lose patent-infringement cases to pay legal fees.
Lawmakers behind the measure, however, say the bill protects innovators by raising the bar on patent lawsuits.
The differences are at the heart of an emerging conversation over what to do about “patent trolls” – people or companies that threaten to sue over vague claims of patent infringement to pressure businesses to settle financially rather than challenge the claims.
A 2013 White House report found that patent troll lawsuits rose over the previous two years “from 29 percent of all infringement suits to 62 percent. … Estimates suggest that (patent trolls) may have threatened over 100,000 companies with patent infringement” in 2012 alone.
Todd Moore, CEO of TMSoft, a mobile app developer based in Virginia, never imagined that he could be accused of patent infringement simply for a hyperlink.
But he was. In 2011, his company received a letter saying that White Noise, an app it developed to help people sleep, infringed on patents of a company named Lodsys.
Lodsys sued TMSoft and other app developers as well in 2013. But it also offered to settle in exchange for $3,500 deposited in an overseas bank account, and with no publicity. Otherwise, TMSoft was looking at legal fees of nearly $200,000, and that’s before even setting foot in a courtroom.
Cutting profits for patent trolls
The technology industry has lobbied hard for changes that would restrict the ability of patent trolls to challenge claims in hopes of reaping financial reward.
The trolls’ tactic appears to have been successful. Businesses paid $29 billion in 2011 to settle claims, a 400 percent increase since 2005, according to the White House report.
Rep. Robert Goodlatte, R-Va., chairman of the House Judiciary Committee, is pushing a bipartisan bill with 20 co-sponsors to protect intellectual property rights. The Innovation Act “contains common sense reforms and makes the patent litigation process more transparent,” he said in a statement.
Goodlatte’s bill seeks to protect innovations from patent trolls by raising the bar on the filing of patent lawsuits. It would require plaintiffs to disclose more information, such as proof of the patent’s validity, early during litigation and clear evidence of a patent’s true owner.
“Many complain about gridlock in Washington,” the Computer and Communications Industry Association, a tech advocacy group, said in a statement praising Goodlatte’s legislation. “This bill would make it less profitable for patent trolls to sue and set up speed bumps for those unfairly targeting everyone from legitimate U.S. companies to those buying an item like a printer from a store.”
Edison Nation weighs in
But higher education institutions and small business firms are among those that suspect the Goodlatte bill needs some tweaking to ensure that it doesn’t end up harming some of the very people it hopes to protect.
Among other provisions, the bill would require losing parties in patent litigation to pay the winning party’s attorneys fees.
The fee-shifting rule would “deter universities and smaller enterprises from enforcing their hard-earned intellectual-property rights” because they fear litigation could cost significant time and money, Robert Brown, the president of Boston University, and James Clements, the president of Clemson University, wrote in a Wall Street Journal op-ed column last week.
“That intimidation would make it very difficult for independent innovators and small businesspersons to go up against a large competitor,” said Foreman, who is also CEO of Edison Nation, a company that helps entrepreneurs produce and market their ideas.
Edison Nation and dozens of other companies, including several big players in pharmaceuticals, biotechnology, finance, education and other fields, sent a letter to Congress recently citing several Supreme Court rulings as well as other laws and regulations that they contend negate the need for more patent protections.
Foreman said he prefers the Strong Patents Act by Sen. Chris Coons, D-Del., because it is “a more surgical approach that solely focuses on demand letters without creating the collateral damage to independent inventors.”
“The current bill just goes way beyond what is necessary,” said Wayne Roper, president of SCBIO, a life science industry member organization based in Greenville, S.C., and who signed the joint letter. “In order to deal with abusive practices by a minority of bad actors, it erects barriers for all the legitimate patent owners who must defend their own businesses against patent infringement.”
Pitch day at Edison Nation for app innovations
Washington D.C.-based AKT IP Ventures, which recently launched a $20 million fund to build new businesses around technology and ideas backed by intellectual property, is teaming with Charlotte-based Edison Nation and product development firm Enventys for a pitch day in Charlotte on May 5.
The goal is “to uncover the next great idea for the creation of an app-enabled device, mobile app concept or Internet of Things innovation,” according to a description from Edison Nation.
Every participant will be allotted 15 minutes to privately pitch his or her idea to a panel anchored by Louis Foreman, CEO of Edison Nation and Enventys, and Nicolas Chaillan, CEO of AKT IP Ventures. Selected ideas will be transformed into sustainable businesses and their creators will receive a competitive royalty or equity structure in the new venture. Begins 10 a.m. at 520 Elliot St., Charlotte. For information and to register: www.edisonnation.com/pitchday.