Patent Trolls in our Midst

CSO — Intellectual property (IP) protections exist in U.S. law for the purpose of ensuring inventors and creators are compensated for their works, encouraging innovation.

Unfortunately, the very protections afforded by the federal government--patents, copyrights and trademarks--are now often used as weapons by companies that exist only for the purpose of shaking down other companies for licensing fees. What was created to encourage innovation is now routinely used to stifle it.

Patent trolls are arguably getting the most press. Under this scheme, a company gathers up rights to one or more patents (most often in high tech) and attempts to extract a fee from "infringing" companies. The problem is that these claims are often made based on groups of patents in which it is unclear exactly what is protected. These companies are usually non-practicing entities that exist only to attempt to extract money from others.

Small companies that get hit with a trollish patent claim may well have to close their doors. Larger companies have suffered severe damage, too. These suits are widely considered a drag on the economy. It is difficult to know what to do about them, other than pay the requested fees, which calls to mind a mafia shakedown. (In most patent defense cases, the defendant countersues the plaintiff; this practice has some chilling effect on frivolous suits. Patent trolls, by contrast, are not doing anything with their patents so there is no way to countersue.)

The courts recently struck a blow against copyright trolls when they dismissed numerous copyright claims made by Righthaven, a collector of rights to online content. This form of trolling does not appear as prosperous as its patent counterpart. This is true for Righthaven, at least, which recently declared itself near bankruptcy.

Trademark or brand trolls run similar schemes by registering Web domains or Facebook pages, or by trademarking business names (typically those that are already in use but are not yet formally protected) in order to extract payment for their use.

These trolls are a nuisance to people such as Evan Falchuk of Best Doctors, who sometimes has to shell out a few bucks to use a domain he wants.

Worse, he has encountered situations where he tried to file the company's trademark in a new country only to find the trademark claim has been rejected as unfit by that country's IP authorities. Having a rejection already on the books can make it more difficult for Best Doctors to obtain its trademark in that country.