By Mark Griffin
Since 2004, patent trolls have sued my company 32 times. We have expended $11 million dollars in our defense. Despite our best efforts to fight back, the trolls don’t seem to go away. And we’re not the only ones suffering.
Patent trolls are exploiting our patent litigation system. They use vague patents, obscure infringement claims and the threat of expensive litigation as their business model. They claim to have exclusive rights to functionalities as common as Web searching, online shopping carts and even hooking a scanner up to a network. They frequently have no products to sell and create no jobs. No business is safe; they’ve attacked everyone from pizza parlors to grocery stores to online retailers. Successful businesses can find themselves targeted multiple times or, in our case, several dozen.
Trolls are costing the economy hundreds of millions of dollars — some claim the direct annual impact is upward of $29 billion. We are pouring buckets of money into the pockets of expensive lawyers and unjust settlements — money that could instead be reinvested in economic growth and job creation.
At Overstock, we respect intellectual property rights, but we never settle with trolls, though we know that many businesses have little choice. They are intimidated when facing the high costs of defense or the hazards of unjust verdicts. In our case, the fight is paying off: In the past three years, 12 trolls dismissed their cases against us, choosing to walk away when they found we wouldn’t settle. But it is an expensive fight, and many companies cannot afford it.
Trolls are increasingly gnawing on the backbone of the growth economy, preying on small businesses and technology startups which have neither the resources nor the expertise to deal with these lawsuits — thus strategically attacking American innovation in its formative, rather than its formidable stages, all with devastating effect. Last year, more than 60 percent of the companies sued by trolls had less than $100 million in annual revenue. These companies are often forced to settle or pay bogus licensing fees to avoid lawsuits.
Fortunately, Congress is addressing the problem. Today, the House Judiciary Committee will hold a hearing to explore ways to end abusive patent litigation. The committee’s chairman, Rep. Robert W. Goodlatte, R-Va., recently introduced HR 9, The Innovation Act, which addresses the issue head on.
And there isn’t just one solution to the problem. We need comprehensive and economically impactful reforms if we are to succeed.
Whereas trolls risk little in bringing a lawsuit, defendants, on the other hand, bear heavy litigation costs with little hope of ever recovering those costs if they win. Judges need more leeway to shift litigation costs to trolls where cost-shifting is clearly justified in frivolous suits. And, because most troll entities are set up as little more than shell corporations, Judges need procedural tools to assure at the end of the day that those behind the troll companies will have to pay any imposed costs.
Also, under current rules, trolls can file complaints without even explaining how a patent is infringed, making it almost impossible for their targets to determine whether a complaint is legitimate before incurring enormous defense costs. We need patent suit pleading rules requiring much more specificity.
Lastly, trolls are experts at causing defendants to have to pay huge discovery demand costs right up to the point that a troll may simply walk away or be kicked out of court. We need practical tools for judges to fairly, and reasonably, limit the discovery process, and to weed out, at earlier stages, bogus claims before discovery is in full swing.
Similar legislation passed the House in 2013 with overwhelming bipartisan support, only to get mired in the Senate. Despite their differences, Congressional Republicans and Democrats generally agree that patent troll abuses must be stopped. This term they should reach across the aisle to get the job done now — we cannot afford to wait.
American business, our economy and future jobs all now stand on a narrowing bridge blocked by greedy patent trolls. Congress needs to help us to stand up and knock these trolls into the ravine, clearing the road to redirect hundreds of millions of dollars away from lawyers and back into economic growth and job creation.
Mark Griffin is the general counsel for Overstock.com.