Stop patent trolls from holding American businesses hostage

Groups on both sides of the battle over patent reform have been preparing as Congress considers whether to pass the Innovation Act in the House and PATENT Act in the Senate. As the debate unfolds, businesses across the country should be paying close attention. If our broken patent system is not repaired with common sense reforms that limit patent trolls’ ability to victimize innovative, job-creating enterprises, these businesses could be their next victims. 

As engineers, we understand the importance of intellectual property as well as anyone. ADTRAN is one of the largest patent-holding corporations headquartered in Alabama, and we have a vested interest in ensuring that claims to intellectual property are respected and valued. However, we have also seen firsthand how the practice of “patent trolling” is stifling innovation and causing real harm to our country’s economy and prosperity. 

{mosads}At ADTRAN, we focus on the creation of new technologies and invest 21 percent of our revenue back into research and development. This ongoing innovation helps support the creation of new jobs and create products that benefit the American economy as a whole. However, when patent trolls target us for frivolous lawsuits, we are forced to divert our top inventors away from innovation. Instead, these valuable resources are siphoned away to deal with discovery in patent infringement lawsuits filed by patent trolls who use their vaguely-worded patents as a weapon against companies like ours.  

Our experience is not unusual. In the first six months of 2015, 3,050 patent lawsuits were filed. This represents a 32 percent increase over the last six months of 2014 and 10 percent higher than the same period last year. And it is not entrepreneurs defending their worthy patents that are driving this spike in litigation: 90 percent of all tech patent lawsuits during this time were brought by patent trolls. If this trend continues, 2015 could be a record year for patent suits filed – and a banner year for patent trolls’ extortion of American businesses. 

Patent trolls have grown emboldened by a number of procedural rules that make it easier for them to target businesses, particularly small businesses with relatively fewer resources. First, unlike other areas of law, patent trolls have been allowed to get away with a bare bones complaint that does little more than identify the patent number and the defendant’s product accused of infringement. This makes it easier for the patent troll to get into court and use discovery procedures to bog down the defendant’s time and heighten costs to drive settlement or to fish for a basis for the suit after the suit has been filed.  In an effort to force an early settlement, patent trolls will send vaguely-worded demand letters that highlight the often astronomical legal costs associated with discovery and defending a patent infringement case at trial. Taking into consideration the huge amounts of time and money it would take to investigate and defend even a weak claim, many small businesses opt to pay a much smaller settlement fee – leaving the patent troll’s claim to remain unchallenged and allowing it to target and extort another company.  

Additionally, current law allows patent suits to be filed almost anywhere, unlike other areas of law where the suit must be brought in a district with close ties to the defendant or the events that led to the dispute. This venue rule allows a patent troll to cherry pick where it will sue its defendants. Often, the forums to which they drag defendants have no relation to where the patent was created or where the alleged infringement occurred.  

These extra hurdles often raise the costs of litigating so high for many companies that they are forced to settle rather than undergo such a lengthy and expensive process. The kicker is that even when a company successfully defends against a patent troll suit, the defendant has virtually no hope of recovering any of the costs of defending even a frivolous case. This is what patent trolls count on — that their target will see the enormous burden of pursuing the case in court, with no hope of recovering its costs and will opt to settle instead.  

Luckily, bills are making their way through Congress to put an end to this unbalanced and unjust patent litigation system. The PATENT Act in the Senate introduces more stringent pleading requirements that would compel patent trolls to clarify and define the patent infringement in question. The Innovation Act in the House includes a strong but fair approach to venue reform — fixing the system so that a lawsuit will be filed in the most suitable jurisdiction, and not the friendliest toward one party or another. In particular, the Innovation Act’s venue provision will clarify that patent infringement suits may only be brought in districts with a real relationship to the dispute in question. Most importantly, both bills address fee-shifting which requires the loser to pay the winner’s legal expenses. These provisions will not prevent legitimate patent owners from defending their patents in court, but it will prevent patent trolls from dragging their victims to distant courts with no connection to the alleged patent dispute and get stuck with an expensive legal bill even when they successfully defend their case. 

American businesses have been victims of patent troll tactics for long enough. It is time for Congress to put an end to procedural abuses and take a stand in favor of patent reform. For members of Congress to drag their feet on legislation now will only give patent trolls a free pass to continue victimizing America’s innovators and job creators for the foreseeable future. 

Stanton is the chairman and chief executive officer of ADTRAN, Inc., a leading global supplier of broadband infrastructure and internetworking solutions. Its headquarters are located in Huntsville, Alabama.