In case you didn’t know, a patent troll is a company that licenses patents without actually producing any products of their own. They will typically buy up patents and wait until unsuspecting companies infringe on their broad patent portfolio. Recently, a Delaware-based company named Innovatio IP Ventures has been doing exactly that and taking on small companies that offer free WiFi service to their patrons. Innovatio has demanded that small businesses such as coffee shops and restaurants provide a one-time licensing payment for the ability to provide their customers with free WiFi services. These settlements typically cost anywhere from $2300 to $5000 and are significantly cheaper than how much it would cost to hire a lawyer and fight the lawsuit. As a result, most businesses are happy to just settle because who really wants to go through the trouble and astronomical legal costs for such a small licensing fee. A good summary of the situation was written by Gregory Thomas on The Patent Examiner website. Innovatio claims they will not be targeting individual residential homes however there does not appear to be much stopping them at the moment.
Patent Trolls are not just costing small to medium sized businesses time and money. They are seriously harming technical innovation. A recent study from Boston University researchers have concluded that patent trolls have cost innovators half a trillion dollars since 1990. In the past four years the costs have risen to 83 billion per year. This doesn’t even count the massive legal battles between the major tech giants such as Apple and Microsoft. The patent system is supposed to be helping to provide incentives to be creative and stimulate innovation but the flurry of patent lawsuits are arguably hurting innovation. You cannot tap the full potential of your creativity when you are worried about some suit wearing trolls emerging from under their bridges to take you to court.
I recommend reading the study from Boston University as it provides some interesting insight into the current state of these frivolous patent lawsuits. I personally hope that these issues can be addressed from a legislation standpoint and be fixed to provide businesses with a little breathing room to be as creative as they want without fear of taking on legal trolls.
What are your thoughts on the effects of the patent system on innovation? Leave a comment if you have anything you’d like to add to the conversation.