Death to Patent Trolls: How a New Bill Could Slay Tech's Worst Parasites

New legislation could force trolls to pay millions of dollars in legal fees when they lose in court. That could go a long way toward killing their business model. 

Patent_Troll_USPTO_Becca_Rosen.jpg

Watch out, troll. (USPTO, Becca Rosen)

It's hard to think of any business more inherently obnoxious than a patent troll. These are the tech-world parasites that buy up troves of intellectual property not so that they can make a product, but so that they can turn around and sue successful companies for patent infringement with the aim of nabbing a quick and profitable settlement. They've infested the courts over the last decade, and by one count are now responsible for more than half of all U.S. patent cases, potentially costing American businesses some $29 billion a year.

So kudos to Oregon congressman Peter DeFazio, who Thursday morning introduced a bill aimed squarely at putting the trolls out of commission. His smart and simple legislation, called the SHIELD Act, would force trolls that lose in court to reimburse the companies they sue for their legal fees, which can amount to millions of dollars. That might not sound particularly bold. But it's a carefully calibrated step that could go a long way to containing the the troll problem by driving up the cost -- and risk -- of bringing flimsy patent cases. 

Trolls have flourished over the last few years largely because it's now easier and cheaper to bring a patent case than it is to defend against one. Much like personal injury lawyers who advertise on TV, the attorneys who represent trolls often work on contingency, meaning they only take a cut of what they win. Defense lawyers, on the other hand, ask for their pay up front, and usually bill by the hour. As a result, a single troll can file a barrage of lawsuits without putting much skin in the game, while the small companies they tend to target -- about 55 percent of the businesses sued make less than $10 million a year -- are forced to mount a costly defense that saps their finances with each passing day. 

The upshot is that it's usually cheaper for companies to settle with a troll than take them to trial. And settle they do. According to a study by professors at the University of Texas at Austin and Stanford, about 90 percent of cases brought by trolls -- which academics politely refer to as "non-practicing entities" or "patent assertion entities" -- end in a deal.

That's crucial to their business model. The fact is that when their cases do go to trial, trolls overwhelmingly lose. The Texas-Stanford study found that when suits don't settle, trolls win just 9 percent of the time. A PricewaterhouseCooper study found that they prevail about 24 percent of the time -- somewhat more impressive, but still not great odds. These companies are essentially betting that they won't have to justify their junk demands in court. 

Presented by

Jordan Weissmann is a senior associate editor at The Atlantic.

Never Tell People How Old They Look

Age discrimination affects us all. Who cares about youth? James Hamblin turns to his colleague Jeffrey Goldberg for advice.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Never Tell People How Old They Look

Age discrimination affects us all. James Hamblin turns to a colleague for advice.

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

Video

Pittsburgh: 'Better Than You Thought'

How Steel City became a bikeable, walkable paradise

Video

A Four-Dimensional Tour of Boston

In this groundbreaking video, time moves at multiple speeds within a single frame.

Video

Who Made Pop Music So Repetitive? You Did.

If pop music is too homogenous, that's because listeners want it that way.

More in Business

Just In