Patent trolls can be bad for business

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They're not hiding under bridges like the trolls in children's fairy tales, but patent trolls can be a very real problem for fledgling businesses, especially for those in the tech sector.

The definition of a patent troll varies, but for the most part they are companies that file or purchase large numbers of patents — sometimes from bankrupt companies — and then file lawsuits or demand fees against infringing companies.

"They're like aggregators, who collect patents with the idea of exacting a toll from an industry," said James Singer, an attorney with Fox Rothschild. "They're known as trolls because of some of the tactics they use."

Patent trolls are more kindly referred to as nonpracticing entities, because they usually don't produce any product related to the patents held. Nonpracticing entities can drain precious resources from startups that might not be up to speed on all the rules about patents.

The Patent Transparency and Improvements Act — Senate Bill 172 — would increase transparency in the patent process. When Sen. Patrick Leahy, D-Vt., introduced the bill late last year, it contained a "loser pays" provision that would have required the loser in a patent infringement lawsuit to pay the legal fees of the opponent.

That language has since been softened, but the legislation still contains provisions for punishing "bad faith demand letters" in which a party asserts its ownership of a patent fraudulently, or in a way that is misleading. The bill also would make it more clear who owns a patent, and make information about resources for small businesses dealing with patent lawsuits more readily available.

States are beginning to get wise to nonpracticing entities, and California, Delaware and Texas — which have high numbers of patent troll companies — have tried to change the process for handling such cases.

"They are being more skeptical," Mr. Singer said.

Not all suits brought to fight patent infringements are trollish in nature, Mr. Singer said, pointing to two recent lawsuits in favor of Carnegie Mellon University and the University of Pittsburgh, respectively.

A jury found that Marvell Technology Group willfully infringed on computer chip technology patented by a CMU professor and student. And Varian Medical Systems last week settled patent litigation with Pitt over technology used during radiation therapy.

Tech incubators in Pennsylvania include intellectual property education in the program training for their startup companies.

"It's important to know what it means to patent technology, and what the risks are," Mr. Singer said.

Kim Lyons: or 412-263-1241. Twitter: @SocialKimly.

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