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Patent Troll Defense May Get Easier With New Federal Intervention

In one case, hundreds of businesses were sued for attaching document scan technology to simple office computer systems. In another, thousands of hotels, retailers and coffee shops were warned of litigation for setting up customer Wi-Fi networks.Business litigation stemming from the actions of patent trolls has gotten to be a major problem in the U.S. More than a simple nuisance, these shell companies, which exist for the sole purpose of opportunistically snapping up patents and then using them to file lawsuits and collect royalties, have the potential to thwart business innovation and progress.

As such, the federal government is taking steps that could make it easier for those defending against such aggressive claims – which cost very little to the patent holder but can pose a major threat to honest businesses large and small.

These shell firms have become a particular problem within the technology industry just in the past 24 months, accounting for more than 50 percent of all the patent infringement suits that have been filed in the country. There were about 4,000 patent infringement lawsuits filed last year. That is an uptick of about 45 percent from 2011 and a roughly 30 percent increase from the number reported in 2010.

Back in 2011, the government attempted to make it tougher for patent trolls by signing off on the America Invents Act , which made it against the law for companies to file a single patent lawsuit with many defendants. So now, a patent holder has to file an individual lawsuit for each company it is alleging has infringed.

Unfortunately, this hasn’t stopped patent trolls. It’s simply created more lawsuits.

In a recent speech, President Obama called the claims “frivolous,” and issued an order to the Patent and Trademark Office, mandating that firms be very specific about what exactly the patent covers. When litigation is filed, he declared the patent holder needs to be very specific about how exactly that patent is being infringed. Overly-broad claims, the administration said, should be approached with greater scrutiny from the PTO, as many patent trolls take aim at business owners large and small for simply using everyday technology.

Still, some industries have expressed concern that this directive could be problematic in its own right. For example, one suggestion is for the patent office to expand a special review program just for patents related to computers. Large software companies have worried this might itself be stifling to innovation.

Pharmaceutical companies also have worried that some of the measures might hamper their ability to defend their patents.

However the federal government decides to approach it, some states have taken to enacting their own measures. For example, lawmakers in Vermont recently signed off on legislation to make it possible for patent troll victims to counter-sue. This is important because in most cases, the initial defendant can’t counter-sue because the patent firm doesn’t actually produce anything that could be interpreted as a violation of the original company’s patent.

Directives like this can go a long way in aiding businesses in fighting back.

The Law Offices of Ira S. Newman provides litigation representation in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or send us an e-mail.

Additional Resources:
Obama Orders Regulators to Root Out ‘Patent Trolls’, June 4, 2-13, By Edward Wyatt, The New York Times
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New York Business Start-Ups Should Invest in Legal Advice, April 13, 2013, Great Neck Business Lawyer Blog