An Open Letter Re: Patent Trolls
To The Massachusetts State Senate:
We represent a group of leading innovators in Massachusetts who support Senate Bill S.178 and encourage you to pass this important bill during this legislative session. We believe “An Act Protecting Massachusetts Businesses from Abusive Patent Infringement Claims” will give Bay State companies a powerful tool to ward off patent trolls who add a significant tax on innovation in our state.
Non-Practicing Entities, or Patent Trolls
“Non-Practicing Entities,” (NPEs) or patent trolls represent a significant drag on our economy. From 2011–2013, the number of lawsuits brought by NPEs tripled and accounted for 88% of patent cases targeting technology companies. 82% of the NPE cases are against companies with under $100M in revenue. In a single year, 100,000 companies were threatened with lawsuits. One study places the economic cost of patent trolling at an astounding $29 billion per year.
These cases are especially frustrating because of the high pressure tactics used by the NPEs to force settlements. “Patent trolls” earn their name by sending volumes of “demand letters” to businesses, in many cases, without revealing who they are or which patents are supposedly being violated. They assert that the recipient is infringing on a patent and must pay, quickly, to avoid a lawsuit.
This is ambulance chasing applied to patents. For emerging companies it can mean the difference between success and failure. For larger companies, the hundreds of thousands of dollars used to litigate these cases means the difference between hiring for a new position, or not. In all cases it distracts the most valuable employees from driving innovation at their organizations.
Massachusetts companies need your help.
The Bill is a Defensive Tool Based on Fair Business Practices.
S.178 provides a legal means for companies, large and small, to defend themselves from entities that engage in bad practices. The new law would provide legal remedy when NPEs fail to:
1) Reveal who they are
2) Disclose the patent that they believe is being violated
3) Identify how they believe the recipient is infringing
4) Allow the recipient sufficient time to review and respond to the claims
If the NPE doesn’t follow these guidelines, the recipient of the demand letter can countersue claiming a violation of this anti-troll law. This law doesn’t interfere with any federal laws, and adds another arrow in the company’s quiver to ward off patent trolls. It won’t stop frivolous lawsuits from being filed, but will give legitimate companies a way to fight back.
This Law Won’t Hurt Companies That Generate IP
Massachusetts is the proud home of many of the world’s finest universities and thriving technology and life sciences ecosystem. This law exempts organizations that legitimately assert their patents, as is the case with pharma companies, and academic institutions that generate revenue by licensing their innovations. These institutions are our partners in ensuring Massachusetts remains The Innovation Hub.
29 States Already Have Similar Laws on the Books — Massachusetts is at a Disadvantage:
Twenty-nine states already have a version of this law on the books. Without a law like this, Massachusetts runs the risk of falling behind. S.178 isn’t a silver bullet, but it creates a meaningful state law remedy that innovators can use to fight the trolls.
We urge you to take action now to protect our innovation ecosystem from frivolous patent claims and help our companies fight back against patent trolls.