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Call them patent assertion entities, non-practicing entities, or, in the words of John Oliver, raccoons, but whatever you do, don’t call them small inventors. Patent trolls do not create jobs or products, and their profits certainly are not small. In an effort to clear the air of all the misinformation going around by the patent troll lobby, we spent the day with Jeff Glueck, COO of tech startup Foursquare, as he and other Consumer Electronics Association (CEA) and Engine Advocacy startup members met with members of Congress and their staff to describe his many encounters with patent trolls. A frontrunner in the industry, Glueck has worked in leadership positions at various tech companies, such as mobile software startup Skyfire and now Foursquare. So it should come as no surprise that he needs two hands to count all of his encounters with frivolous patent lawsuits. As he describes it:
The typical troll process is to shake down small companies or startups with the expectation that business owners will settle rather than endure the cost of fighting frivolous claims in court. It’s sad when you work hard to create real inventions and a group of lawyers with a vague patent — that never should have been granted in the first place — is able to derail your business with a groundless claim. … Small businesses take it on the chin. Last year, patent trolls targeted small businesses and tech companies about 80 percent of the time. Now, that number is approaching 90 percent. You may as well call it an all-out assault on the innovation economy.
In fact, 2015 is on track to be a record-breaking year for the patent troll lobby. Comparatively speaking, patent trolls have filled over 11 percent more lawsuits this year than at this point of 2014. Even worse, they are attacking tech startups more than ever before. Patent trolls traditionally have targeted small businesses that are least equipped to defend themselves.
For those select small businesses courageous enough to fight back, the costs are steep financially and the reward is purely ideological. It can take over a million dollars and three years to defend your company going all the way to trial against a troll. Few small businesses or startups have that luxury. And that’s only counting legal fees and legal costs. For small business, a bigger cost can be the time and distraction, or the way that customers and partners may shy away from doing business with you while under a patent assault. As CEO at Skyfire, Jeff saw a baseless patent troll suit against his first major telco customer delay launch of Skyfire’s mobile network software by 15 months. With a deployment on hold, Skyfire couldn’t get paid, and had to keep the company alive at a cost of $15 million dollars until ultimately the troll was defeated in court. Now, in his role at Foursquare, he sees the company dealing with five trolls at any one time, and roughly a million dollars annually in costs dealing with trolls:
That’s nearly ten engineers we would hire tomorrow, but instead that money is going to lawyers. As a country, our leadership in software is a huge potential job growth engine. We can have companies focus on improving their products to grow users and revenues globally, or we can have an economy derailed by everyone suing everyone.
The current climate is daunting for tech entrepreneurs, and Glueck is focused on a solution. In this case, it’s legislative — the U.S. House of Representatives Innovation Act, which is slated for a floor vote this month:
We’re fans of H.R. 9. We need to put a stop to the corrupt process of venue shopping – it’s un-American. Overly burdensome upfront discovery is being used as a weapon and fishing expedition to force companies into settling regardless of the merits of the case. Narrowing early discovery will take away a weapon for trolls. An automatic stay for innocent users will also help to protect innocent small businesses – from restaurants to tech startups – who just simply use a product. They don’t make it.
Ahead of the upcoming crucial vote for the tech community, contact your member of Congress and urge him or her to support innovative startups like Foursquare by reforming America’s patent litigation system. The patent troll lobby is big and its pockets are deep; don’t let these extortionists get away with another cent.
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