March 19, 2013

It's Time To Deal With Patent 'Trolls'

Eli Dourado

Former Senior Research Fellow
Summary

While the SHIELD Act may provide some modest relief for Silicon Valley firms against spurious lawsuits, it doesn't solve the real problem that the Valley and other industries have—that patents do more harm than good in their particular area of innovation.

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Silicon Valley firms have complained about "patent trolls" for years. As nonpracticing entities, trolls acquire patents but don't produce anything with them except lawsuits against companies that may (or may not) infringe on their patent portfolios. In recent years, trolls have even become a tool that practicing companies use to stifle competition. By transferring a patent to a troll and retaining a license, firms can inflict legal pain and distraction on their competitors.

To remedy this problem, Reps. Jason Chaffetz, a Utah Republican, and Peter DeFazio, an Oregon Democrat, have reintroduced  the SHIELD Act, which would require nonpracticing entities who lose such lawsuits to pay for their adversaries' legal fees. While the SHIELD Act may provide some modest relief for Silicon Valley firms against spurious lawsuits, it doesn't solve the real problem that the Valley and other industries have—that patents do more harm than good in their particular area of innovation.

There is good evidence that patents spur innovation in some industries, like chemicals and pharmaceuticals. It is easy to find out if a particular molecule has already been patented, and therefore easy to avoid infringement. And to create a new, not-yet-patented molecule, it is not usually necessary to license very many other patents.

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