A primer that provides an overview of patent issues and what they mean for startups.
A flood of perspectives on privacy. Late last week, the federal government got dozens of comments from companies, trade groups, non-profits and more on how to approach consumer privacy online. As part of the response to a request for comments on a broad framework for consumer privacy, Engine submitted comments to the Commerce Department’s National Telecommunications and Information Administration, outlining the ways in which various privacy proposals and laws affect startups.
Engine has released a new booklet that outlines why the strength of the patent system is so important for startups.
The Big Story: Patent trolls aren’t a fairy tale. Last week, in a speech to the Eastern District of Texas Bar Association, the United States Patent and Trademark Office Director Iancu told a room full of trial lawyers that there is no patent troll problem and that it's just a "narrative" being pushed by large companies trying to decrease innovation and competition. This week, we pushed back on that claim, explaining that abusive patent litigation is “a real threat and one every startup founder dreads.”
The Big Story: Europe passes online filtering rules.
This week, the European Parliament approved sweeping changes to its copyright regime, including Article 13, which would effectively require all websites hosting user generated content to adopt expensive and ineffective content filters. The proposal also creates a new IP right for publishers that requires websites to pay publishers if the website creates a link to the publisher’s content.
A year after the Supreme Court’s unanimous decision in TC Heartland LLC v. Kraft Food Group Brands LLC, however, Marshall may be returning to the normalcy of tumbleweeds and prairie, as NPEs who once filed there flock instead to other jurisdictions.
Today, the Supreme Court delivered a blow to patent trolls by unanimously reversing the Federal Circuit’s decision in TC Heartland v. Kraft Foods Group Brands LLC. The high court ruled that defendants in patent cases can only be sued where they are incorporated or have a regular and established place of business. The decision will make it significantly harder for patent trolls to file lawsuits in jurisdictions that patent-friendly but otherwise unrelated to the claims at issue—most notably the Eastern District of Texas, where almost forty percent of patent cases were filed last year.
Today, Engine hosted Austin Meyer, the director of the new documentary “The Patent Scam,” at the Capitol Hill Visitor Center. The screening and subsequent discussion with real victims of patent litigation abuse demonstrated the extent that the U.S. patent system is failing to protect small businesses and startups from patent trolls.
The patent system was established by our founding fathers as a tool to promote innovation and invention. But too often, America’s most creative, forward-thinking startups find themselves interacting with the patent system in a less-than-ideal way: on the receiving end of an infringement suit or a letter threatening as much. Bad actors that have amassed hundreds and thousands of overbroad, low-quality patents (colloquially known as “patent trolls”) target businesses, using these patents as proverbial weapons with the goal of forcing companies into costly settlements.
The patent system was enshrined in the American Constitution as a tool to promote innovation and invention. But as we have lamented again, and again, and again, the current system often has the opposite effect. In recent years, patent trolls—more politely known as non-practicing entities or NPEs—have hijacked the patent system, amassing hundreds and thousands of overbroad, low-quality patents with the sole purpose of suing and forcing companies into costly settlements. Unfortunately, this abusive patent litigation disproportionately impacts startups, entrepreneurs, and innovators (more than 80 percent of patent troll victims are small- and medium-sized businesses, and 55 percent of troll suits are filed against companies with revenues of less than $10 million).
This week, Senators Flake, Gardner, and Lee introduced a piece of legislation targeting one of the most egregious—and, frankly, ridiculous—problems with our current patent system. Specifically, the Venue Equity and Non-Uniformity Elimination (VENUE) Act would get patent cases out of the Eastern District of Texas, where patent trolls most commonly file their specious lawsuits. Together with the comprehensive reform legislation found in the PATENT Act, this bill would help put an end to a dangerous patent troll problem that continues to prey on this country’s startups and innovators.
Are you a startup or inventor wondering what to do about our broken patent system? Want to know what your options are? Check out Hacking the Patent System, an updated white paper published in partnership with EFF and students from the Juelsgaard Intellectual Property Clinic at Stanford Law School.
This paper includes important and timely advice for technology entrepreneurs attempting to navigate a dysfunctional and unfair system because, unfortunately, patent trolls remain a grave threat to startups and innovators. This is despite multiple attempts to pass reform legislation through Congress and an active Supreme Court working hard to fix a broken system. Not only does the threat of extortionary patent trolls still exist, but it’s actually getting worse. Lawsuits filed by patent trolls are up and significantly more than half of those cases are filed in the notorious Eastern District of Texas.
Despite these problems, startups often find themselves filing for patents, either because their investors tell them it’s a good idea or they plan to later use them defensively against lawsuit threats. This has led to a dangerous culture of “patenting up”—getting as many patents as possible in as short a time as possible.
To really fix the problem, a handful of things need to happen:
Congress must pass patent reform legislation that addresses fundamental inequities in the patent system that favor large patent holders and litigation plaintiffs.
Patent quality must be improved. Removing low-quality patents from the system will also remove the trolls’ deadliest weapon.
We must change the culture of “patenting up.” Big companies, investors, startups, and inventors need to come together to take a stand and return the system to its roots, which—as the Constitution provides—is meant to promote the progress of science and useful arts.
That all might take awhile. In the meantime, there are things that startups can do to navigate a broken patent system without hiring an expensive patent lawyer or even filing for a patent itself. We lay out some of those options here in an updated version of our Hacking the Patent System white paper, originally released in 2014. The paper takes a deep dive into alternative patent licenses: specifically, patent aggregators, patent pledges, and (new this year!) patent insurance.
Thanks to partners EFF and the Juelsgaard Intellectual Property Clinic at Stanford Law School—especially former students Marta Belcher and John Casey—for all their hard work.