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Policy: Law

Patent trolls profit at your expense

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Opinion,Op-Eds,Law,Patent Law

As consumers, we think of the holidays as a time to find unparalleled shopping deals. Most retailers cut price tags on everything from toys to technology, and shoppers are in a frenzy to find the perfect gift for loved ones.

Unnoticed by many are looming threats – like excessive and double taxation – that can impact everyone at the cash register, stripping consumers of holiday savings and creating significant losses for business of all sizes, but disproportionally affecting smaller businesses that operate on tight margins.

But other threats, like the stifling of innovation and threats to intellectual property by patent assertion entities, or patent trolls - which cost U.S. companies around $29 billion each year - have only recently become a focus of lawmakers. The House recently passed the Innovation Act, undeniably a step in the right direction in confronting domestic threats to intellectual property while simultaneously preserving our free-market principles. However, as we look at the impact private trolls can have on the economy and innovation, we should not neglect to examine the risks associated with foreign government-sponsored patent trolls that, if not addressed, will impact American innovators, consumers, and businesses alike. While legislation like the Innovation Act speaks to domestic players, it does not do enough to address foreign government-owned trolling.

Patent trolls are frequently criticized because, rather than using patents to protect their research investment while producing or improving goods, they use intellectual property as an offensive tool and earn revenue through infringement settlements and occasionally awards.

Bad-acting trolls, both domestic and foreign, operate under the model of offensively pursuing litigation and threats against alleged patent infringers across the globe. Those sponsored by foreign governments harm innovation by offering legal protection to companies based in their country of origin and deliberately attacking foreign patent holders. The mere existence of these entities rewards anticompetitive and protectionist behavior and sets a dangerous precedent for “copycat” governments to undergo a similar approach.

One of the most prominent such entities is France Brevets, a program committed to promoting and monetizing primarily French-held patents. France Brevets is financed in part by the French government and also Caisse des Depôts, a publicly traded company. This troll has acknowledged giving preference to French companies and its patent portfolio expands across jurisdictions in the United States, China, Japan, and much of Europe.

There are multiple government-sponsored trolls in existence around the world - from France Brevets in Europe to Innovation Network Corporation of Japan, which has been around since 2009. The Japanese government launched the program by guaranteeing 1,800 billion yen ($17.2 billion) initially with smaller investment amounts from private investors.

Patent trolls strive to generate revenue through lawsuits and threats, yet they do not invent anything or even innovate on existing technologies. High legal fees typically associated with defending against these attacks have a trickle-down effect. Small businesses selling the products need to increase the prices of the products they sell and create. Consumers foot the bill at the cash register with every purchase.

With the holidays now behind us, our lawmakers and regulatory bodies need to consider the costly impact of both domestic and foreign patent trolls, and the effects their aggressive actions have on all consumers and the millions of small businesses that serve them and create jobs in local communities.

Mario H. Lopez is president of the Hispanic Leadership Fund, an advocacy organization dedicated to promoting limited government, individual liberty and free enterprise.
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