This weekend, the New York Times published a fascinating portrait of Erich Spangenberg of IPNav, who has been called one of "one of the most notorious patent trolls in America." In the past five years, IPNav has sued 1,638 companies.
While the Times' profile includes many colorful details (such as the time Spangenberg purchased so much wine at a Christie's auction that it had to be delivered by an 18 wheel truck), this is not the important part of the story. What is far more important is the evidence that IPNav's business, and patent trolling more generally, is a huge tax on innovation.
Thanks to trolls like IPNav, the Times explains, U.S. companies are forced to spend upwards of $30 billion every year on patent litigation. Most of that money goes to troll profits and legal expenses, with less than 25 percent flowing to inventors. Even Spangenberg concedes that his business uses “the courts as a marketplace, and the courts are horribly inefficient and horribly expensive as a market.” Patent trolls like IPNav are a symptom of a fundamentally broken system.
In a follow up article, the Times tells the story of Peter Braxton and his app Jump Rope. In an all too common tale, Braxton's promising start-up was devastated by a troll lawsuit (brought by a company not associated with IPNav). Even though Braxton won a clear victory at the district court, litigation costs were destroying his business. In exchange for a substantial equity stake in Braxton's company, IPNav agreed to handle the litigation. As the Times explained, this story suggests that “there is really only one way to deal with a patent bully: team up with a bigger bully.”
This is a terrible climate for innovation. We hope that media attention like this helps spur legislative reform. We should create a patent system that doesn't squelch start-ups solely to enrich patent trolls. Erich Spangenberg doesn't need a seventh Lamborghini.