October 25, 2013 | By Daniel Nazer

Why The Innovation Act is Good For Startups and Small Business

We have praised the Innovation Act of 2013, introduced this week by House Judiciary Committee Chairman Rep. Bob Goodlatte (R-VA) and co-sponsored by a bipartisan coalition, as the best patent troll-killing bill yet. We support the bill because it offers a host of fixes to the growing patent troll problem. Taken together, these reforms will help stop the abusive patent litigation that has targeted everyone from grocery stores to podcasters.

Now that the bill has been released, patent trolls are scrambling for a way to save their destructive business model. The latest attempt is through spreading a story that the Innovation Act would hurt smaller companies. Of course, opponents of the Innovation Act are not small companies but multi-billion dollar enterprises like patent troll Intellectual Ventures. And their self-serving claim is simply false. By cutting down on troll litigation the Innovation Act would deliver massive benefits to startups and small businesses.

Patent trolls do not just go after the big guys. In fact, more than 50 percent of patent troll lawsuits are against defendants with less than $10 million in annual revenue. Trolls have hit cafes, podcasters, application developers, and small businesses using standard office equipment. And trolls have made a specialty of targeting startups—sapping them of time and money when they need it most. Since patent cases cost well over $1 million to defend, smaller companies targeted by trolls generally have no choice but to pay up, even when the underlying suit is weak.

The Innovation Act helps fix this imbalance. For example, it will reduce the number of meritless troll suits by requiring a patent holder to provide certain obvious and essential details (such as which patents and claims are at issue, as well as exactly what products allegedly infringe and how) when it files a lawsuit. Any patent holder, big or small, filing a legitimate case will easily be able to provide these basic details. But this requirement will make it harder for patent trolls to launch massive litigation campaigns against defendants who don’t actually infringe their patents.

Similarly, the Innovation Act’s fee-shifting provision will make it easier for small companies to fight back against meritless troll suits. This is important. The most aggressive patent trolls tend to bring the worst cases (one study found that, if forced to litigate to judgment, these trolls win only 9.2% of their cases). Instead of being forced to pay a settlement to avoid ruinous litigation expenses, small defendants can fight back against weak troll cases. The Innovation Act’s fee-shifting provision helps small company patentees with meritorious cases by allowing them to recover fees when they prevail.

The Innovation Act also has transparency provisions (requiring patent trolls to reveal the parties that would actually benefit from the litigation). These provisions won’t have much impact on legitimate small companies. But they will have a huge impact on giants like Intellectual Ventures which notoriously hides behind more than 2,000 shell companies. Opposition to these provisions is not about protecting small companies. It’s about keeping damaging facts secret from the public.

Patent troll lawsuits are devastating to startups and small business. The Innovation Act will deter these abusive suits and give defendants tools to fight back. At the same time, it does not impose any burdens on smaller companies bringing legitimate cases. The bill is good for everyone but patent trolls.

Join us in supporting the Innovation Act. Take action and contact your member of Congress now.


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