Receiving
a ‘patent violation’ notice is really a bad news for a startup or a small
business. Patent trolls are literally guzzling startups. The innovation or idea
if implemented can be good for the society in numerous ways. However, they are
holding it just for their own benefits. And, when someone else is transforming
that idea into success for making the society the real beneficiary, they send a
notice of ‘patent violation’. They are using patent infringement lawsuit as a
legal way for extortion. It is found in many surveys that small companies and
startups are strongly affected by Patent Assertion Entities.
Professor
Colleen Chien from Santa Clara University School of laws surveyed startups and
small companies. One-third of these companies had received ‘patent demand
letters’ from PAEs. The revenue of 13 companies was less than $100,000.
Patent Trolls Create Trouble
The demand
letter has an adverse impact on the operation and productivity of the targeted
company. Delayed hiring, inability to meet operational milestones and product
change often reduces the value of the company and this often ends with the
shutdown of the company. The patent demand letter has a significant operational
impact on 50% of the companies having revenue less than $100million. However,
companies with revenue more than $100 million do not report a significant
impact on the operations.
On
receiving a patent demand letter, 35% of the startup or small companies opt for
fighting. 10% opt to settle and 22% do nothing. The average cost of settlement
among 12 companies in this survey was $350,000. Fight in the court costs an
average of $857,000. Moreover, small businesses do not have enough knowledge
and information, and strategy to address this threat.
Ramifications
Many
companies fall short in understanding the ramifications of their actions after
receiving a patent demand letter. And, the problem is that the information
about easy targets is propagated quickly in the PAE community. Taking license
without proper research puts them at a disadvantage.
Dealing with Patent Troll
To deal
with patent trolls, first of all, the company should go for patent infringement
insurance. Having an insurance indicates that you are ready to fight. This can
deter the confidence of the patent troll. Industry association groups should
work together when their common interests are threatened. Small businesses
should share information about PAEs.
