I know firsthand how detrimental patent trolls can be to small businesses, as my Connecticut small business, Capstone Photography, was recently the victim of abusive patent litigation in which bad patents were used as weapons of financial intimidation against my small business. $100,000 in legal fees and ten months of litigation later, we successfully defended against these frivolous lawsuits.
A federal judge invalidated all three patents, ruling the patents as overly broad and ineligible for patent protection, upholding our arguments that the U.S. Patent and Trademark Office should never have granted these three patents in the first place. A year later, however, my small company is still recovering from exorbitant legal fees, none of which we were able to recoup from the legal system.
As a result of the lawsuit, my mom-and-pop photography shop had to downsize from five full-time employees to three part-time. We spent the equivalent of a year’s worth of profit to defend ourselves, with no budget allocated before to legal defense. And we were considered lucky – statistics show that the cost of defense against patent trolls generally exceeds $1 million.
Capstone Photography delivers high-volume, high-quality photography services at sporting events, capturing photos of athletes for their purchase. We built a company website where athletes could look up their photos by their race number – a common tool that many photographers utilize online. On New Year’s Eve 2013, I received notice of a lawsuit claiming that Capstone had used patented methods of cataloging race photos online without paying licensing fees. In a threatening demand letter, the patent-holder requested thousands of dollars in damages and a yearly fee for utilizing online technology that photographers all over the country use. This same individual had sued dozens of other companies, each of which decided to settle out of court instead of paying the expensive legal fees it would take to litigate. I decided to fight, and won, so that these bad patents could never again damage another small photographer in this country.
I am a strong supporter of the intellectual property system and believe is should be robust in protecting against genuine innovation being stolen. However, our current patent system is ripe for exploitation. Like the abusive patent litigation we endured, malicious actors are abusing the system and using it as a weapon against legitimate businesses, harming innovation, driving small companies out of business, and overtaxing our already overburdened litigation system.
Abusive patent litigation is happening in high volume, affecting both large and small businesses. Patent trolls operate in the shadows and use overly broad patents as tools of intimidation. For most companies, it’s cheaper to settle out of court rather than go through the expensive process of litigation. But without legal challenge, trolls can never be stopped. This is a problem that costs our economy billions of dollars every year, with estimates ranging from $29 to $80 billion a year. That’s money that could be invested in innovation, job growth and new technologies.
Fortunately, there is bipartisan support in Congress for patent reform, and bills have been introduced in both the House and Senate that strengthen the system; but action is needed soon to ensure other small companies like mine no longer have to choose between extortion or expensive litigation. The Protecting American Talent and Entrepreneurship (PATENT) Act of 2015 would make it more difficult for trolls who possess overly broad patents to file baseless and frivolous lawsuits against legitimate businesses. It would require heightened transparency, forcing plaintiffs to disclose more detailed information about themselves, what patents are at issue, which parties have a financial stake in the case, and every similar complaint filed by them over the past three years. The PATENT Act would also streamline discovery, often the most expensive part of litigation for defendants, and require patent trolls cover the legal fees of the defendant if a judge declares the lawsuit to be frivolous in nature. This legislation takes many common-sense steps toward genuine reform.
Congress must act this fall to fix our broken patent system, protecting businesses while also ensuring our intellectual property is protected as well. Failure to act for another year on this critical reform will cost the American economy billions and will stifle innovation and job growth across the country. We can’t afford to wait.
Michael Skelps is the General Manager of Capstone Photography.