Who Will Save Us From Patent Trolls?

The business world is apparently afraid of trolls. However, these trolls are not the kind you might encounter on the way to Rivendell or Mordor. These are “patent trolls” who obtain or collect patents and then actually try to collect royalties or enforce the patents through litigation (or the threat thereof).

While that is the actual purpose of a patent and perfectly legal, the trolls can be separated from non-trolls in that trolls are in the primary business of acquiring and attempting to enforce “questionable” or “dubious” patents. Worse yet, the trolls tend to target smaller businesses that are ill-equipped to defend against potentially expensive litigation.

The troll problem is exacerbated by three things:

1. Granted unexpired patents are presumed to be both valid and enforceable thus placing the burden on the accused infringer to demonstrate the patent should not be enforced;
2. patents are a creature of federal law exclusively; and
3. despite some discussion, Congress has to date failed to take federal legislative action to address the troll problem.

As to number three, I am speculating and cynical so I wouldn’t expect a legislative answer any time soon. It might just pave the way or set an example for addressing the problem of tort reform and I am not sure Congress wants to risk that. So what can a small business do? Who will save them from the trolls? For now, the answer is Vermont.

Vermont recently passed a law under their consumer fraud statute to protect businesses there from improper or baseless assertions of patent infringement.

So the next question is this: will other states follow or should you just pack up your small business and move to Vermont? I am not sure many states will actually follow Vermont’s lead and, while I have nothing against Vermont, I would have to say don’t pack yet.

The Vermont law puts the federal government in a unique, if not unfamiliar position. Conflicts between state and federal government relating to enforcement of laws are certainly not unknown. For example, marijuana remains illegal under federal law while it has been decriminalized or legalized in several states such as California and Colorado. Although it is one of the best known conflicts, it really isn’t the best comparison to be made here. Anywhere from medicinal marijuana to legal marijuana for recreational use, those states don’t want to enforce the equivalent of a federal drug law (and the feds don’t seem terribly interested in enforcing it either).

Instead, the federal government has already faced, and taken a stand in, a more similar situation where a state has tried to enforce a law the feds don’t seem to want to enforce. That would be in Arizona. Arizona passed state law essentially mirroring federal illegal immigration law to allow Arizona to enforce what the feds didn’t. Ultimately, in a split decision the Supreme Court sided primarily with the federal government and its ability to decide how federal law is enforced. That suggests, perhaps strongly, that it will be up to the federal government and not states to determine how patents may be enforced. Thus, enforceability of the Vermont law against trolls may be somewhat “dubious” or “questionable”. How ironic.