Ted Simons: Businesses are expressing increasing concern over patent trolls, or groups that file suit to enforce patents even though there is no intent or even capability of producing an actual product. Attorney Brian LaCorte of Ballard Spahr in Phoenix is here to talk about patent trolls and their impact on some local companies. Good to have you here. Thanks -- Give me a better definition of a patent troll.
Brian LaCorte: Thanks for having me, Ted. A patent troll is essentially a business or individual that buys or somehow acquires a patent, and then uses that patent as a meal ticket in litigation or in an enforcement campaign to try to what I think can be fairly described to shake down businesses or bring litigation and try to get damages awards when the patent troll itself is not involved in any sort of actual manufacturing, development, research, or innovation of any kind.
Ted Simons: I was going to ask, how do you differentiate between a quote unquote patent troll and someone who is trying to protect an idea that maybe the also guy had over here and the big guy now has appropriated and is not reimbursed?
Brian LaCorte: That's a fair question. It's sort of a negative term for a company that calls itself an assertion entity, a PAE, patent assertion entity or nonpracticing entity. There are small inventors that have legitimate patents, and those patents are at times infringed usually by big companies. But what is more often the case in the last five years is that patents have become a commodity. And those that buy patents for the sole sake of litigating and enforcing them not to protect technology, but to make money off of companies that are not infringing, is the type of operation I would refer to as a patent troll. That's bad on the economy, it's bad for business, and Frankly it's bad for our patent system.
Ted Simons: And it sounds like Arizona companies discount tire, go daddy among those concerned about that.
Brian LaCorte: I think so. Those are companies that I've worked with in patented cases where it's a head scratching exercise. How in the world can what we do really be infringing a patent? It's not just retailers, it's banks, it's pizza delivery operations, it's hotels, it's car -- You name it, the patent cases that I've been involved with are filed in the last few years cover everything from renewing a product on a website, offering wi-fi in the lobby, credit card swipe machines, basic fundamental tools of -- And methods of business being accused of infringement that one would think is not belonging to one individual as a monopoly in a patent.
Ted Simons: Are they winning these cases?
Brian LaCorte: By and large they're not. For a time in Texas there were a number of very big awards that sort of emboldened patent trolls to fire there. More often than not these cases are exposed for what they are -- Dubious. However, it's expensive to litigate a patent case. And so what is typically the operation is to take a patent, try to get a couple hundred thousand dollars in settlement because that's less than what it would cost to defend, and move on to the next target. That is what can fairly be described as shakedown campaign, and it's costing businesses millions of dollars.
Ted Simons: It's costing big businesses, but if I'm an app developer, for example, and I start getting a cease and desist order, I don't even know it exists, that's got to be a problem. I can see where you want to protect the little guy. But it sounds like some of these trolls are going after the little guy.
Brian LaCorte: That's right. In fact, the very analogy or example you cited, the angry birds, a beloved app my kids play, sued for patent infringement an app developer. And it was ridiculous case. It happens all the time. Small businesses, start-ups, companies introducing new products launching for the first time get a cease and desist letter, end up hiring a lawyer, spending a fortune to protect a product and in some cases I've seen companies not introduce that product because they can't afford to defend it. That's bad for the economy.
Ted Simons: So how do we address the problem and how do we do this to ensure that legitimate cases aren't washed away?
Brian LaCorte: It's a fair question. Congress now has before it a very important bill, it passed the house, it's in the U.S. senate, the innovation act. That would curb the litigation abuses. It would expose companies that buy patents and make them more transparent to find out if they're legitimate, it would heighten the standards for proving patent infringement or pleading it, and it would create fee shifting so if a case is really bogus, and a defendant wins, they can get their fees to discourage frivolous litigation. That's pending in the senate, it's being considered, there are alternative measures with similar reforms that have been introduced in the senate. And the hope is that will create meaningful reform in the justice system as it relates to patents.
Ted Simons: If it gets past the senate does it have bipartisan support, the kind of thing the president would sign?
Brian LaCorte: It is. It had bipartisan support in the house and President Obama has been very supportive of patent reform. He's recently announced some executive orders to do that very thing in a small way if it passes the senate can and comes out of Congress I think the president would sign it.
Ted Simons: All right. Interesting stuff. Good to have you here.
Brian LaCorte: Thank you, Ted.