Patent trolls, legitimate plaintiffs expose flawed patent process

American companies are locked in a fight against trolls.

These aren’t the revolting, mythical creatures that lurk under bridges and hinder the quests of various heroes, but they are nonetheless destructive.

The real ogres we see today are patent trolls who wage a kind of guerrilla warfare within the legal system against American companies.

Patent trolls file dubious patent applications and/or purchase broad, low-quality patents that the U.S. Patent and Trademark Office likely should never have approved. Then the trolls turn around and sue companies for supposed patent infringement, which has the ability to impact myriad Americans.

“Abusive patent lawsuits against some of our most innovative companies are on the rise, forcing more and more successful businesses to delay hiring new workers, raising wages, and developing new products,” according to the Harvard Business Review. This strategy is quickly becoming a problem so large that it cannot be ignored, but it’s hardly new.

Perhaps the very first patent troll was a lawyer and inventor named George Selden. In the 1800s, he had the bright idea to patent a “road engine powered by a liquid hydrocarbon engine of the compression type” with a “body adapted to the conveyance of persons or goods.”

By 1895, the patent office approved his overbroad application, giving him rights to the automobile, which he then sold to the Electric Vehicle Company. They, in turn, required prospective manufacturers to acquire a license from them and give them a cut of their business, or else they would be mired in litigation. This largely stood as accepted business as usual until a defiant Henry Ford defeated the Electric Vehicle Company’s claims in court.

George Selden may have been the first patent troll, but his clash with Henry Ford was a harbinger of things to come. Patent disputes—some legitimate and some dubious—have continued unabated and have resulted in messy legal fights.

While neither company is a patent troll, one ongoing legal challenge between Apple and AliveCor is particularly interesting. As many of the Apple diehards out there already know, some Apple watches have a heart monitor, and this technology has been responsible for saving people’s lives. The question is who owns the intellectual property for the heart monitor.

“AliveCor accused Apple [in 2021] of infringing three patents related to its KardiaBand, an Apple Watch accessory that monitors a user’s heart rate, detects irregularities and performs an ECG to identify heart problems like atrial fibrillation,” reports Reuters. In late 2022, the U.S. International Trade Commission ruled in favor of AliveCor, which could result in the Apple products being banned in the U.S. The Biden administration has since chosen to let the decision stand.

This is far from an open and shut case because, as Reuters wrote, “The U.S. Patent and Trademark Office found the patents invalid [in late 2022], in a ruling that AliveCor has said it will appeal.” If AliveCor’s patents are invalid, then they don’t have a strong case against Apple.

The case is still being litigated, and there’s no telling how it will be resolved. Ultimately, that’s for the courts to decide, but the dispute elevates the messy nature of patents. Anyone with a cursory grasp of the patent process understands that reforms are needed. “It’s estimated that [U.S. Patent and Trademark Office] receives over 600,000 applications each year, while examiners only have, on average, 19 hours to review each one,” Forbes found.

No matter how good a government agency is—and most of them aren’t very good—it’s hard to imagine bureaucrats having the time, capability and expertise to thoroughly review the vast number of patent applications. Research bears this out too. “Some studies have estimated that 30% to 40% of issued patents are invalid or low quality,” reads Forbes.

Moreover, the Smoot-Hawley Tariff Act ultimately gave the U.S. Trade Commission wide-ranging jurisdiction to adjudicate patent disputes, which patent trolls have learned to abuse. Instead of going through the courts, they can challenge patents and hamper American businesses through this venue, which leads to problems.

As the Harvard Business Review noted, “Each year, patent trolls create $29 billion in direct, out-of-pocket costs from the companies they go after. Another study found that the companies that settle with patent trolls, or lose to them in court, wind up reducing investments in research and development by an average of more than $160 million over the next two years.”

To be absolutely clear, many patent disputes involve sincere parties who aren’t motivated by devious intentions, but there are plenty of trolls out there skulking in the shadows and waiting to take advantage of others. In either case, it would be wise for the government to revamp the patent process and ensure that the International Trade Commission isn’t used as a way to circumvent the normal patent review process.