Blake Glasgow: Patent Trolls Come To Arkansas

Editor’s note: The following commentary was written by Blake Glasgow, attorney with Wright, Lindsey & Jennings. It appears in the latest magazine edition of Talk Business Arkansas.

They may be the biggest threat to Arkansas businesses that you have never heard of. They are called “patent trolls.” They make or sell no goods, they offer no services, and they have no customers or clients. Instead, patent trolls are in the business of patent litigation for profit, and they are targeting Arkansas businesses more now than ever before.

It has been reported that over 60% of all patent infringement lawsuits filed in the U.S. in 2012 were filed by patent trolls. While such lawsuits are nothing new for tech companies in the Silicon Valley or Fortune 500 companies, prior to this year small- and medium-sized businesses in Arkansas have seldom had to tangle with them. Now, any business with a website that can be found by the patent trolls is a target, no matter the size of the business. While Arkansas is not a hotbed for patent litigation, the number of cases filed by patent trolls is on the rise, and no industry is immune from attack.

I have recently worked with a number of companies to fend off patent trolls, including companies in the telecommunications, printing, and consumer goods industries, and their experiences with patent trolls are no different than the many other Arkansas firms targeted by patent trolls this year. These companies were alleged to have infringed patents by using goods in the course of their business—such as equipment or software—that were purchased from vendors and used by virtually everyone in their industry. Patent trolls almost exclusively target the end users of the technology, not the actual manufacturers or suppliers. By going after the end users, there are more potential targets and thus more sources of revenue.

Unlike when actual competitors fight, patent trolls do not want the targeted company to stop using the technology. Instead, patent trolls seek licensing or “right-to-use” fees from the companies they target in exchange for allowing them to use the technology for the remainder of the life of the patent. To entice early settlement and avoid the risk of an unfavorable decision during the litigation that could torpedo their attacks on other companies, patent trolls routinely offer early settlements for amounts well below the cost to defend the lawsuit. The targeted companies then face a tough decision: either settle early to avoid expensive litigation even if they believe they have done nothing wrong, or defend against marginal patent infringement claims even if it costs more to win outright. Not surprisingly, many targeted companies settle during the early stages of the case, and the patent troll moves on to its next victim.

Many view these five- or six-figure demands from patent trolls as nothing other than a “shake-down.” Some state attorneys general have launched investigations into whether patent trolls violate consumer protection laws by sending mass demand letters for licensing fees with little to support their allegations. In June, President Obama issued executive orders designed to curb patent trolls. Many have called for legislative action to crack down on patent trolls and several bills are currently before Congress. But until we see legislation that stops or deters patent trolls from their lucrative and highly successful business model, Arkansas companies have no other choice but to try to dodge the influx of patent trolls looking to exploit them.

The best way to avoid trouble from patent trolls is to stay under the radar. Often it is information that the targeted company has posted on its website, a video posted on YouTubeTM, or pictures posted on other social media sites that catch the attention of the patent troll. Staying under the radar can be challenging because making it difficult for a patent troll to find a business may mean that it is difficult for prospective customers to find the business as well. While the balance between disclosing too much and disclosing too little will likely depend on the industry, businesses should remain mindful of the risk of patent troll litigation when publicly disclosing information about the technology used in making their goods and performing their services.

Even if you receive the dreaded patent troll demand letter, all is not lost. Some patent trolls will simply go away if the targeted company does not respond to the demand. If they do not go away, invoking the help of the manufacturer or supplier in establishing non-infringement or invalidity of the patent can prove valuable because of its knowledge of the technology. Utilizing industry organizations is also a common approach because member companies can pool resources to defend themselves.

Only time will tell if patent trolls targeting Arkansas businesses is just a fad or if they are here to stay, but until something changes, all should be on the lookout to protect themselves against these predators.

Blake Glasgow is a patent attorney with Little Rock-based Wright, Lindsey & Jennings, LLP. Glasgow’s practice focuses primarily on patent and trademark prosecution and related litigation.