Graphic courtesy of i2Coalition member Rackspace.

Graphic courtesy of i2Coalition member Rackspace.

Christian Dawson, Co-Founder and Board Chairman of the Internet Infrastructure Coalition (i2Coalition), sent a letter to Bob Goodlatte, Chairman of the House Committee on the Judiciary, urging amendment of the U.S. Patent Act. The current version of the act does not protect small to medium-sized businesses from victimization and frivolous lawsuits by Patent Assertion Entities (“patent trolls”) and threatens to stifle an industry that generates an estimated $46 billion in annual direct and indirect revenue. Read an excerpt from the letter below:

According to a recent study, Patent Assertion Entities (PAEs) cost defendants and licensees $29 billion in 2011. Small to medium sized businesses have borne the brunt of PAEs’ efforts, making up 90% of defendants sued by PAEs and bearing 37% of the aggregate costs from 2005-2011. 

This is particularly troubling to our industry and to our membership because we are often the target of these frivolous lawsuits which can cost a single company millions of dollars to litigate. Many tech companies – specifically startup companies – are particularly susceptible to extortion by PAEs because they know that the company cannot afford the high costs of patent litigation and, thus, has no choice but to settle. Some go out of business altogether. As a result, the broader effect is to hamper innovation, which is exactly the opposite of what the patent system was designed to encourage.   

Any proposed amendment to the U.S. Patent Act should protect end users from patent infringement claims. This protection is needed because PAEs harass the numerous end users of a common product or service rather than sue its manufacturer or provider – all of which drives up the cost of settling lawsuits. Further we need to clearly define an “end user item” to encompass any product that is sold publicly and that is used without modification and as intended by the manufacturer or provider, as well as any processes that those products use. The end user should not be required to pay for damages for using this kind of product or risk being enjoined from using the product. And finally the amendment should be narrowly focused to protect the true end user.

i2Coalition looks forward to working with Chairman Goodlatte on reforming the U.S. Patent Act in such a way that will promote innovation in the United States and restore customer confidence in patent systems. Read the full letter here.