Patent Trolls Are Trolling Startups In Massachusetts — And We Need To Change That

Attendees visit sponsor booths at the TechCrunch Sessions: Robotics at Kresge Auditorium on July 17, 2017 in Cambridge, Massa
Attendees visit sponsor booths at the TechCrunch Sessions: Robotics at Kresge Auditorium on July 17, 2017 in Cambridge, Massachusetts.

In a recent episode of the HBO series “Silicon Valley,” Richard Hendricks is getting his tech startup off the ground when he comes face to face with a patent troll: an unscrupulous lawyer who claims Richard’s new company is committing copyright infringement.

The lawyer knows his claim is bogus, but also knows Richard would have to pay him in a legal settlement to avoid battling it out in court.

This is not just the stuff of TV fiction. This is real life, and it’s costing billions of dollars in frivolous lawsuits and lost business opportunities.

With an average lawsuit costing $1.6 million, the deceptive actions of patent trolls add up quickly. In 2015 alone, trolls robbed companies of $7.4 billion. One study puts the number much higher, costing companies $29 billion per year.

Fortunately for Richard, he outsmarted the troll and got his case dismissed. But too many of our small businesses and young entrepreneurs are falling prey to patent trolls.

One such company is Carbonite, a startup based in Boston that offers data backup and storage on the cloud. As the CEO, Mohamad Ali, told the state Senate in testimony on July 20, Carbonite spent well over $5 million fighting a troll that falsely claimed the company was infringing certain patents.

Only after winning the case in front of a jury did Carbonite learn from the U.S. Patent Office that the patents the trolls claimed were not even valid.

Congress, which traditionally regulates intellectual property, has sat on their hands. There are still no federal rules in place to protect innovators from trolls.

In the vacuum, more than 30 states have stepped in to protect intellectual property and defend their startup businesses. It’s time for Massachusetts to act.

In the State Senate, Sen. Richard Ross and I have filed legislation that would prohibit a person from making a bad faith assertion of patent infringement. The legislation would also create a legal means for companies to defend themselves from such claims.

If the bill passes, patent trolls in Massachusetts could be held liable for damages such as lost business opportunities when a company is forced to shift resources and attention to fighting fraudulent lawsuits.

There is clear evidence that laws like these prevent business losses and promote growth, both for the tech industry and for individual companies.

The first published study of the effects of anti-patent troll laws showed that these state laws led to an increase in employment at small firms in high-tech industries, who are often the targets of trolls.

The same study showed that anti-troll legislation leads to fewer business bankruptcies and more investment in startup firms.

Once the threat of a lawsuit is removed, venture capital firms are more willing to invest in startups because they no longer have to worry that the companies will fold under the expense of legal battles.

This is particularly important for Massachusetts, the number two state in the country for tech innovation. The Bay State economy relies on young college grads tinkering, with the hopes of developing the next Microsoft, Facebook or Vertex.

Patent trolls might have stopped Bill Gates from creating Microsoft or prevented Mark Zuckerberg from creating Facebook.

They should be tamed before they kill the next great innovation that transforms our economy.

Senator Eric P. Lesser is the Senate Chair of the Joint Committee on Economic Development & Emerging Technologies, Vice Chair of the Joint Committee on Financial Services, and leads Millennial Outreach for the Massachusetts State Senate. He represents the First Hampden & Hampshire District in Western Massachusetts.