We need your help on a patent reform issue that is critically important for tech startups and businesses in general.
In particular, this is about patent trolls, also known as patent assertion entities, who enforce patent rights against accused infringers for the purpose of licensing fees, but do not actually make products or supply services based upon those patents.
According to one study by Professor Colleen Chien, 55% of patent troll litigation defendants make $10 million or less in revenues. Startups and small businesses are at the receiving end of frivolous patent litigation that has grown three-fold since 2005, costing the American economy at least $29 billion per year.
As a result, startups find themselves wasting valuable time and resources by putting more executive and engineering time toward depositions, purchasing attorney time to produce millions of documents in discovery, diverting budgets from research and development, and delaying product development and general company growth. This does not take into account the products that never make it to market because of the patent troll threat.
Patent trolls threaten innovation in Hawaii and the growth of the startup community in this state.
Hawaii Senator, Mazie Hirono sits on the Judiciary Committee, and a vote on patent reform is coming up in two weeks. It is critical that she hear local support for reform before the Committee meets.
We need your help in making your views known to the Senator.
You can contact Senator Hirono’s Chief of Staff, Betsy Lin by email at betsy_lin [at] hirono [dot] senate [dot] gov
Or send a letter to:
Senator Mazie Hirono
330 Hart Senate Office Building
Washington, DC 20510
Here is a Sample Letter to Hawaii Senator Mazie Hirono you can use as a guide.
Our thanks in advance for considering this request.
For those interested, here’s further background on patent troll impact on the startup and VC community:
The startup and tech community make up a large part of the $29 billion in payouts to patent trolls each year. This means:
- Executive/engineering time spent in depositions rather than at work
- Attorney time searching through millions of documents in discovery (which may not relate to actual trial)
- Budgets diverted from R&D toward litigation/legal fees
- Product development potentially delayed by pending litigation
VC Impacts – In Robin Feldman’s 2013 study, she found:
- Startups and VCs overwhelming believe that patent demands (originating mostly from trolls) have a negative impact on the venture-backed community
- 74% of the venture capitalists and 58% of the startup companies report that patent demands had a significant impact on a company
- 60% of VCs estimate that it costs more than $100,000 for a company to defend against patent infringement allegations, with some reporting costs in the millions of dollars.
- 59% of the venture capitalists and 66% of the startup companies reported that all or most came patent demands came from trolls
- All VCs surveyed indicated that if a company had an existing patent demand against it, it could potentially be a major deterrent in deciding whether to invest.
Start-up Impacts – In Colleen Chien’s 2012 study, she found:
- 40% of startups targeted by patent trolls experienced one or more “significant operational impact” after receiving a demand letter, according to a recent survey of tech startups.
- 66% of unique PAE defendants make $100 Million or less in revenues; 55% of unique PAE defendants make $10 Million or less in revenues.
- “40% percent of small companies that received a demand … reported a ‘significant operational impact’: delayed hiring or achievement of another milestone, change in the product, a pivot in business strategy, a shut-down business line or the entire business, and/or lost valuation.”
- Near 60% of the demands [sent to small companies] involved software or high-tech patents.
- “40% of survey respondents stated that they were being targeted because of their use of another’s or a widely available technology.”
We need new legislation that addresses the patent troll problem by undercutting their business model.
There is current support and momentum to pass a law this year.
- In December the House passed similar anti-troll, pro-innovation legislation in an overwhelming 325 – 91 bipartisan vote.
- President Barack Obama, in his State of the Union address, called on Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.”
Senate Judiciary Chairman Patrick Leahy (D-VT) also supports anti-troll, pro-innovation legislation. Though he has introduced a bill addressing some of the symptoms of the troll problem, his legislation does not get at the heart of the troll business model and does not do enough.
We need a patent reform bill with reforms that will help us fight back by:
- making it easier to recover attorneys’ fees spent defending against frivolous cases;
- curbing abusive discovery practices;
- raising pleading standards, requiring all patent owners to state their claims upfront; and
- creating a faster, cheaper and less burdensome alternative for challenging poor quality patents.