Atlanta’s tech start-up community has a lot to be proud of. Companies are emerging from Georgia Tech, being nurtured in communities like Hypepotomous and Atlanta Tech Village, and getting funded locally. Unfortunately, success can also result in high-class problems. Atlanta entrepreneurs have recently begun experiencing the scourge of patent trolls, just like their industry colleagues in Silicon Valley and New York.
Patent trolls — or Patent Assertion Entities, as they prefer to be called — operate unusual businesses. They do not create products or provide services. They typically own a handful of poor-quality patents that do not support real products or operating businesses. They hire lawyers to scour the country for “targets,” whom they offer a deal that is hard to refuse: License our patents for several thousand dollars and a percentage of future revenue, or spend hundreds of thousands of dollars defending a patent infringement lawsuit in federal court.
Several trolls are public companies that focus on large targets like Cisco, Motorola and AT&T. But a new class of trolls has recently started to attack small companies, even pre-revenue start-ups. These trolls finance their operations by obtaining nuisance-fee settlements from small companies. The settlements create the patina of legitimate patents by documenting dozens of licensees and also fund the troll’s focus on larger targets. It’s a business model that’s bad for innovators and entrepreneurs in Atlanta and nationwide.
Recently, one Atlanta-based company fought back against a troll and won. BlueWave Computing was targeted by a prominent troll that claims a patent on technology that converts scanned documents into email attachments. BlueWave’s CEO thought the troll’s original demand letter was laughable, and he ignored it. But when a lawsuit followed, the CEO hired a prominent Atlanta law firm and successfully defeated the troll. It cost tens of thousands of dollars in legal fees.
Unfortunately, the absurdity of a troll’s patent claims usually does not matter because most small companies — including many in Atlanta — cannot afford to pay lawyers and fight back. They simply pay the troll to go away. This is a tax on innovation that threatens Georgia’s vibrant start-up community and burgeoning tech industry.
Last year, the app industry generated more than $1 billion in economic activity in Georgia. Georgia’s app economy is the seventh-largest in the nation, and the tech start-up scene is growing. Investment and energy are destabilized when a single patent troll letter can shutter a company, force it to change business models or scare investors.
Congress is just beginning to pay attention to patent trolls. Georgia Congressman Hank Johnson Jr. is a member of the influential Judiciary Committee that will consider new patent reform laws later this year. If you agree that Congress should stop patent trolls, visit devsbuild.it/fightpatenttrolls and send a letter to your Congressional representative.
Jon Potter is president of the Washington, D.C.-based Application Developers Alliance.
