The U.S. patent system is being manipulated and exploited by non-practicing entities (NPEs), or “patent trolls,” who are attacking American manufacturers through the weaponization of low-quality patents.
By Dean Wegner, Guest Columnist
American manufacturers are on an obstacle course of supply chain setbacks, labor costs, labor shortages and price inflation. The last thing we need is one more stumbling block hindering our ability to contribute to the U.S. economy.
As the Founder & CEO of Authentically American, an apparel company with a manufacturing network that stretches across 11 U.S. states, I’m passionate about creating American jobs.
Unfortunately, a threat to manufacturers’ support of more than 13 million jobs has been growing over the past decade.
The U.S. patent system is being manipulated and exploited by non-practicing entities (NPEs), or “patent trolls,” who are attacking American manufacturers through the weaponization of low-quality patents.
“Non-practicing” is code for “shell company,” one that does not actually develop products or services, nor create jobs. In short, they add no value to the U.S. economy.
How does the scheme play out?
Patent trolls acquire vague, overly broad patents, and then sue hundreds, or even thousands, of companies at the same time, accusing them of patent infringement where no such infringement exists. The goal is either a court ruling in their favor by a judge or jury with minimal patent knowledge or a remunerative, out-of-court settlement with the targeted victim.
Cornered in a lose-lose situation, U.S. manufacturers often choose to pay off the troll because doing so will cost less money and waste less time than duking it out in court – which can cost $5 million or more and take five to seven years. It’s truly an injustice, as these lawsuits are often baseless and rob manufacturers of the resources needed to innovate, invest and hire.
Patent infringement lawsuits have climbed by 500% since 2002. The majority are not filed by inventors, nor companies aiming to protect intellectual property; they’re filed by patent trolls.
In 2021, the busiest year for NPEs since 2016, NPE patent litigation was up by nearly 10%. This means that American manufacturing companies – more than half of all patent defendants – are increasingly on the defense against these predators.
Putting an end to paten trolls
Thankfully Sen. Patrick Leahy (D-VT) and Rep. Lamar Smith (R-TX) led the bipartisan charge on the America Invents Act (AIA) in 2011 to improve patent quality and help productive American employers like U.S. manufacturers be better equipped to defend themselves from patent trolls.
The AIA discouraged frivolous patent litigation by improving access to the post-grant review process for weeding out lawsuits without merit. It created inter partes review (IPR), a process for challenging bad patents that’s far more efficient than going to court: the IPR process takes 12 to 18 months and typically costs less than $1 million.
Patents that should have never been issued began being invalidated by the United States Patent and Trademark Office (USPTO), too. It’s no surprise that some weak patents undeservingly get the stamp of approval, since there are between 600,000 and 650,000 new patent applications every year and only 8,100 patent examiners to review them.
Unfortunately, the rules for post-grant review have not been properly upheld by the USPTO in recent years. As a result, U.S manufacturers have been under assault with patent lawsuits against them climbing to their highest levels in a decade. While U.S. businesses face any number of challenges on a regular basis – many of which are unavoidable – this threat is stoppable.
Congressional leaders are coming together on a bipartisan basis to disarm patent trolls and fortify the U.S. patent system. Sens. Leahy and John Cornyn (R-TX) recently introduced S. 2891, the Restoring the America Invents Act (RAIA), which revisits the intent of the AIA, protects American manufacturers’ rights to IPR proceedings and improves patent quality by invalidating bad patents that don’t pass muster.
Rather than promoting invention and innovation, as intended, the patent system is becoming a hotbed for abusive patent litigation. However, when U.S. manufacturers come together as one, we can make a big impact and save American jobs.
This is a call to action for Congress to dig deep and eliminate this unnecessary obstacle to our success. Passing the Restoring the America Invents Act is critical to American manufacturing as an industry and our country’s economic engine.
Dean Wegner is the Founder & CEO of Nashville-based Authentically American, an apparel company whose products are 100% manufactured in the U.S. and a member of US*MADE. Authentically American shares its success and honors American heroes by donating 10% of its profits to veteran and first responder charities.
This article was originally published by the Tennesseean.