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Support Our Startups by Tackling the Troll Problem

Gary Shapiro, Consumer Technology Association (CTA)™

Today is Startup-Up Across America Day – an opportunity for our 30 million small businesses to tackle the issues impacting their growth and development head on. And no issue is a bigger threat to American innovation and entrepreneurship than the plague of patent assertion entities (PAEs), which now drain $1.5 billion from the U.S. economy every week.
Better known as “patent trolls,” PAEs are the very antithesis of entrepreneurs. They don’t actually create any products or provide any services, but instead acquire dormant patents and then file suit (or threaten to) against real entrepreneurs and startup firms, vaguely contending that the legitimate businesses are infringing on those patents. Meanwhile, every dollar spent defending against these meritless lawsuits is one less dollar that small businesses can invest in technological innovation, economic growth and job creation.

Small businesses have created 7 million U.S. jobs since 2008. The Small Business Administration calls entrepreneurs“our life preserver in [the] economic storm,” because of their resilience and careful budgeting. But patent trolls are crippling startups and threatening entrepreneurship across all industries – from tech startups to coffee shops and hotels.

In the first quarter of 2015, patent lawsuits filed in district courts were up 13 percent over the first quarter of the year before. Small- and medium-sized businesses make up an estimated 80 percent of trolls’ targets, and that’s no coincidence. Trolls realize that small businesses – especially startups – don’t have the financial resources to hire high-dollar lawyers to fight the claims and will often agree to settle out of court to avoid costly litigation. The trolls and their trial-lawyer allies are winning at the expense of innovation and the economy.

The trolls’ scheme amounts to legal extortion, and someone needs to put a stop to it. Thankfully, H.R. 9, the Innovation Act, bipartisan legislation now pending before the House of Representatives, would do just that by shifting the burden of proof onto the trolls. Similar legislation, the PATENT Act, is now pending in the Senate.

Founded four years ago by the co-chairs of the Congressional Caucus on Innovation and Entrepreneurship, Start-Up Day helps small business leaders and entrepreneurs connect with their members of Congress about federal policies that support – and hinder – our nation’s economic strength and job creation. Last year, 35 members of Congress met with entrepreneurs, incubators and startups on Start-Up Day.

Hopefully, this year even more members of Congress will hear from entrepreneurs on the front lines of the patent fight. Small businesses should take this opportunity to press those lawmakers for congressional passage of the Innovation Act and the PATENT Act, both of which were voted out of their committees with strong bipartisan votes, but have yet to get a vote on the House and Senate floor. 

On behalf of our nation’s small businesses, the Americans they employ and the innovations they develop, we urge Congress to stop predatory patent trolls from legally bleeding tens of billions of dollars from the U.S. economy each year and choking off American innovation and job creation. Thoughtful patent reform is the right thing to do for our nation’s entrepreneurs, innovators and job creators.