It is time for Congress to reform our countrys patent system, especially in regard to technology patents. Our patent system was designed to protect inventors from having their ideas stolen, but recently it has been abused by unscrupulous attorneys who use it as a tool to threaten inventors with lawsuits demanding large payments for routine use of existing technology.
These lawyers have earned the derisive nickname of patent trolls. These trolls acquire the rights to vague patents and use those rights to sue users and creators of technology across a broad spectrum of our economy. The frequency of these lawsuits has exploded in recent years. A 2012 study published by Boston University found 5,842 defendants who each faced a lawsuit over a technology patent in 2011. Eighty-two percent of those defendants were companies with less than $100 million in revenue.
These lawsuits have real-world impacts. The average settlement in these cases for small and medium-sized companies was $1.33 million, and the average defense for similarly sized companies cost $1.75 million. Those are costs that could be easily defined. The study pointed out that the lost opportunities because of diverting resources, delaying products and losing market share are harder to define. In turn, patent troll lawsuits stifle inventions and entrepreneurship, which leads to a significant strain on economic growth.
As the president and founder of the Wireless Research Center of North Carolina, I work with entrepreneurs as well as small and large companies who are on the cutting edge of developing next-generation wireless technologies and devices. The wireless connectivity market is growing at an unprecedented rate and is the new frontier for communication in commerce, health care and national security.
The average smartphone today supports five to seven wireless communications links. New personal communications devices are expected to have a broad range of antennas and wireless systems. Wireless technology is being used in health care to monitor pacemakers, connect on-body sensors and support the development of in-body telemetry and innovative prosthetic devices.
The Wireless Research Center serves as a catalyst for the creation of these technologies. The intellectual and financial investments made in the wireless innovations of our clients deserve clear protection under our patent system. The exploitation of patents is limiting the drive to innovate toward the next breakthrough in wireless technology.
The first step to putting our patent system back on the side of the inventor is to require these patent trolls to pay for frivolous lawsuits when they lose. Congress is considering this remedy through legislation called the SHIELD Act. It would give patent trolls great pause because they have a clear track record of losing.
A PricewaterhouseCoopers study in 2012 found patent trolls lose 76 percent of the cases taken to trial. However, because of the time and expense, defendants rarely take these cases to trial. Patent system reform would allow innovators to continue their research, make discoveries, bring products to market and create 21st-century jobs.
The Wireless Research Center of North Carolina and other entities in our state that support technology development are working diligently to drive innovations and grow jobs. Adoption of the SHIELD Act will ensure that new technologies developed in North Carolina will be protected from abusers of the patent system.
Gerry Hayes is president of the Wireless Research Center of NC.