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President Obama Joins Innovators In Our Fight Against Patent Trolls

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The most creative and productive elements of our technology economy won a major ally last week when President Obama called out corrosive patent lawsuits and called for patent reform during a globally accessible Google+ Hangout.

The patent troll problem has become our most pressing legal issue at Rackspace. Since 2010, our spending to combat so-called “patent assertion entities” (PAEs) – more commonly known as patent trolls – has increased by 500 percent. To put the scope of the problem into perspective, a Boston University study of patent trolls, conducted last year, found that they cost the U.S. economy about $29 billion in 2011, up from $7 billion in 2005.

Patent trolls hit hardest at the most productive sectors of our economy, including the young businesses that create most of the nation’s jobs, and the software developers who invent new technologies. We at Rackspace see this damage up close, as these young businesses and developers represent a large share of our customers. We are particularly concerned about the impact that patent-troll lawsuits have on important open source software projects. These projects are helping our country boost its share of global technology innovation. Patent trolls represent a direct threat to the open source development that powers many tech startups, small businesses and new growth opportunities for mature companies.

We’ve been vigilant in our fight – pushing for patent reform to be a top priority for Congress and encouraging Congress to take action. We were strong supporters of the SHIELD Act filed last session by Rep. Peter DeFazio (D-Oregon) and Representative Jason Chaffetz (R-Utah) which would have required patent trolls to pay defendants’ legal costs if the suit was unsuccessful. Under current law, patent trolls don’t face any meaningful risk in bringing litigation, while defendants are subjected to massive legal expenses and discovery costs. This approach would have leveled the playing field and would have taken away the trolls’ unfair advantage. We hope that similar legislation will be introduced in the current Congress and eventually make its way to President Obama’s desk for signature.

With the president’s recent acknowledgement of the scale of the patent troll problem, we feel we’re one step closer to seeing true change enacted.

Last week, during the Google+ Hangout, President Obama fielded a question from a young entrepreneur who said patent troll suits that target software patents are stifling innovation and spreading fear throughout the startup community.

“These are firms that collect software patents just for the purpose of litigation, and getting money out of small companies that can’t afford patent defense, they’re expensive. So, I know you’ve made a lot of progress on patent reform, but I’m wondering, what are you planning to do to limit the abuses of software patents? For example, would you be supportive of limiting software patents to only five years long?” the entrepreneur asked.

In an encouraging response, the president said patent troll suits are extortion and that the America Invents Act, which originally intended to spark sweeping patent reform, only got “halfway” to where it needed to go.

“The folks that you’re talking about are a classic example; they don’t actually produce anything themselves. They’re just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them,” President Obama said, later adding “what we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.”

The president’s response shows that we’re on the right track and gives us hope that the importance of software patent reform is resonating at the highest levels of government. We applaud President Obama for his candor and transparency and look forward to working closely with legislators to create reform and encourage troll-free innovation.

About the Author

This is a post written and contributed by Alan Schoenbaum.

Alan Schoenbaum is Special Counsel for Rackspace.

Prior to joining Rackspace in 2005, he was a partner at Akin Gump Strauss Hauer & Feld LLP in San Antonio, Texas. Alan has more than 25 years of experience in corporate and securities law and mergers and acquisitions. Throughout his legal career he has represented public and private growth companies, venture capital funds and their portfolio companies. Alan received his B.A. in English and his law degree from the University of Texas at Austin.


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  • Jesse

    America Invents was watered down and not especially helpful to actual, real, inventors trying to create new value and new companies. I’m glad the President is sensitive to the troll problem in the exchange noted above, but I also recall him touting what a big accomplishment America Invents was when it passed. So now he’s saying it was half-baked. Which it was.

    Not sure what all of this means except to indicate how profoundly broken the Senate is – and that getting ANYTHING out from the last congress was a miracle. I’m curious if there’s any chance at going back to patent reform and doing it right… I’m inclined to say ‘no way’. Perhaps at the very end of the second term, but that depends on what happens in 2014.

    • Alan Schoenbaum

      Thanks for your comment Jesse. We are certainly going to try to convince members of Congress to pass some new laws. It won’t be easy, but we are going to work with other tech companies, developers, and other victims of patent trolls to get something done.

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