The Real Victims in the Patent Wars

Timothy B. Lee
Cato Institute
Mar. 06, 2012

Last May, James Thompson, the maker of a popular calculator app for the iPhone, got a nasty surprise. "Just got hit by very worrying threat of patent infringement lawsuit," he tweeted.

The letter came from a Texas company called Lodsys LLC. The firm, widely described as a "patent troll," doesn't produce any useful products. Rather, its primary business is suing other companies that accidentally infringe its portfolio of patents, including one on the concept of buying content from within a mobile application.

Lodsys' letters, which went out to numerous small software entrepreneurs last year, place their targets in a bind. Merely asking a patent lawyer to evaluate the case and advise a company on whether it was guilty of infringement could cost a firm tens of thousands of dollars. And a full-blown patent lawsuit could easily carry a price tag in the millions of dollars, with no guarantee of recovering attorney's fees even if the defendant prevailed. The Lodsys litigation campaign is a particularly egregious example of a much broader problem. Patents are supposed to reward innovation, but in the software industry, they are having the opposite effect. The patent system has become a minefield that punishes innovators who accidentally infringe the patents of others. There are now so many software patents in force that it is practically impossible to avoid infringing them all.

The result has been an explosion of litigation. Large firms like Apple, Microsoft, Motorola, and Samsung are suing one another over mobile phone patents. And as a recent episode of This American Life documented, there are entire office buildings full of "patent trolls" that produce no useful products but sue other companies that do. What has gone largely overlooked in the coverage of the “patent wars,” however, has been the disproportionate burden placed on small firms—which has enormous consequences for the movement toward DIY innovation.

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