Heffron: Patent trolls have hijacked Delaware’s courts

Delaware is one of the most attractive states in America to do business. Low corporate taxes, sensible regulation and a reliable court system bring businesses from around the country to our state to set up shop. Delaware has not imposed the bureaucratic red tape of its neighbors — we are open for business.

Though smart policy has allowed our economy and our people to flourish, it sometimes attracts unscrupulous actors taking advantage of our low tax rates, while engaging in shady business practices. Some of the biggest perpetrators are patent trolls — firms that buy up patents they did not earn with the intent to sue other companies for patent infringement. The purpose of these suits is to extract legal settlements. Most do not produce any goods or services; they simply look to benefit from frivolous litigation. The victims are often forced to decide if they should engage in an expensive trial or negotiate a legal settlement.

Many patent trolls claim status in Delaware. As a result, the U.S. District Court of Delaware has been bombarded with bogus lawsuits, preventing the courts from considering real cases with legitimate claims on a timely basis.

Frankly, the court system and business community have had enough. In a landmark decision, U.S. District Court judge for the District of Delaware Colm F. Connolly referred the Texas-based patent monetization firm IP Edge to the U.S. Department of Justice, the state bar and the U.S. Patent and Trademark Office for allegedly hiding its patent-trolling schemes behind front companies in patent trials, shielding themselves from public knowledge of their spurious practices. Maybe Judge Connolly’s referral will root out ill-intentioned patent trolls like IP Edge from the American economy. While helpful, this is not guaranteed to cure the problem.

The patent troll problem extends far beyond Delaware, to the entire country. Most recently, former U.S. Sen. Patrick Leahy, a former chair of the Senate Judiciary Committee, wrote in the Boston Herald about how patent trolls profit from litigation, which affects the entire U.S. economy. Hence, this widespread problem requires a broad solution.

In his op-ed, Sen. Leahy presents solutions, and they start at the International Trade Commission, the federal agency originally created to streamline the patent litigation process by taking on intellectual property cases with international trade implications. Increasingly, the commission is now another venue for patent trolls to exploit successful companies. Its primary enforcement mechanism, the exclusionary order, which entails banning the import of a product to U.S. markets, poses a significant economic threat to the victims of lawsuits — a threat large enough for patent trolls to blackmail companies into providing legal settlements.

A recent case with extraordinary implications was brought in front of the commission by a company called Masimo. It sued Apple for using pulse oximetry technology in the Apple Watch, and the ITC ruled in Masimo’s favor. Now, come Dec. 26, the Apple Watch will be banned from the United States, unless President Joe Biden vetoes the decision. With the stakes this high, it’s no wonder why the International Trade Commission has become the venue of choice for blackmailers to obtain a recovery from popular, job-creating American companies when they can’t win in court. The result is that American consumers are the ones who stand to lose.

It is essential that something is done to protect American companies from blackmail by bad actors, preserving America’s economic and technological prowess. First things first, President Biden must veto the trade commission’s decision banning the Apple Watch. To prevent even more erroneous patent decisions, we must raise and maintain the standards for bringing patent lawsuits to the ITC and the courts. Thankfully, Congress is considering a bill, the Advancing America’s Interests Act, that would significantly deter the most egregious of settlement leverage seekers at the commission by requiring that plaintiffs actually have a vested interest before threatening to remove American products from shelves. This bill will force the agency to prioritize the “public interest” of Americans when determining exclusion orders.

Passing this legislation, along with additional reforms to the patent system, will restore the commission to its proper role of protecting — not targeting — U.S. industry, will ease the burden on the courts in Delaware and will help the state remain an economic hub that Delawareans, and Americans at large, depend on.

Richard Heffron

Hockessin

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