Another Looming Threat to Small Businesses: the Patent Troll

During the COVID-19 crisis many Americans have come to understand the importance of small businesses to the U.S. economy and local communities. Their collective contribution is tremendous, having employed 58.9 million people and generating nearly $6 trillion in economic activity prior to COVID-19. 

Hopefully, the combination of smart and safe reopenings and the strategies being deployed by entrepreneurs and their employees to operate more innovatively will bring small businesses back to financial stability more quickly. Technology platforms and cloud services have played a significant role in helping small businesses pivot and survive, and the tablets and smartphones used by owners and employees alike have become even more essential during COVID-19. 

Clearly, the pandemic and need to social distance have upped the use of digital technology, as more business owners have come to master tools and devices to connect with customers, market their products or services, advertise, fill orders, and manage finances and payroll. As painful as the virus has been for many small businesses, the silver lining is that mobile technologies have saved countless small firms and readied entrepreneurs for the recovery period and opportunities that lie ahead.   

Smartphones and tablets are an economic lifeline for the 30 million gig economy workers who connect to customers via mobile applications. A mobile internet infrastructure and versatile range of devices enable entrepreneurs to operate remotely and more flexibly.

In the months ahead, many small businesses will give up office space and look for other ways to cut overhead expenses to recover and stay competitive. Employees and teams have become comfortable using a variety of online platforms and devices to communicate and collaborate, which will impact the future of work in ways that are both exciting and yet to be identified. Mobile technology provides extraordinary flexibility and efficiencies, and there will be no turning back from some of the “workplace” changes that have become necessary due to COVID-19.    

But these changes and the acceleration to mobile in general are threatened. A dispute over the intellectual property in many of these devices could result in a halt to the importation of nearly 90 percent of the devices small businesses, their employees and the self-employed use to operate every day.

A company based in Ireland, Neodron, owns a number of patents for some of the touch screen technology in these devices. It has filed suit against Apple, Motorola, Microsoft, Samsung and other leading designers and manufactures for infringement. 

Battles over copyrights and patents are common given the sophisticated technology in so many products we use every day. Mobile devices in particular are often jammed with thousands of patents. To some companies such as Neodron, sometimes called Non-Practicing Entities (NPEs) and just as often “patent trolls,” each patent is an opportunity to extract a licensing payment in court.  They gamble that a manufacturer would rather settle even frivolous claims than to be embroiled in litigation. It gets down to a battle between companies that invent and make things and those that sniff out opportunities to sue and cash in.

In this clash of business models, patent trolls have figured out that getting the U.S. International Trade Commission (ITC) to investigate an allegation of IP infringement can expedite court settlements in some cases. The ITC’s chief job is to monitor trade flows and prevent trade in goods that is unfair or violates laws. If the ITC concludes that an import infringes on the intellectual property owned by a domestic industry, it can put pressure to settle a dispute that could take years to litigate in court. 

The problem with this strategy is that the ITC’s only remedy is to block the importation of the products with the allegedly infringing patents. In Neodron’s case, that would mean that later this year 90 percent of devices entrepreneurs and their employees use every day to stay in business could become increasingly scarce and more expensive. 

The idea of such self-inflicted damage and disruption at this time is unthinkable. As small businesses struggle to survive the pandemic, they can ill afford impediments to replacing and upgrading the mobile technology at the foundation of their operations.

Neodron has not likely taken into account these implications. It is not interested in deploying its patents to develop and produce new products. It only wants the fastest path possible to a lucrative court settlement. That is the business model of patent trolls.

For entrepreneurs and small business owners, the business model is just the opposite: Creating something of value and staying agile and efficient in serving customers and clients. Mobile technology is at the heart of this model as never before so it is critical to prevent companies like Neodron from undermining it with a sweeping and reckless import ban on mobile devices.

Karen Kerrigan is president and CEO of the Small Business & Entrepreneurship Council.

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