The casinos and resorts along the Las Vegas Strip are staple industries in Nevada. They are known for their innovative and creative use of technology in all aspects of their operations. But several of these companies have recently been caught up in ridiculous court battles over patented technology. The lawsuits hitting the state’s economic engine and the entertainment capital of the world are proof that the U.S. patent litigation system badly needs reform.
In one of the Las Vegas lawsuits, California-based Email Link Corp. sued Treasure Island, Hard Rock Hotels and several other casino operators for violating the terms of their patents when they sent emails containing links to website pages.
Another lawsuit was filed by Texas-based Webvention LLC against Las Vegas Sands (also a defendant in the Email Link suit) and several nongaming companies, ranging from Campbell’s Soup to Toyota. The suit accused them of violating Webvention’s rights on a patent for “structures and methods for organizing, presenting and accessing information.”
Email Link Corp. and Webvention LLC are patent trolls — companies whose business model consists of buying patents and enforcing them through licensing or litigation. Trolls exploit flaws in the U.S. patent system by asserting vague, over-broad patents against a wide range of businesses — patents that should never have been issued.
This rise in patent troll activity is an issue of real importance and concern to the Nevada Resort Association, the American Gaming Association and the Consumer Electronics Association. Many of our member companies have been hit with frivolous patent lawsuits, or the threat of lawsuits, claiming that they are violating patents as part of their everyday marketing efforts, such as including links in emails. These patent trolls claim to own broad marketing concepts, not just specific and narrow inventions.
Across the nation, many businesses faced with the prospect of complex, multimillion-dollar patent litigation decide to settle out of court. Unfortunately, this costs jobs and drives up the prices of our most innovative products and services. According to one estimate, trolls cost the U.S. economy half a trillion dollars between 1990 and 2010. Over $320 billion was lost to trolls in the last four years. Today, trolls account for most of the patent litigation in the United States, a clear illustration that this problem is only becoming more severe.
Moreover, most companies targeted by trolls are small businesses. Our patent system was intended to protect small businesses. Instead, it is being used to exploit them, stifling innovation. While trolls tend to style themselves as defenders of the rights of small business owners, in reality they hurt small businesses most of all. In 2011, 90 percent of companies facing patent suits were small businesses making on average $11 million per year.
We have to stop patent trolls from misusing low-quality patents to extort productive businesses in all sectors of the economy. In particular, we need laws in place that will protect Nevada’s staple industries. Businesses in Nevada and across the country are joining together to support common sense reforms that will stop trolls from inflicting further damage on the innovative community. This week in Las Vegas, the 2014 International Consumer Electronics Show (CES) included a panel discussion on patent trolls.
Leaders from both parties in Congress have spoken out against frivolous patent litigation and are now demanding change. They join a growing number of voices that include President Barack Obama and Sens. Patrick Leahy, D-Vt., Chuck Schumer, D-N.Y., Mike Lee, R-Utah, John Cornyn, R-Texas, and Orrin Hatch, R-Utah.
Last month, the U.S. House of Representatives came together in a rare display of bipartisanship by voting overwhelmingly in support of the Innovation Act, a bill that offers several solutions to abusive patent litigation. Now it’s up to the Senate. Under the leadership of Sen. Harry Reid, D-Nev., the Senate must act now to bring patent reform to a vote without delay, so that innovators can stop padding the pockets of patent trolls and instead get back to business.
The Senate must quickly send a strong message to the business community that patent trolls will no longer be allowed to operate through shady tactics and intimidation.
Gary Shapiro is president and chief executive officer of the Consumer Electronics Association (Twitter: @GaryShapiro). Virginia Valentine is president of the Nevada Resort Association (www.nevadaresorts.org). Geoff Freeman is president and chief executive officer of the American Gaming Association (Twitter: @AGAUpdate).