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Patent trolls stifling SME innovation

Jeremy Streten
25 July 2017 2 minute readShare
Thief in a skeleton mask and hoodie

Behind many legal protections lurk a dark side where unscrupulous individuals take advantage of laws designed to protect business owners for their own financial gain, writes Jeremy Streten.

Given the intangible nature of intellectual property, it is an area that is open to abuse. In recent years, the rise of patent trolls in the United States has caused concern among lawyers and governments around the world about their effect on innovation.

The policy debate within the Australian government has sought to target innovation but also to resolve the conflict between supporting innovation and promoting economic growth.


On one hand, creative ideas need to be protected to support the innovation, so that the creator is rewarded for their innovation. But too much protection can stifle competition and economic growth.

Recently IP Australia, in its 2017 report, noted that there has been a decline in the amount of applications to register patents in Australia.


While there are no accurate statistics on the impact of patent trolls in Australia, according to a study in the Federal Law Review, the cost of litigation and obtaining advice from lawyers often means that commercial decisions are made to resolve disputes before they ever reach courts.

What needs to change

While the law in Australia is a good start, it needs to go further to protect industries from patent trolls by not allowing their business model to exist in the first place.

Serious questions need to be asked about the role of the law in protecting intellectual property, particularly patents so that the law cannot be used to stifle innovation.

The protection regime for patents is based on solid policy grounds, but with the rise of these companies, the law needs to evolve to allow innovation to thrive and develop.



The difference between Australia and the United States

The difference in the law between these countries makes the business model of patent trolls less attractive in Australia.

The most prominent example was a decision in December 2014 after a UK company, Upaid Systems Ltd, brought an action against Telstra in Australia. Upaid had been successful against other parties in the US and the UK, but was unsuccessful in Australia because it could not meet the technical rules required to enforce patents in Australia. It should be noted that this case is currently on appeal.

The actions of patent trolls has caused many businesses and inventors to lose their inventions in the US. Due to the fact that the patent trolls do not actually make any products, the practice stifles innovation as they merely use the patent to stop other people from using the innovation or technology.

There are many examples where companies take this approach simply for profit and it is estimated that more than $60 billion of wealth is lost by innovative companies each year by this practice.

What you should do if approached by a patent troll?

If approached by a company that you believe is a patent troll, it is important that you should never give them any money without obtaining advice from a lawyer or patent attorney who practices in this area.

Most importantly, assess your ability on a commercial basis to fight any action by a patent troll. Protecting your rights can cost you a lot of money, but you need to weigh that against the gains of protecting your intellectual property.

Jeremy Streten is a lawyer and the author The Business Legal Lifecycle. 

Patent trolls stifling SME innovation
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Jeremy Streten

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