DENVER – Colorado will start prosecuting so-called patent trolls, businesses and individuals who falsely claim to have the rights to an idea or product so they can intimidate inventors and companies into doling out money to settle or avoid lawsuits.
A bill signed into law this month makes Colorado one of about two dozen states that have passed measures to crack down on patent trolls in the past two years. With businesses spending billions of dollars to deal with frivolous claims, Congress also has two pending bills addressing the topic.
Companies around the country spend about $29 billion a year in legal fees because of fraudulent claims, according to legislative analysts who worked on the Colorado bill.
“Patent trolls have turned patent law into an abusive litigation process,” said Republican state Sen. David Balmer, one of the sponsors of the Colorado law.
The law gives Colorado’s attorney general the authority to prosecute individuals who make groundless ownership claims to a patent to extort money from businesses. Before the law, state prosecutors had no such power because the litigation was considered a private matter that parties were expected to resolve themselves.
Lawmakers say small businesses or startups with little resources are particularly vulnerable because they’re more inclined to pay money to make a claim go away – even if it’s baseless – and avoid a long and expensive legal process.
Usually, it starts with a letter from a shell company to a business or inventor demanding money for infringing on a patent they claim to hold. The letters say they can prevent a lawsuit, or settle a pending one, if they pay up. Sometimes, that could be a few hundred dollars, but other demands are far more expensive.