How $19 in a Patent Troll's Hands Can Cost the Economy $9,000,000

A selected quote from RIM's Jim Balsillie's congressional testimony:

In the NTP case, NTP mass- mailed letters to 47 companies, including RIM in January 2000. RIM responded with a letter to NTP asking for additional information about its patents. NTP claims never to have received the letter, and made no further effort to contact RIM until NTP filed suit. Nonetheless, RIM was found liable for willful infringement based on what RIM did or did not do after receiving NTP’s letter. The fact that the patent owner took no interest and forwarded no claim charts or otherwise showed there was an infringement simply did not matter. A recent case in the Court of Appeals for the Federal Circuit further suggests that, even if NTP had acknowledged receipt of RIM’s letter, it would have no obligation to respond to inquiries or to provide support for its claims of infringement in order for it to obtain enhanced damages for willfulness.

Thus, even though a patent owner does not deem the potential infringement worthy of investing time and money to do a proper infringement analysis and may never even bring a claim of infringement, the targeted defendant must do so or risk treble damages and the brand of “willful infringer.”

To illustrate the economic costs inherent in this bias towards patentees, one need only consider the NTP case. With 1920 claims in the NTP patents, each of the 47 companies would likely have to spend at least $200,000 for a legal opinion of invalidity and/or non- infringement. Thus, for about $19 in postage, a single patentee like NTP can require 47 companies to divert over $9 million from other industry endeavors to obtain legal opinions regarding NTP’s patents. Although it is currently rare for that many claims to be asserted, it is common for companies to receive dozens of such letters each year and to spend several hundreds of thousands or more each year on external legal opinions alone (not including the salaries and overhead for those that deal with these issues).

And, keep in mind, that's $9 million before any legal action even happens -- this is simply the cost of reacting to a cease-and-desist letter sent from a patent holder.

And, if you are a small company instead of a large one, it is doubtful you could ever justify spending $200,000 to respond to a single cease-and-desist.

The mafia never had a deal so sweet as that given to holders of shady patents.