Scott Burt

In 2012, Mr. Rust bought five patents from an inventor named Laurence Klein for exactly $1. He then set up 101 separate limited liability companies (LLCs), each with bizarre six letter names like IsaMai, BriPol, and HarNol. No one but Mr. Rust knows what those acronyms mean. But thousands of Mom and Pop small businesses — 16,465 to be exact — soon found out that they translate as “trouble.” Each of these businesses received a “demand letter” from one of Rust’s shell companies accusing them of patent infringement and demanding roughly $1,000 per employee if they wanted to avoid a minimum six-figure (and possibly seven-figure) lawsuit in U.S. federal court. There’s a word for that: “bully.”

The greatest long-term threat to the U.S. patent system does not come from its professional opponents – those large businesses and their political allies who stand to profit from enfeebled patent rights. A deeper harm is caused by unscrupulous patent trolls who use extortionist “demand letters” to victimize small businesses. Yet even as damage caused by demand letters spreads, most legitimate patent licensors whose businesses depend upon continued legislative and public trust stand idly by, doing little or nothing to address it. Well-insulated within the patent industry’s cozy professional bubble, we are, in effect, fiddling like a modern-day Nero while innovation’s Rome burns.