Efficient Infringement: A Patent System Challenge.

This article takes on a troubling issue in the world of intellectual property: efficient infringement.

What Is Efficient Infringement?

Efficient infringement happens when a company decides it’s cheaper to infringe on a patent than to pay licensing fees. Instead of negotiating with the patent owner, these companies leverage their size to avoid paying the inventors:

The cost of litigation is lower than the licensing fee.
The patent owner, especially a startup or small inventor, might not have the resources to pursue legal action.
Even if they’re caught infringing, the penalties are unlikely to outweigh the profits they make from it.
If the risk of paying royalties or being sued becomes too high, the infringer can use the IPR system (called a “patent death squad” by the former Chief Judge of the Federal Circuit Court of Appeals, which hears all patent appeals in the United States) to invalidate the patent. Because defending an IPR can easily cost half a million dollars, small companies and independent inventors may be forced to let the patent lapse because they cannot afford to defend it.

It’s a calculated gamble that exploits weaknesses in the patent enforcement system.

Why Does Efficient Infringement Happen?

High Costs of Litigation
- Patent lawsuits are notoriously expensive, often costing millions of dollars and taking years to resolve. Small inventors and startups lack the resources to sustain such battles.
Low Damages for Infringement
- Even when infringement is proven, courts may award damages that are less than the licensing fees the infringer would have paid.
Power Imbalance
- Large corporations have legal teams and financial resources that dwarf anything that individual inventors can afford, making it difficult for small patent owners to challenge infringement.

The Ethical D̶i̶l̶e̶m̶m̶a̶ ̶Lapse

Efficient infringement raises serious ethical concerns, and puts U.S. innovation at risk:

Unfair Advantage: Big companies profit from inventions without paying the inventors.
Erosion of Innovation: If inventors can’t protect their creations, they will lose motivation to innovate. It is a truism that inventors can’t stop inventing, but it is also true that if they need to work at DoorDash to make ends meet, they’re unlikely to have enough time to do anything more than invent low-value, low-effort solutions around the house.
Undermining the Patent System: The patent system is designed to encourage innovation. Efficient infringement rewards bad behavior and pulls the rug out from under innovators.

What Can Be Done?

Strengthen Patent Enforcement
- Policymakers should introduce penalties that make infringement riskier and less profitable, such as enhanced damages for willful infringement. Intentional efficient infringement should certainly be a trigger for more serious damages.
Lower Litigation Costs
- Efforts to reduce the cost and complexity of patent litigation could level the playing field for small inventors. This could be as simple as a federal small claims court for patents (perhaps with a $1 million cap on recovery) or a set of simplified litigation procedures if the inventor agrees to a damages cap.
Support for Small Inventors
- Programs that provide legal assistance or funding for small inventors could help them defend their patents. Or — this is a big one — insurance companies could be subsidized by the government for offering policies that cover litigation against infringers.
Alternative Dispute Resolution
- Encouraging mediation or arbitration as alternatives to multi-million-dollar litigation can make resolving patent disputes something other than a game of kings.

Final Thoughts

Efficient infringement exploits a terrible imbalance in the patent system that hits small inventors and startups particularly hard. Addressing this issue is key to a fair and effective patent system that encourages innovation by everybody, not just whatever stilted innovation comes from mega corporations.