The Harsh Realities of “Patent Trolling”

November 14, 2016

By Senator Richard J. Ross

The now mainstream act of “patent trolling” is a growing threat to small businesses not only in Massachusetts, but across the United States. These acts are carried out by non-practicing entities, or NPEs, and have gone from a low-profile to conventional issue in less than ten years. Too often, NPEs fraudulently threaten patent infringement litigation, or worse, actually file a patent infringement lawsuit. This is a true threat to the business community and to honest entrepreneurial efforts.

The overall goal of NPEs is to take advantage of companies with licensed or pending patents, through litigation. With no option but to avoid costly and time consuming lawsuits, the targeted businesses are forced to pay a lesser settlement. When small businesses, in particular, find themselves falsely accused of patent infringement, they are left with no defense because NPEs have no assets themselves, and they do not have the option of countersuing.

Put simply, NPEs have no intention of using their patents to actually create products or technology. Instead, they acquire patents solely for the purpose of conning businesses into paying fees.

A recent study conducted by James Bessen, a lecturer at Boston University Law School, found that defendants nationally paid $29 billion in 2011 to NPEs – an increase of 400 percent since 2005. In June of 2013, a White House report stated that although many significant settlements come from large companies, the majority of NPE lawsuits target small or start-up companies.

Not only are NPEs financially hurting their targets, but they are also negatively impacting the U.S. economy and clogging our judicial system. In 2011, NPE lawsuits cost the economy $80 billion. Millions of dollars that could be invested in more productive areas continue to be consumed by litigation costs. The number of defendants in NPE lawsuits spiked from roughly 1,500 in 2005 to nearly 6,000 in 2011, congesting both lower and appellate courts.

States such as Maine and Maryland have adopted legislation to protect businesses, and other states have advanced bills to prevent NPE’s from controlling small corporations. Legislation in Maine and Maryland include various provisions determining that a person may not make an assertion of patent infringement against another in bad faith as well as authorizes the awarding of damages.

Unfortunately, the Commonwealth has yet to enact meaningful reform. The vulnerability of small businesses and the lack of regulation make entrepreneurs and businesses in Massachusetts easy targets for NPEs. Discouraged from filing infringement against businesses in protected states, NPEs are taking advantage of businesses in states where such protection does not exist. Such claims by NPEs lead to high costs and can ultimately ruin small businesses.

To address this serious problem, I plan to work with my colleagues to introduce anti-patent trolling legislation. Utilizing other states’ successful legislation as guides, it is my hope we can create a right of action for those affected by NPEs. For example, targeted businesses and the attorney general would be authorized to take action against persons who have made claims of patent infringement under bad faith. The legislation would likely provide a comprehensive list of factors that a court may consider as evidence that a claim has or has not been made with fraudulent intensions.

Until there are laws in place, there are ways small business owners can defend their intellectual property from such threats. The National Federation of Independent Business (NFIB) recommends ignoring the first contact, finding support from associations, and weighing your legal options. NPEs send out hundreds of “demand letters” in order to negotiate a settlement for false patent infringement. If small businesses refuse to engage after the first letter, they may ultimately keep off the NPEs’ radar.

The issue of patent trolls is something that is not receiving sufficient attention, but is a potential threat to innovators in my district and across the Commonwealth. It is my hope that we can pass such legislation to protect businesses in Massachusetts and ban the practice of “patent trolling”. By not solidifying legislation, we are ultimately discouraging innovation more than encouraging it. Protecting intellectual property can help grow the economy and will positively affect taxpayers and consumers. These NPEs are profiting from a flawed legal system, and it is time that we stop them.

In addition to joining the fight against these trolls, I ask that members of the business community speak out about their experiences or share their input regarding this issue. If you have feedback, suggestions or personal experiences regarding non-practicing entities, please feel free to contact me at Richard.Ross@masenate.gov.


Ongoing Reforms at the MBTA

August 11, 2016

By Senator Richard J. Ross

Over a year ago I expressed concerns with the unstable finances of the Massachusetts Bay Transportation Authority (MBTA). Since then, I joined Senate Republicans in filing an amendment to the FY16 budget, which led to the creation of the Fiscal Management Control Board (FMCB). The amendment proposed that the board would provide strict oversight of the beleaguered agency.

Shortly after it was formed, the FMCB conducted a review of the major problems the MBTA was facing. From that review we learned that the T has an unsustainable operating budget while not preserving its core system and struggling to get projects completed. Not only did they have frequent leadership changes, but they also were found to have weak workplace protocols and lacked customer focus. The most significant finding was that the MBTA was not underfunded, but simply lacked the management and direction needed to effect serious reforms.

Fortunately, the Commonwealth endured a calm winter this year, and the MBTA had little to no operating issues caused by recent harsh weather conditions. However, over the past year, the MBTA has been weathering its own storm. As the agency’s FMCB finished its first year since it was enacted in 2015, we now have a clear understanding of the extent of reform necessary to transform this part of our transportation system.

The Commonwealth has been throwing money into a beast that cannot contain itself. The MBTA has been given various resources and opportunities to get back on track from state contracts to a well-rounded capital budget. The system has had the funding and resources, but has never been able to take advantage of them sufficiently.

With a flat lined operating budget the T required no additional funding increases for FY 16. But due to no increase in ridership, the T has yet again turned to a fare increase to make ends meet. Recently, the Legislature passed an amendment that would prohibit MBTA fares from being increased more than once within a two year period as well as being increased more than 7 percent during a two year period. I supported this amendment because I believe the T should not depend on its consumers to be the solution to the issue. The legislation also provides flexibility to the MBTA, rather than have the agency returning to the legislature with new requests.

New findings show that the T’s money management process contains serious risks. In a recent consultant’s review, it was discovered that the MBTA’s cash handling procedures were not secure. Doors to the money room where the facility handles nearly $200 million per year were found not alarmed or access controlled – a flaw that the system cannot be willing to risk or ignore under current circumstances.

Another major concern the MBTA is facing is the mismanagement and severe underproduction of its pension system. The system loses $89 million a year in assets. The public records bill that I supported made T records public, including details of their disappointing pension fund. After management’s frequently failed reforms, Governor Baker recommends it be managed by the state’s PRIM system this January.

Governor Baker’s administration has done a great job when it comes to turning these problems into solutions and giving the MBTA the momentum it needs. They have pushed the T to use state contracts to purchase millions of dollars’ worth of goods and services at lower costs. The administration also helped them save money in areas such as supporting the suspension of the Green Line Extension for its redesign, cutting off hundreds of unused wireless devices, and encouraging a digital advertising program to boost revenue.

We can only hope to have another mild winter, but this year we need to fully prepare for it. The T expects to double the funds spent on signals, switches, and tracks that are long overdue for replacement. With a focus on operating expenses and performance, any savings need to be invested into its infrastructure and construction so that we can see more projects on time and on budget.

It is clear that the MBTA will have to undergo substantial changes. With the T’s rising operating expense and plateaued ridership, I hope to see changes in the administrative processes, money management, the pension system, infrastructure and various other problematic issues setting back our transit authority. The hardworking citizens of Massachusetts deserve a reliable, sustainable and consistent transportation system and it is time we follow through with that promise.


Getting the MBTA Back on Track

March 2, 2015

By Senator Richard J. Ross

This region has seen a difficult start to 2015. Historic amounts of snow this winter have impacted us all, but for those that use the Massachusetts Bay Transportation Authority (MBTA) service, it has meant limited service, crippling delays, and routine cancellations, and frankly it is unacceptable.

However, the events that have transpired over the last month were a long time coming and speak to much larger concerns regarding the Commonwealth’s transportation system as a whole. From irresponsible expansion proposals, an unsustainable pension system, and a severe lack of timely maintenance, it is shocking that a snow storm has only just brought to light what the Senate Republican Caucus has been trying to address for a very long time.

The failures of the transit system stem from a history of mismanagement on the part of the MBTA, as well as a lack of sufficient oversight measures from the legislature. According to financial statements taken from the MBTA’s website, by increasing the sales tax in 2009 and then raising the gas tax in 2013, the MBTA’s revenue grew from just over $1.1 billion in 2001 to over $1.9 billion in 2014. Despite an increase in funding and revenue, the Boston Herald reported that for the last five years the MBTA has neglected to file reports outlining the transportation systems’ maintenance needs. In the midst of constant performance failures, costly rail lines to the South Coast and Foxborough continue to be proposed, reflecting poor planning and a clear misallocation of resources.

The unprecedented levels of snow have only exacerbated the growing number of complications that have yet to be addressed with the aging infrastructure the MBTA currently uses. This level of service is unacceptable and it is only going to worsen for the people of the Commonwealth if immediate action is not taken.

For years, Senate Republicans have offered significant reforms to the MBTA to reel back expansion projects and promote more transparency in spending and oversight. From fare evasion studies, expansion limitation, financial and pension fund accountability proposals—the Senate Republicans have been at the forefront of fixing the MBTA, but these innovative proposals were routinely rejected in favor of increased taxes and fares.

In February, Senate Republicans put forward legislation to financially stabilize the MBTA by creating a seven member Finance Control Board that would gain immediate control of the MBTA’s finances. The Finance Control Board would first establish a plan to correct historical inefficiencies, and put the transit system back into full service operation as soon as possible. The legislation would also provide an interest free loan to the MBTA, to be repaid in full, so the newly established board can implement the necessary procedures and structural changes they feel are necessary to correct the direction of the organization.

If key benchmarks have not been met, the MBTA finance control board could ultimately be dissolved in favor of a receiver that would take over the board’s responsibilities. The proposed legislation would be a logical approach to fix a broken system in much need of repair.

This is by no means the only solution, but we cannot continue to throw money at a problem and expect it go away. Over the past decade, the MBTA’s expansion efforts have come at the expense of solving its current issues and the legislature’s answer to the MBTA’s mismanagement cannot be to burden our constituents with more taxes and fare increases. The legislature’s answer should be to tackle the issue directly and provide the public with the transportation system they have paid for and rightly deserve.