How Trolls – And The Lawyers Who Love Them – Are Hurting Our Economy

Gary Shapiro President and CEO, Consumer Technology Association
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One of the proudest days of my life was when I passed the bar exam, more than 30 years ago. But today, I often hide my legal background when I meet people. Simply put, I believe lawyers are in many ways hurting our nation.

Many – if not most – lawyers are helping create jobs, build businesses and grow the economy by launching new companies, creating contracts and assisting businesses to raise the money and create the partnerships necessary to drive our new economy. But let’s be clear: Our country has a surfeit of lawyers. Last year, Boston Globe columnist Jeff Jacoby wrote: “With almost 1.3 million lawyers – more by far than any other country, and more as a percentage of the national population than almost all others – the United States is choking on litigation, regulation, and disputation.”

The most concerning statistic is the rate at which law schools keep churning out graduates. While overall enrollment rates are declining, the American Bar Association says nearly 40,000 new law students matriculated in the fall of 2013. And job prospects for law school graduates are bleak. D.C. Bar President Tim Webster lamented that “[O]nly about 60 percent of the law school class of 2014 had secured long-term, full-time jobs that require bar membership a year after graduation.”

For many students, law school affords them a fantastic learning and growing opportunity. Law school taught me to think concisely, ask questions and frame major issues in one page. But law school also turns empathetic, thoughtful human beings into mercenaries who take either side of an issue depending on who is paying for it. Worse, some students graduate from law school believing that if something is legal, it must be ethical. I disagreed then, and I disagree now.

Today, some unethical but opportunistic lawyers are devastating the economy by filing – or threatening to file – bogus class-action lawsuits that rarely if ever benefit the so-called “injured” parties. Other lawyers blanket the web and broadcast airwaves with advertisements for worker’s compensation or accident injury lawsuits. And some exceptionally bad actors encourage the pursuit of false Social Security disability claims.

But there is a special place reserved in hell for patent-troll lawyers.

These lawyers and their firms – euphemistically called “patent assertion entities” buy up expiring and ambiguous patents and send out scores of demand letters to unsuspecting businesses employing American workers. The letters allege a patent violation and demand a settlement.

Restaurants that offer Wi-Fi to customers, small businesses that use copying machines, podcast creators, entrepreneurs who build websites with the shopping cart feature, app makers, and many, many more have been victims of patent suits – or threats of suits. Sending a threatening letter costs patent troll lawyers 49 cents. Defending against a bogus patent suit can cost businesses seven figures.

Patent trolls cost our economy $1.5 billion each week. The trolls’ legal-extortion racket is so lucrative that their lawsuits have jumped 500 percent since 2005. And lawsuits are just the tip of the iceberg – they do not reflect the tens or hundreds of thousands of demand letters that have been sent by trollsto businesses big and small.

The situation is so bad that President Obama asked Congress to address the situation, and Congress responded…almost. In late 2013, the House passed remedial legislation with an overwhelming bipartisan vote of 325-91. In 2014, Sen, Patrick J. Leahy (D-VT) planned to move a bill out of the Senate Judiciary Committee, until then-Majority Leader Harry Reid (D-NV) called him and said not to bother, since Reid would not bring it to the Senate floor.

I realized the gravity of this exchange when I saw a headline in POLITICO about Reid holding a fundraiser with trial lawyers – an event that raised more than $1 million dollars. After all, this is the same majority leader who insisted the cabinet secretary overseeing Medicare come to his office to meet a doctor who bilked Medicare for millions, but gave Reid $400,000.

Thankfully, Congress was not deterred by Reid’s shenanigans. In June, the House Judiciary Committee passed the Innovation Act and the Senate Judiciary Committee passed the PATENT Act. The fee-shifting provisions of the Innovation Act and the PATENT Act will ensure patent trolls must pay defendants’ legal fees if those trolls bring bogus lawsuits and lose. And provisions in both bills would make it easier to collect legal fees from patent trollshell companies, reducing the likelihood trolls will simply declare bankruptcy and disappear if they lose the lawsuits.

These fair and bipartisan bills should make their way to the Senate and House floors. But never underestimate the political power and open checkbook of trial attorneys. This is their cause, and we are sure to see the trolls – and their mercenaries – put up a strong fight here in Washington.

Early in my career, the CEO of a major technology company told me that business people grow the pie and that lawyers simply re-divide the pieces of the pie. Regrettably, since then, the situation has gotten worse. Today, lawyers pour so much money into the coffers of elected officials, like Reid, that the tiniest of changes aimed at preserving American innovation and entrepreneurship are under threat.

Lawyers are bending laws in ways that hurt startups, entrepreneurs and legitimate businesses. It’s time Congress put a stop to the tyranny of underemployed lawyers. And it’s time for the legal profession to return to respectability and recognize that just because something is legal, that does not mean it’s moral.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling booksNinja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro