Guest post by Ian Clarke, Capital Factory Mentor and CTO of OneSpot

Imagine you’ve started a business (many of you won’t need to imagine). You’ve invested your savings in this business, taken risks, and endured the stress and uncertainty. Your social life suffered – perhaps even your relationships.

After years of challenges, your revenues finally start to exceed your costs. You’ve created a successful business and you can start to think about expansion.

And then you get your first threat.

A stranger tells you that you can either pay them or they’ll destroy your business. This stranger hasn’t contributed anything to your business, has taken none of the risks that you have. They haven’t built anything. You ask around, and it turns out he isn’t bluffing. Everyone tells you that your best option is to pay up – so you do.

Sounds like an episode from The Sopranos, doesn’t it? Actually, it describes the predicament of many of today’s software entrepreneurs. The stranger isn’t a criminal thug; instead, it is a perfectly legal company known as a “non-practicing entity,” better known as “patent trolls.”

A patent is a powerful weapon. With it, you can sue anyone who independently reinvents whatever is covered by your patent. It doesn’t matter that they weren’t aware of your patent. Yes, you can argue that the patent is obvious, or that it wasn’t original, but even if you win, fighting the patent troll can cost you millions, while costing them next to nothing. If all they’re demanding is a few tens of thousands of dollars, doesn’t it make sense to pay up?

This is why companies such as Google must divert billions of dollars away from research and development, and spend it acquiring huge numbers of patents that they hope will defend against this kind of attack. Of course, the small software entrepreneur doesn’t have Google’s vast resources.

Fortunately, our political representatives have taken notice. Sen. John Cornyn recently introduced legislation to make life more difficult for patent trolls and, therefore, easier for software innovators.

One of the most important reforms is to force the loser to pay for patent litigation. This significantly shifts the calculus of both the patent troll and the entrepreneurs they attack. Now, if the patent trolls can’t adequately make their case, they’re on the hook for the entire cost of litigation. This alone should be a significant disincentive to patent trolling.

The legislation would also improve transparency: Patent trolls often operate through shell companies to disguise who they really are. The law would make this more difficult by forcing trolls to reveal anyone with a financial interest in the patent.

Of course, this legislation is not a panacea. The ultimate solution to this problem – at least within the software industry – is to say that you cannot infringe on a patent through the writing, distribution, or use of software. In other words, get rid of software patents.

None of the software innovations we rely upon today owe their existence to software patents, while the threat to innovation is clear. Indeed, if these patents were had been widely enforced prior to 1990, the Internet and many other important technologies that we take for granted today probably wouldn’t exist in their current form today.

That said, the perfect should not be the enemy of the good. Senator Cornyn should be applauded for this legislation.

About Ian Clarke

Ian Clarke is a Computer Scientist and Entrepreneur, with a track record of both technical and business innovation, and an outspoken thinker and activist on issues relating to freedom of speech, intellectual property law, and technology. Ian is best known as the founder and coordinator of the Freenet Project; designed to allow true freedom of communication, Freenet was the first decentralized anonymous peer-to-peer network, and a precursor of the “distributed hashtable” data structure. Ian has also founded a number of innovative and diverse commercial ventures, including Revver, the first online video website to share revenue with video creators, SenseArray, a powerful machine learning engine.  Ian is currently the co-founder and CTO of OneSpot, an ad network focussed on content marketing. You can follow him on Twitter @sanity