Obama says patent trolls “hijack” and “extort;” So do something, Mr. President

GigaOM’s regular readers are familiar with the plague of patent trolls. These are shell companies that don’t make anything but instead amass old patents in order to demand licensing fees from those that do. Startups are frequent targets for the trolls and those who resist are dragged into multimillion dollar litigation they can’t afford.

The patent troll problem, widely exposed by NPR in 2011, has long infuriated real companies and the tech sector. And now people in high places are starting to notice.

This week, a young woman told President Obama in a Google Hangout that she and other entrepreneurs live in fear of patent trolls and asked if he planned to continue patent reform. In response, the president made his boldest statement to date on the issue:

“The folks that you’re talking about are a classic example; they don’t actually produce anything themselves. They’re just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.”

It looks like common sense has come even to the highest halls of power (see interview and transcript here via Patent Progress). The question now is whether President Obama will actually take charge and do something about the patent plague that is sucking money out of the most innovative sector of the economy.

In the past, the president has proved adept at throwing sops to his fans and fundraisers in the tech sector without doing much to help them. In 2011, for instance, he signed the America Invents Act, which was a milquetoast measure to fix the worst elements of the patent system. While the law made it easier to challenge bad patents, it didn’t reign in absurd jury verdicts or overly broad patents that enable the trolls in the first place.

It’s time for the president to try again. To do so, he will first need to get around the specific concerns of the pharmaceutical industry, which has blocked previous patent reform efforts; as Judge Richard Posner has noted, drug makers are among the few who may need the monopoly power of a patent in order to recoup their investments. This is not the case for software and tech where a first-mover advantage provides an adequate head start and technology rapidly becomes obsolete.

As for addressing the trolls, law professor Brian Love has proposed a very sensible solution. Love, a protege of IP godfather Mark Lemley, suggests changing the patent fee structure to create disincentives for hoarding the obsolete patents that trolls typically use to torment their targets. The advantage here is that this is something Obama can do directly. Meanwhile, in Congress, the president can push for legislation to eliminate billion dollar jury verdicts.

Finally, the president can also tap his executive power to increase antitrust scrutiny of giant patent trolls like Intellectual Ventures for imposing what is, essentially, a startup tax across the tech sector. If the Obama administration even attempted to impose such a tax, the political cost would be enormous; there’s no reason the private sector should get away with the same thing.

Enough talk. It’s time to act, Mr. President.