November 18, 2002 -- There needs to be some kind of process put into place that will make defending themselves against intellectual property lawsuits less punitive for small businesses -- especially when they are forced to go toe-to-toe with corporate giants.

It may seem like a statement of the painfully obvious to you, but that was the primary conclusion reached by participants at an intellectual property conference hosted in Washington last week by EntrepreneurPR in cooperation with the House Small Business Committee.

Readers of The MicroEnterprise Journal may recognize EntrepreneurPR as the company whose principal, Scott Smith, won a major victory earlier this year in an ongoing trademark dispute with Entrepreneur Media.

A 9th Federal Circuit Court of Appeals ruling overturned a summary judgement that had stripped Smith of his company's name, it's publication name and it's domain name, and awarded Entrepreneur Media more than $300,000 in damages. With the initial decision overturned, the case is currently awaiting trial in the lower court.

Smith took his case to Washington some two years ago, in search of some permanent legislative remedies for him and for other small business owners confronted with similar legal headaches. This conference was the result. With it, Smith sought to educate the folks in Washington on the way small businesses have been taking a beating on intellectual property issues in recent years and to get to work on practical solutions.

Other small business owners at the conference represented cases that may also be well known to regular readers. They included Uzi Nissan, currently in a dispute with Nissan Motors over which of them has the ultimate right to the use of the domain name 'nissan.com', Brad Wardell, who also tangled with Entrepreneur Media over his software company's game called Entrepreneur, and Walt Smith, who attended as a representative of the fifty-one small business owners currently being sued for patent infringement by Pangea Intellectual Properties.

Perhaps the most important contribution these small business owners made -- assuming that some of the relevant people were listening -- had to do with their descriptions of the profound disruption that intellectual property litigation can have on a small business. Other participants asked more than once whether these business owners could quantify their financial loss from the disputes in which they were involved, and repeatedly received the same answer -- it's hard to say.

Defending against a lawsuit, besides being expensive, is a time consuming business. The small business owners present at this conference were dragged into these suits with no prior warning and, in many cases, not even a cease and desist letter. Since they were unprepared, they didn't have their paperwork ready when the process server showed up and had to scramble to create their defense.

The fundamental problem, as trademark and domain name attorney Stephen Sturgeon pointed out during his luncheon presentation, is that the current system gives all the leverage to plaintiffs in intellectual property actions. Part of the reason for that is a legal assumption in favor of trademark, patent and copyright holders.

Another reason is that, as a group, trademark holders have a lot of money available to pitch toward re-election campaigns.

Unfortunately, intellectual property law did not pre-suppose the requirements of the "New Economy" and are badly outdated. And, while we have been seeing a spike in the number of infringement suits (particularly against smaller firms) in the way that usually happens when new technology emerges, Jonathan Hangartner, an attorney who represents several of the PanIP defendants, predicted that it's going to get worse.

"The USPTO is only just now beginning to get through all the patents that were filed early on," he said. "This is the tip of the iceberg."

In the midst of a certain amount of hemming and hawing, several practical suggestions for possible legislative and regulatory action emerged from the conference. They included

• making it easier to have frivolous suits, or suits over weak trademarks in non-conflicting categories, dismissed earlier in the process;

• making it easier to request a patent or trademark reexamination,

• requiring plaintiffs in intellectual property disputes to make more information available to defendants so that their cases are less time-consuming to assemble, and

• creating "bright line" tests and any other procedures that would level the playing field when large corporations with deep pockets decide to pick on small businesses over intellectual property issues.

It is difficult to say whether or not anything more will come of the conference. In many ways, it might be considered an excellent start but small businesses have a lot going against them. While it is not difficult for the small business victims of predatory intellectual property lawsuits to clearly demonstrate the inherent biases in the system, small business as a group are not well-organized enough to mount the kind of concerted effort that gets legislation passed in Washington. They also don't have the kind of money to throw around that gets attention in that town.

It would seem that what small businesses really need is their own political action committee (PAC).

They do have at least one important thing going for them. House Small Business Committee Chairman Don Manzullo seems to be very much concerned with the issues presented at the conference. While he was unable to attend the entire conference, he did stop by to speak to participants briefly and to let them know that he intended to hold hearings on the matter early during the 108th Congress. Whether Manzullo has enough clout to tangle with the powerful IP lobby, and win, remains to be seen.