Foreign Companies’ Patent Infringement Impact on Small U.S. Business and Entrepreneurs

Because of the prevalence of U.S. companies manufacturing overseas, U.S. patents are vulnerable to foreign companies

Jack Strauser
Jack Strauser

My company, Dok Solution, sells over 50 products, with 95 percent having one or more U.S. patents on them. Most of these products are manufactured and sell very well in the U.S. In years past, I did not have any companies infringe upon my patents—until now. Because of the prevalence of U.S. companies manufacturing overseas, U.S. patents are vulnerable to foreign companies. When a large foreign company decides that someone else’s patent is worth manufacturing and selling, there is little that the smaller inventor company can do, based on the money that a smaller company must spend to defend its patents in court.

Most large companies that target U.S. patents know these small U.S. companies/inventors don’t have enough capital to spend $1 million or more to defend their patents. However, we are doing just that in our patent infringement court case with a foreign company, and will continue to fight and defend our patents to protect our company. I have been in business long enough (over 25 years!) and my company is financially stable enough to protect my patents. But in order for inventors to become manufacturers to protect their patents and grow their companies, they should seek financial partners to help keep their patents protected from potential infringers. 

A little background on patents: To receive a patent, you must first have an original idea, submit line drawings, explain why your product is different, explain what it does and explain why it is patent-worthy. Once you file this information with the U.S. Patent Office for an examiner to review, this process can take up to three years from start to finish. It is always a good idea to start creating your product before patent approval, but you must be confident that your patent will get approval due to its originality. During this waiting process, if your patent is duplicated once you received patent approval, you can sue the infringers. However, you must have patent-pending status on your products while awaiting this approval process.

It is very expensive to invent, create and sell a product in this market. The process of creating a patent, and designing and making a sellable product (including manufacturing) can run up to $300,000 per product. To be created, consumer electronics products need to have tooling, electronic components, engineering, design and a minimum manufacturing run of at least 3,000 to 5,000. After all these expenses, you still have to market and sell your product.

In addition, it is very important that you manufacture the products for which you receive patents. Otherwise, you may be considered a troll, which is defined as a person or company that creates, buys and collects patents, but never actually produces a product. Trolls usually sue companies for patent infringement for a lesser fee than normal so that they don’t have to take companies to court or they settle out of court. Currently, there are legislators helping to create laws against these trolls that do not manufacture or employ people, just sue to collect money. 

On the other hand, there are companies like mine that are smaller, with strong patents, which bigger companies try to copy. The nd result is that the bigger company copies and sells the product, and waits for the smaller companies to take them to court. The larger companies will spend up to $1 million dollars or more to take smaller companies to court, thus out-financing the smaller companies rather than paying the millions in royalties that are deserved to the original patent owners.

There is a delicate balance for entrepreneurs to create and protect their patents, or lose them. The bigger companies can afford to hire large law firms, ironically using the money they received by selling the copied patented products upon which they infringed. This is a common practice that larger companies employ to bypass expensive research and lengthy development, using smaller companies’ innovations as a shortcut to quick money. The large companies know that they can easily take advantage of the smaller companies’ lack of funding to see the lawsuit to the end.