MPHJ Technology Investments allegedly made plenty of money last year using a rather interesting business model. First, according to a lawsuit filed by the State of Vermont, it bought patents of dubious validity that could theoretically cover basic technologies, such as the scanning of documents. Next, it and its subsidiaries sent threatening letters, with various misstatements of fact, to businesses and nonprofits around the country, alleging patent infringement and demanding payment. MPHJ never went to court; it is said to have just collected settlements, asking for a thousand dollars per employee of the targeted firm. It didn’t invent anything. It didn’t create anything. It just took advantage of our patent laws to leech money from companies that do.

It is time to declare total war on patent trolls. The federal government, and the states, should do everything they can to exterminate them and to make anyone regret getting into such crooked work. The existence of trolls is entirely a product of government: they abuse a government program (the patent law), and continue to exist only thanks to government inaction.

MPHJ, if the allegations are true, is an extreme case of a widespread problem. Patent infringement is easy to allege and expensive to disprove. The problem is compounded by the excessive leniency with which patents have been issued over the past two decades, particularly for software and high technology. That creates ripe and lucrative opportunities for blackmail and extortion. One recent study suggests trolling costs the U.S. economy close to thirty billion dollars a year. The mathematics of deterrence suggests that the government needs to make the life of a troll miserable instead of lucrative.

There are good laws in place that could fight trolls, but they sit largely unused. First are the consumer-protection laws, which bar “unfair or deceptive acts and practices.” Some patent trolls, to better coerce settlement, purposely misrepresent matters such as the strength of their patents, the extent of other settlements, and their actual willingness to litigate. Second, there are plenty of remedies available under the unfair-competition laws. Some trolls work by aggregating an enormous number of patents, and then present the threat that one of their thousands of patents might actually be valid. The creation of these portfolios for trolling may be “agreements in restraint of trade” under Section 1 of the Sherman Antitrust Act, or they may “substantially lessen competition” under the Clayton Antitrust Act. More generally, the methods of the trolls are hardly what you would call ordinary methods of competition; they should be considered, rather, what the Federal Trade Commission calls “unfair methods of competition” under Section 5 of the F.T.C. Act. The Commission has the power to define and punish methods of business that are inherently harmful with few or no redeeming benefits, and that’s what trolling is. Finally, it is possible that the criminal laws barring larceny and schemes to defraud may cover the conduct of some trolls.

Unfortunately, other than in Vermont, these laws remain largely unenforced, for reasons that aren’t particularly good. Trolls, to switch metaphors, are like cancer cells: they mimic ordinary activity, namely the assertion of patent rights. A war on trolls could become a war on patent holders in general. Since the line between the two can be fuzzy, the argument is that war might deter some real invention. It might, for example, lump universities in with the extortion artists.

But that justifies caution, not inaction. All law enforcement involves this problem of sorting. There is a narrow line between the legitimate trader who knows the stock market well and the criminal inside trader, yet that doesn’t mean securities laws should be left unenforced. A historic example may help. Pyramid-investment schemes—which promise and deliver high returns, based on paying earlier investors with the money from newcomers—were not always clearly illegal. To this day, distinguishing pyramid, or Ponzi, schemes from normal investment funds is not easy. Is Amway a pyramid scheme? Are hedge funds? Sometimes it’s hard to say.

Still, the challenge of distinguishing pyramid schemes from legitimate investments hasn’t stopped prosecutors from going after obvious cases like Charles Ponzi, in the nineteen-twenties, or, more recently, Bernie Madoff. Similar cases can be found in patent-trolling: MPHJ is just one example. The key for enforcers is focussing on conduct that goes beyond the ordinary, such as the outlandish accumulation of seemingly worthless patents for their extortionary value, or a pattern of frivolous demands. Another red flag is misrepresentations of fact, like dubious assertions of a company’s litigation record.

The one exception to the pattern of government inaction is Bill Sorrell, the Attorney General of Vermont, who, two weeks ago, filed lawsuits against MPHJ for exploiting Vermont businesses and nonprofits. He explained to me that Vermont is trying to attract new businesses to the state, and that scaring off trolls might help. “This is not anti-patent,” Sorrell said. “This is anti-abuse of patent rights. We don’t want people preying on Vermont’s small business.”

The Vermont story may help create a race to the top. If Vermont succeeds in scaring trolls away, it will give companies there an advantage. And as more states act, it will be relatively worse to do business in those that don’t.

Ultimately, other states and the Federal Trade Commission need to bring their considerable resources to this fight. The Commission is taking comments on the trolling problem, and newly appointed Chairwoman Edith Ramirez may make progress.

The deeper issue is the relevance of government itself in the high-tech economy. A primary and fundamental role of government is to keep clear the channels of commerce, by scaring off bandits, pirates, and other parasites and nuisances. This once meant chasing outlaws out of town; in today’s economy, it means clearing out the patent trolls, and making sure they never come back.

Photograph of Vermont Attorney General Bill Sorrell, right, by Toby Talbot/AP.