The day may come soon in which patent trolls will join their namesakes in the realm of lore and legend, at least if both houses of congress are able to reconcile dual measures into a single piece of legislation. Although the House of Representatives had already passed “The Innovation Act” in 2013 by an overwhelming manner, the bill stalled in the Senate amid a healthy dose of finger-pointing. Once again, the House re-introduced the bill earlier this year, and on Wednesday, April 29th, the Senate followed suit by introducing a companion bill amid widespread bipartisan support. The Protecting American Talent and Entrepreneurship, or the PATENT Act, is geared toward making it more difficult for patent-holding companies, known derisively as “patent trolls,” to bombard companies, largely software providers, with costly yet usually frivolous lawsuits in order to coerce a settlement. These companies are usually fly-by-night or shell-corporations that don’t actually produce or intend to produce any products, instead taking advantage of legal loopholes that put the burden of proof on the company being sued as opposed to the patent-holding company. Although the bill has a large amount of bipartisan and bicameral support, there is a murmur of objection as well.
The bill’s primary sponsors are John Cornyn (R-TX) and Chuck Schumer (D-NY), although picking up powerful allies in co-sponsors Chuck Grassley (R-IA), chair of Judiciary committee, and top-ranking committee Democrat, Patrick Leahy (VT). Many large technology companies, especially Google, also lobbied heavily for the reform. Although the PATENT Act is somewhat toned-down compared to the House version, the Innovation Act’s chief sponsor, House Judiciary Chairman, Bob Goodlatte (R-VA) strongly supports the Senate’s efforts. It is likely the bills will become reconciled and the amended legislation will be passed by both houses. Senator Schumer said that the bill “shifts the legal burden back onto those who would abuse the patent system in order to make a quick buck at the expense of businesses that are playing by the rules.”
Because it is usually cheaper to settle patent lawsuits than to fight them under current law, the theme of the PATENT Act is to shift much of the burden of proof to the patent-holding company to reduce frivolous attacks. Among others, these are the 3 key changes included in the bill:
- Delayed discovery- this is by far the most important component of the bill. Much of the expense in fighting a patent lawsuit is the multitude of requested documents the defendant is required to produce, much of which require legal review while the patent-troll, being a shell company, does not usually have to provide much documentation since they do not manufacture a product. Defendants can file an immediate motion to dismiss under frivolousness claims, or request a transfer to another district, as some districts, like East Texas, are notoriously patent-friendly.
- Increased requirement for specificity- Under current law, all a plaintiff needs to do to file a patent-infringement suit is have the patent number and the name of the product that allegedly infringes. More cases than not, the products do not actually infringe upon any patent, but the defendant still has to spend the time and legal fees proving the matter. Under the PATENT Act, lawsuits must be specific about the nature of the claim and how the product infringes them. It also requires the patent-holding company to list anyone with at least a 20 percent stake in the litigation, requiring the often secretive shell company to identify its members more transparently.
- Force patent trolls to pay for filing lawsuits not being “objectively reasonable” – This may stop many troll lawsuits from the beginning; however, this was the most controversial provision in 2013, when Harry Reid brought the bill to a standstill. Reid, along with many trial lawyers, fears that this provision will set a precedent in other forms of legislation. Being that the Senate is now in Republican hands, a party not known for its abundant support of trial lawyers, this objection will likely not be enough to stop the measure. Another concern about this provision, however, is the fact that trolls are often shell companies with no assets, therefore putting nothing at risk to sue.
Despite the widespread acknowledgement that patent trolls are a hindrance to innovation, and to the tech industry as a whole, there is not universal support for this measure. Although the Senate bill is less aggressive than its House counterpart, some both within and outside Washington consider it to be an overreach. Senator Chris Coons (D-DE) is one such opponent, stating that “Congress must address abuse in the patent system, but broad changes that undermine the ability of inventors to enforce their patent rights present serious concerns for our innovation economy.” Congresswoman, Marcy Kaptur, one of the most senior members, has been the most vocal opponent of the House version, writing in an op/ed that the bill “goes well beyond what is needed to address bad actions of a small number of patent holders, and instead raises costs for all legitimate patent holders to enforce their Constitutionally-given property rights in court.” Innovation Alliance Executive Director Brian Pomper, who represents businesses whose primary focus is on research and development, called the Senate measure a “welcome improvement” over the House bill, but warned that, “A law that would make it harder to enforce U.S. patents will encourage the infringement of American ingenuity and innovation and embolden competitors in China and elsewhere.” Other conservative groups such as the American Conservative Union and the Club for Growth oppose the bill on the basis that it is a giveaway to large tech firms and it adds additional governmental intervention upon the private sector. Despite the criticism, most agree that patent-trolling is a problem, and although amendments to a consolidated bill may be forthcoming, it appears that the time for a bipartisan effort to stop the practice has arrived.
IP Watchdog – Congresswoman Marcy Kaptur
Legal Newswire – Jessica M. Karmasek
Vox – Timothy B. Lee
Wall Street Journal Law Blog – Ashby Jones