Bipartisan effort in Congress fights lawsuits by patent trolls
Patent law — famously arcane and technical — is becoming a mainstream, even bipartisan issue in Congress.
The push for patent overhaul is spurred by the recent increase in patent litigation, mainly by companies whose principal business is generating lawsuits rather than producing products. And a Senate bill introduced last week is designed to slow these patent trolls by making it more difficult and more costly to bring many patent suits.
The proposed Senate legislation fine-tunes an antitroll bill in the House, patent experts say, to be less objectionable to groups, including pharmaceutical companies and universities, that traditionally resist any moves to weaken the rights of patent holders.
“It looks pretty good, and in this environment it should have a good shot at becoming law,” said Arti Rai, a professor at the Duke University School of Law and former senior official in the U.S. Patent and Trademark Office.
The environment for patent overhaul has been shaped by changes in politics and public attitudes, as well as the rising number of patent suits. In December 2013, the House overwhelmingly passed legislation aimed at curbing patent litigation. A key provision in the bill, written by Rep. Bob Goodlatte, RVa., chairman of the House Judiciary Committee, was to make the losing party pay legal fees. The provision was an attempt to increase the cost and risk for plaintiffs, deterring trolls from bringing many suits in what amounts to legal prospecting for a big payday.
Trial lawyers lobby
In the Senate last year, Harry Reid, D-Nev., who was then majority leader, said he would not bring patent legislation to a vote. Trial lawyers, who as a group are large campaign contributors to the Democratic Party, objected to the fee-shifting provisions. Reid’s decision was widely interpreted as a nod to the trial lawyers lobby.
After last year’s election, the Republicans are the majority in both houses, adjusting political calculations somewhat.
But the Obama administration and many Democrats are now champions of patent overhaul to curb the flood of suits. The Senate bill, written mainly by Chuck Schumer, D-N.Y., and John Cornyn, R-Texas, would place restraints on demand letters, essentially threats to settle or be sued; require information on who actually owns a patent, making it more difficult to hide behind shell companies; and require losing parties to pay legal fees if the court decides the suit was not “objectively reasonable,” a deterrent to frivolous suits.
The fee-shifting provision in the Senate bill, for example, is a case of modifying the House proposal. The House bill would require the loser to pay unless the court makes an exception. Under the Senate bill, fee-shifting is not the starting point, its sponsors say, but will be done only if the court determines the suit to be unreasonable.
The political climate has shifted fairly significantly since 2011, when the America Invents Act was passed, as the most sweeping change in U.S. patent law in several decades.
That law made it more difficult to obtain certain kinds of patents and prohibited patent holders from filing dozens of suits at once. But otherwise, it did not do much about trolls. Big Silicon Valley companies, who are prime targets of patent trolls, were dissatisfied.
Since then, the number of patent suits has risen sharply. And there were new tactics by some of the most aggressive firms. They began filing demand letters with nontech companies, including retailers, hotels and restaurants. The allegations included the claim that some feature on their websites, usually involving software they bought from a technology supplier, violated some patent.
“Those stories resonated,” said Aaron Cooper, a lawyer at Covington & Burling and a former chief counsel for intellectual property for the Senate Judiciary Committee. “Now, it wasn’t just companies in Silicon Valley. It was companies in every state.”
‘Mainstream America’
James Bessen, a patent expert at Boston University Law School, said, “The litigation problem got worse, and it spread into mainstream America. That’s why we’re seeing this now, only four years after we had major patent reform legislation.”
There may be bipartisan support in Congress, but some conservative academics oppose the legislation. They refer to trolls as “patent monetization entities” who are engaged in price negotiations for intellectual property owners whom they represent. Legislation, they say, is mainly an effort to change the game to favor politically influential technology companies, increasing their profits further.
The bill, Schumer said, is a measured step to change the game. But the goal, he said, is to weed out litigation mischief and to “shift 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.”