Legislators Aim to Send Patent Trolls Packing

The United States House of Representatives on Thursday passed the Innovation Act, a bipartisan bill seeking to curb frivolous lawsuits by patent trolls, by a vote of 325-91.

Bill H.R. 3309, whose chief sponsor is House Judiciary Committee Chairman Bob Goodlatte, will go before the Senate where another bill, the Patent Transparency and Improvements Act of 2013, was introduced Nov. 18 by Sens. Patrick Leahy and Mike Lee.

These bills are the culmination of years of criticism of the U.S. patent system, which is widely considered broken.

Unremitting pressure from businesses led to the U.S. Federal Trade Commission launching its own investigation in September into what it calls “patent assertion entities.”

“In the last five to six years, the patent world has been like the Wild West with no sheriff in sight,” Robin Feldman, a professor at the UC Hastings College of the Law, told the E-Commerce Times.

“It is great to see some help on the horizon, and I hope it arrives,” said Feldman.

Patent trolls — which Feldman calls “patent monetization entities” — filed 58 percent of patent lawsuits in 2012, compared with 24 percent in 2007.

Highlights of the Innovation Act

Goodlatte’s bill requires plaintiffs to disclose patent owners before filing litigation so they cannot hide behind shell companies to avoid accountability for frivolous lawsuits. They also must explain in their court pleadings why they are filing suit.

Courts have to decide early in the litigation process whether a patent is valid so patent trolls cannot keep a legal battle dragging on.

Judges have to award attorneys’ fees to victims of frivolous lawsuits, although they can waive such awards in special circumstances.

The Judicial Conference must make rules that reduce the costs of discovery in patent litigation. This removes another weapon from the patent trolls’ armory.

The bill lets small businesses that bought off-the-shelf products postpone expensive patent lawsuits while their much larger suppliers complete their patent lawsuits against trolls.

Support for the Innovation Act

“The bill addresses abusive litigation tactics in any patent case, Matt Levy, patent counsel for the Computer & Communications Industry Association, told the E-Commerce Times.

“Patent trolls small and large are experts at finding flaws in the patent litigation laws,” remarked Keith Kupferschmid, general counsel and senior vice president, intellectual property, at the Software & Information Industry Association. “The objective of H.R. 3309 is to fix those flaws so that patent trolls and those they sue are on an even playing field.”

Google, one of the major forces behind the bill, belongs to both industry groups.

What the Critics Say

Goodlatte’s bill may smother technological innovation, warned Richard Epstein, a law professor at New York University.

The bill protects end users but may not have much impact on larger, more sophisticated trolls such as IP Nav and Intellectual Ventures, contended Brian Love, a legal scholar at Santa Clara Law School.

Not true, countered CCIA’s Levy. “The provision that protects customers applies to all patent trolls as well,” he explained. “Even larger trolls, such as Intellectual Ventures, sue end users some of the time.”

No Easy Solution

“With the multi-headed problem of patent demands, many approaches are needed,” said UC Hastings’ Feldman. “The Goodlatte Bill contains a number of them in the short term. Others will be needed in the long term.”

The FTC investigation will be “very important” because “we cannot solve what we cannot see,” she continued.

The Goodlatte Bill’s Future

The Innovation Act now goes to the Senate.

Although it will go up against the Lee-Leahy bill, chances are that legislation to limit patent abuse will go through in one form or another.

“There is so much support for [anti-patent troll] legislation that we think there is no chance that very good patent abuse litigation reform legislation does not pass the Senate,” the SIIA’s Kupferschmid said. “The only question is when.”

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