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How the Senate's Feel-Good Moment Fell Apart How the Senate's Feel-Good Moment Fell Apart

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Tech

How the Senate's Feel-Good Moment Fell Apart

In the upper chamber, “next week” could mean “never” for patent reform.

Sen. Patrick Leahy(Win McNamee/Getty Images)

It was only 19 words, but they came from the president of the United States. And everyone was listening.

"Let's pass a patent-reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation," President Obama said during his State of the Union address in January.

It was far from empty rhetoric. Obama's words came after the House had passed a bill aimed at slaying patent trolls—companies that buy up patents and then leach cash from inventors by threatening infringement lawsuits. The bill, which seeks to make trolling less lucrative and better policed, passed with enormous bipartisan support and—in congressional time—at lightning speed: 43 days from introduction to approval.

 

With House action and White House backing, patent reform appeared possible, even in a political environment where nearly no other legislation did.

Enter the Senate.

Despite support for reform from a wide swath of industries—indeed, perhaps because of it—the upper chamber's Judiciary Committee has repeatedly failed to find the just-right Goldilocks language for patent-litigation reform. Instead, numerous delays have left the fate of its once-expected passage in doubt during an election year.

Chairman Patrick Leahy has pushed back a vote on patent reform—originally scheduled for March—so many times that some watchers have lost count. Sources say they now expect the earliest vote to take place next Thursday, a date that is dangerously close to the Senate's end-of-May recess. Sen. Chuck Schumer, a Democratic committee member who has been central to the ongoing negotiations, has publicly stated that a patent bill needs to get out of committee by May for it to have any chance of getting to the president's desk this year.

WHAT'S THE HOLDUP?

A diverse array of tech companies, entrepreneurs, pharmaceutical companies, universities, and financial services support some level of reform to the nation's patent-litigation system. But some stakeholders are more full-throated than others, and a number of key players have warned that overcorrecting could quash American innovation.

Senate staffers for months have been trying to forge a compromise to satisfy the lion's share of stakeholders, but even slight changes to certain sections have become battlegrounds.

Sources on and off Capitol Hill say one tricky provision in particular continues to bedevil negotiations: fee-shifting. This would make the loser pay the winner's legal fees in some infringement cases that are considered meritless. Republicans generally favor a strong fee-shifting provision, but Democrats, who typically earn support from trial lawyers fearful of anything that sounds like tort reform, are less bullish.

How Patent Trolls Are Costing the Economy Billions Each Year

Still, a way forward looked to be emerging during and after April's two-week recess. Following weeks of back-and-forth talks, Schumer and Sen. John Cornyn—a Texas Republican at the forefront of his party's pro-patent-reform bloc—offered Leahy a package deal. It would have required federal judges to shift fees—but only when a judge deems the losing party did not "behave in an objectively reasonable fashion," according to a circulated draft.

But Leahy balked, according to patent lobbyists close to the negotiations. Instead of accepting the bipartisan compromise, Leahy attempted to cobble together unanimous Democratic support for his original bill. As of this week, both approaches appeared to lack the votes necessary to punch through the committee.

Leahy is "trying to swing from one end of the pendulum to the other, trying to see where he can get the votes—and he hasn't found the sweet spot yet," said one patent lobbyist, who would speak only on background because of the sensitivity of the negotiations. Vote-counters believe Democratic Sens. Dick Durbin and Christopher Coons are likely to oppose either measure, and several Republicans remain in doubt, as some have suggested they could craft a better bill if they reclaim the Senate after the midterm elections.

Additionally, two Supreme Court rulings handed down at the end of April may have further complicated negotiations. The opinions make it easier for federal judges to implement fee-shifting in patent cases, which some say has decreased the level of urgency in the Senate.

"The folks that are trying to slow down or derail the bill are clearly trying to make the case that the Supreme Court has solved the problem, and we should wait and see," said Peter Pappas, former chief of staff at the Patent and Trademark Office. "Those are important steps, but the Court moved the needle from what was an incredibly high bar where it was virtually impossible to fee shift to a lower bar, but you're still limited under existing law to exceptional cases."

What's more, it remains unclear whether Senate Majority Leader Harry Reid has any intention of bringing patent reform up for debate during a tight election year if a compromise ever gets through the Judiciary panel. Any legislation could run the risk of upsetting trial lawyers, who are typically a strong Democratic donor base.

IS TIME RUNNING OUT?

Despite its sluggish pace, reform advocates for months resisted criticizing the Judiciary Committee, instead expressing confidence that a slow and steady approach would ultimately yield results. But with the shedding of each calendar page, stakeholders are turning up the rhetoric.

Last week, after the committee delayed a vote for the fifth time, the pro-reform Consumer Electronics Association released an unusually forceful statement blasting the Judiciary panel—and other stakeholders pleading for a more cautious approach—for costing the economy $1.5 billion each week it fails to act. That number, it said, came from a frequently cited Boston University study that estimates patent trolling saps the economy of $80 billion each year.

"It is time for the Senate to do the right thing: Ignore the pleas of trial lawyers, universities, and others who routinely profit from patent abuse, and pass strong, commonsense reforms to protect American innovators and entrepreneurs," said Michael Petricone, CEA's senior vice president of government affairs.

Many reform crusaders remain—on the record, at least—confident that the Senate Judiciary will get something out of committee soon, even as lobbying from big tech, universities, pharmaceutical companies, and others continues unabated.

"Our general view is to be good rather than to be fast," said Dana Rao, Adobe's vice president of intellectual property and litigation, told National Journal last month. It's especially important to get legislation just right, he added, because "we're not going to get a third shot at a patent bill in Congress," referring to the America Invents Act that Congress passed in 2011, which overhauled some aspects of the patent system.

Such changes are "on the edge, not in the middle," added Rao, who testified on the impact of patent trolling before the Senate Judiciary Committee in December.

While the Senate Judiciary tries to smooth out those edges, reform backers will continue to do what they have done for months: wait and see.

This article appears in the May 13, 2014 edition of NJ Daily.

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