The Senate Is Finally Getting Serious About Slaying Patent Trolls

But nothing ever comes easy when it comes to patent reform.

A man works on the exhibit 'Cave Troll' 18 January 2007 in preparation of the show 'The Lord of the Rings' at the filmpark Babelsberg in Potsdam, eastern Germany.
National Journal
April 29, 2015, 11:41 a.m.

Pat­ent re­form is back in the Sen­ate, and it’s go­ing to be tough­er for Harry Re­id to get in the way this time.

Sev­en mem­bers of the Sen­ate Ju­di­ciary Com­mit­tee—in­clud­ing Ma­jor­ity Whip John Cornyn and Chuck Schu­mer, the No. 3 Demo­cratun­veiled le­gis­la­tion Wed­nes­day that would over­haul sev­er­al as­pects of the pat­ent-lit­ig­a­tion land­scape and clamp down on pred­at­ory pat­ent-troll be­ha­vi­or.

The con­tents of the meas­ure are the product of months of de­lib­er­a­tions that began in Janu­ary between Cornyn and Schu­mer, ac­cord­ing to con­gres­sion­al aides close to the pro­cess. Dis­cus­sions have dragged on for months as ne­go­ti­at­ors tweaked the bill to earn ap­prov­al from Ju­di­ciary Chair­man Chuck Grass­ley, rank­ing mem­ber Patrick Leahy, and oth­ers. It is part of an on­go­ing ef­fort to build con­sensus around an agree­ment in which nearly every pro­vi­sion is sub­ject to hos­tile dis­pute from in­ter­ested groups—ran­ging from tech gi­ants to start-up in­cub­at­ors to re­tail stores and bio­med­ic­al firms.

The Pat­ent Act ef­fect­ively jump-starts a dormant de­bate in the up­per cham­ber on how to best le­gis­late against so-called pat­ent trolling—the prac­tice of fil­ing frivol­ous pat­ent-in­fringe­ment law­suits against in­vent­ors and busi­nesses in the hope of reap­ing hefty set­tle­ments—nearly a year after ne­go­ti­ations with­in the com­mit­tee crumbled.

Re­form ad­voc­ates say trolls sap tens of bil­lions from the eco­nomy an­nu­ally—a ne­far­i­ous activ­ity that has grown with the ex­plo­sion of soft­ware pat­ents in re­cent years. Op­pon­ents ques­tion the vera­city of those cal­cu­la­tions while warn­ing that over­cor­rect­ing the na­tion’s in­tel­lec­tu­al prop­erty rules could do more harm than good.

Harry Re­id, then the Sen­ate ma­jor­ity lead­er, was widely blamed last year for killing the com­prom­ise brokered by Schu­mer and Cornyn just hours be­fore it was ex­pec­ted to emerge pub­licly. Even Leahy told a Ver­mont news­pa­per last year he was “furi­ous” that Re­id had killed the bill.

Re­id was ac­cused by Re­pub­lic­ans and some re­form ad­voc­ates of cav­ing dur­ing a tight elec­tion year to the de­mands of tri­al law­yers—long a Demo­crat­ic con­stitu­ency—who have op­posed broad re­form to pat­ent lit­ig­a­tion. The GOP takeover of the Sen­ate fol­low­ing last year’s midterm elec­tions was viewed as a boon to the pro­spects for pat­ent re­form in the new Con­gress, now that Re­id is re­leg­ated to the minor­ity lead­er job.

“Last year it was stalled by a sig­ni­fic­ant per­son run­ning the U.S. Sen­ate,” Grass­ley said dur­ing a press con­fer­ence in­tro­du­cing the bill.

In ad­di­tion to Re­id’s loss of in­flu­ence, re­form ad­voc­ates are buoyed by the wide-ran­ging polit­ic­al spec­trum of the bill’s co­spon­sors. In par­tic­u­lar, some high­lighted Demo­crat­ic Sen. Amy Klobuchar’s co­spon­sor­ship as a sign the meas­ure is likely to have the votes ne­ces­sary to muscle its way through the Ju­di­ciary Com­mit­tee. Grass­ley said he plans to hold a hear­ing on the bill next Thursday and then mark it up two weeks later, be­fore the Me­mori­al Day re­cess.

The le­gis­la­tion was quickly praised by sev­er­al pro-re­form groups, in­clud­ing the re­cently formed United for Pat­ent Re­form, whose mem­bers in­clude Google, Face­book, tele­com gi­ants, and the hotel, res­taur­ant, and re­tail lob­by­ing groups, which lauded Schu­mer and Cornyn for “their hard work driv­ing the pro­cess that led to today’s bill.”

But in­flu­en­tial stake­hold­ers, in­clud­ing phar­ma­ceut­ic­al com­pan­ies, uni­versit­ies, and tri­al law­yers, re­main skep­tic­al that such broad changes are ne­ces­sary, es­pe­cially just years after Con­gress passed the Amer­ica In­vents Act, which also dealt with the pat­ent sys­tem. Re­form op­pon­ents are also quick to point to a num­ber of de­cisions made by the Su­preme Court last year that tweaked pat­ent lit­ig­a­tion, ar­guing that it is too soon to gauge the im­pact of those rul­ings.

And the bill is likely to en­counter sharp res­ist­ance from Minor­ity Whip Dick Durbin and Demo­crat­ic Sen. Chris­toph­er Coons, both mem­bers of the Ju­di­ciary pan­el who have offered their own more nar­rowly tailored pat­ent bill. In a state­ment shortly after the bill’s re­lease, Coons blas­ted sev­er­al as­pects of the Pat­ent Act, claim­ing it would “re­duce the value of Amer­ic­an in­ven­tions and the val­id en­force­ment of pat­ent rights” while not do­ing enough to ad­dress vague de­mand let­ters.

“If it looks like the House bill, I’ll def­in­itely op­pose it,” Durbin told Na­tion­al Journ­al on Tues­day, re­fer­ring to the In­nov­a­tion Act, a pop­u­lar bill re­in­tro­duced by House Ju­di­ciary Chair­man Bob Good­latte earli­er this year that had over­whelm­ingly passed the lower cham­ber 15 months ago.

Sev­er­al of the Pat­ent Act’s pro­vi­sions do ad­here closely to the In­nov­a­tion Act, though Grass­ley was quick to ar­gue that key dif­fer­ences ex­ist and are worth con­sid­er­a­tion by his skep­tic­al col­leagues.

“It looks a lot dif­fer­ent than the In­nov­a­tion Act in the House,” Grass­ley said when asked about Durbin’s lack of sup­port. “[Good­latte] had the abil­ity to get a much dif­fer­ent bill out of his com­mit­tee than I was out of my com­mit­tee,” he ad­ded, tick­ing off dif­fer­ences on fee-shift­ing, plead­ing, and dis­cov­ery pro­vi­sions.

The dif­fer­ences on fee-shift­ing—mak­ing the loser pay the win­ner’s leg­al fees in an in­fringe­ment case—are es­pe­cially not­able, giv­en how con­ten­tious the pro­vi­sion is among stake­hold­ers. The Sen­ate bill would al­low fee-shift­ing only in cases when the loser is deemed not “ob­ject­ively reas­on­able.” The House bill of­fers a sim­il­ar sound­ing “reas­on­ably jus­ti­fied” stand­ard, though IP law­yers con­tend the House meas­ure is stronger.

In ad­di­tion, the Sen­ate meas­ure does not make fee-shift­ing “pre­sumptive” like the House bill, which would re­quire fee pay­ments for the win­ner un­less a pat­ent is shown to be le­git­im­ate. Like the House bill, the Sen­ate bill also would place re­stric­tions on send­ing vague de­mand let­ters, pro­tect end-users—for in­stance, cof­fee shops hit with an in­fringe­ment claim for us­ing a pat­en­ted product such as an es­presso ma­chine—and al­low for a delay to the start of the dis­cov­ery pro­cess un­til a court settles cer­tain facts of an in­fringe­ment case, such as the ven­ue.

The bill would also give the Fed­er­al Trade Com­mis­sion more lee­way in poli­cing against com­pan­ies that are send­ing bad-faith de­mand let­ters.

Sig­ni­fic­ant hurdles re­main as the bill moves for­ward, but the bill’s law­makers didn’t back down from be­ing bullish about its pro­spects.

“This is the year we will fi­nally pass pat­ent re­form. I’m con­fid­ent of that,” Schu­mer said. “I look for­ward, if we’re all still friendly and talk­ing to each oth­er, six months from now all be­ing at the White House as the pres­id­ent signs our pat­ent bill in­to law.”

“Or soon­er,” Cornyn cut in, eli­cit­ing a round of ap­prov­ing laughs among the law­makers.

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