Patent Reform Just Took a Massive Setback in the Senate

Senate Judiciary Chairman Patrick Leahy announced Wednesday he was taking a bill aimed at reducing patent trolling off the agenda.

U.S. Sen. Patrick Leahy (D-VT) speaks with reporters following a weekly Democratic caucus policy luncheon at the U.S. Capitol June 25, 2013 in Washington, DC. Leahy has introduced a bill seeking to rein in NSA programs.
National Journal
Dustin Volz
May 21, 2014, 8:58 a.m.

Just when it looked like a grand com­prom­ise was fi­nally com­ing to­geth­er, Sen­ate ne­go­ti­ations over a ma­jor bill de­signed to curb ab­us­ive pat­ent trolling have fallen apart.

It now ap­pears the ef­fort to re­duce frivol­ous pat­ent-in­fringe­ment law­suits is all but dead in Con­gress.

The Sen­ate Ju­di­ciary Com­mit­tee an­nounced Wed­nes­day that it was tak­ing its pat­ent con­sid­er­a­tion off its agenda, and gave no in­dic­a­tion when it may next be up for a vote. The bill was sched­uled for a vote Thursday, and sources on and off Cap­it­ol Hill had ex­pressed re­newed con­fid­ence that the pack­age — already delayed for con­sid­er­a­tion sev­er­al times over — was fi­nally ready to be passed out of com­mit­tee.

“Un­for­tu­nately, there has been no agree­ment on how to com­bat the scourge of pat­ent trolls on our eco­nomy without bur­den­ing the com­pan­ies and uni­versit­ies who rely on the pat­ent sys­tem every day to pro­tect their in­ven­tions,” Chair­man Patrick Leahy said in a state­ment. “We have heard re­peated con­cerns that the House-passed bill went bey­ond the scope of ad­dress­ing pat­ent trolls and would have severe un­in­ten­ded con­sequences on le­git­im­ate pat­ent-hold­ers who em­ploy thou­sands of Amer­ic­ans.”

{{ BIZOBJ (video: 4880) }}

Leahy con­tin­ued, “If the stake­hold­ers are able to reach a more tar­geted agree­ment that fo­cuses on the prob­lem of pat­ent trolls, there will be a path for pas­sage this year and I will bring it im­me­di­ately to the com­mit­tee.”

Earli­er in the day, pat­ent-re­form ad­voc­ates said they ex­pec­ted Thursday’s vote to go for­ward, as a draft of com­prom­ise lan­guage was cir­cu­lat­ing. But ne­go­ti­ations quickly de­teri­or­ated, sources said.

“I am sur­prised and dis­ap­poin­ted that the Sen­ate Demo­crat lead­er­ship is not will­ing to move for­ward on a bill that we’ve worked on so hard and we’re ready and ex­pect­ing to mark up to­mor­row,” said Sen. Chuck Grass­ley, the pan­el’s top Re­pub­lic­an, in a state­ment. “We put in a good-faith ef­fort to get to this point, and it’s too bad that the bill is be­ing pulled from the agenda.”

Ad­ded one pat­ent lob­by­ist: “At 9 o’clock we were on track. By 11 we were off track.”

Tech groups quickly de­nounced the de­cision to shelve pat­ent re­form.

“It is re­gret­table that the in­ab­il­ity of Con­gress to ad­vance widely sup­por­ted le­gis­la­tion will ex­pose many small com­pan­ies to pred­at­ory lit­ig­a­tion,” Jonath­an Zuck, pres­id­ent of ACT | The App As­so­ci­ation, said in a state­ment. “Fail­ing to act on this is­sue may pro­foundly im­pact the in­nov­a­tion we are see­ing through small busi­nesses and new entrants in the mo­bile eco­nomy.”

Ne­go­ti­ations over how to ap­pro­pri­ately ad­dress pat­ent trolls — com­pan­ies that buy up pat­ents and then leach cash from in­vent­ors by threat­en­ing in­fringe­ment law­suits — have re­peatedly be­deviled Sen­ate staffers work­ing on the is­sue. Throughout the de­bate, heavy lob­by­ing from a wide swath of tech com­pan­ies, en­tre­pren­eurs, phar­ma­ceut­ic­al com­pan­ies, uni­versit­ies, and fin­an­cial ser­vices con­tin­ued to com­plic­ate the multi-is­sue dis­cus­sions.

In par­tic­u­lar, fee-shift­ing, which would make the loser pay the win­ner’s leg­al fees in some in­fringe­ment cases that are con­sidered mer­it­less, proved to be a stick­ing point. 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 sup­port­ive.

Leahy wanted “broad bi­par­tis­an sup­port” for any bill he brought to his com­mit­tee for con­sid­er­a­tion, but “com­pet­ing com­pan­ies on both sides of this is­sue re­fused to come to agree­ment on how to achieve that goal,” he said in his state­ment.

Des­pite the obstacles, a deal be­ing worked out between Sens. Chuck Schu­mer and John Cornyn that would have re­quired fed­er­al judges to shift fees in cer­tain cases had garnered sub­stan­tial sup­port in re­cent weeks. Even after sev­er­al changes and tweaks, however, it was un­able to sat­is­fy every­one with a hand in the ne­go­ti­ations.

Schu­mer vowed Wed­nes­day to con­tin­ue work­ing with Cornyn and oth­ers to “come up with a strong, com­pre­hens­ive solu­tion.”

Late last year, the House passed the In­nov­a­tion Act with enorm­ous bi­par­tis­an sup­port. That bill, sponsored by House Ju­di­ciary Chair­man Bob Good­latte, would re­quire plaintiffs to be more spe­cif­ic in their law­suits, in­crease trans­par­ency of pat­ent own­er­ship, re­duce the costs of dis­cov­ery, and pro­tect end users, such as cof­fee shops that might pur­chase a pat­ent-pro­tec­ted item from a vendor. It also makes it easi­er for those who suc­cess­fully de­fend them­selves against a pat­ent law­suit to re­cov­er leg­al costs.

Good­latte, in a state­ment, called Leahy’s de­cision to can­cel a vote “ex­tremely dis­ap­point­ing” and urged the Sen­ate to use his In­nov­a­tion Act “as a bi­par­tis­an roadmap.”

“Un­for­tu­nately, we have only seen delay after delay come out of the Sen­ate,” the Vir­gin­ia Re­pub­lic­an said. “Ef­fect­ive pat­ent re­form le­gis­la­tion re­quires the care­ful bal­ance that was achieved in the In­nov­a­tion Act and so I urge the Sen­ate to work with us on this is­sue in­stead of clos­ing doors to mean­ing­ful pat­ent re­form.”

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