Innovation act will crack down on patent trolls

The bipartisan Innovation Act introduced last week by House Judiciary Chairman Bob Goodlatte (R-Va.) and Rep. Zoe Lofgren (D-Calif.) is a strong response to the economic burden of patent trolls. This bill, which has both bipartisan and bicameral support, will reduce the unfair advantages and incentives that patent trolls rely on. It will also strengthen the patent system while making patent litigation more efficient, transparent, and balanced. The end result will be a boost for businesses across the country, and ultimately our economy.

Each year, patent trolls cost our economy $80 billion. That’s a significant drag on businesses. And it’s money that can’t be used to create new jobs or develop new, innovative products and services, develop new products.

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The breadth of this problem is staggering. According to the White House, trolls sent out more than 100,000 demand letters last year. And their targets include businesses of all sizes from all sectors, including retailers, restaurants, grocery stores, hotels, airlines and even hospitals and charities. Internet companies have been targeted too, which is why patent counsels from The Internet Association’s member companies are coming to Washington this week to educate Members of Congress on the problems they face with patent trolls. 

Patent trolls use demand letters and litigation to threaten, intimidate and exhaust productive businesses into paying fees for questionable patents. If their first letter doesn’t work, their threats of costly litigation become stronger. It’s a form of legalized extortion, and it has to stop.

The fact is, when lawsuits over patents on common business methods – like scanning documents to email or providing an online store locator, which are the most litigated types of patents - do reach court, the trolls lose 85 percent of the time but the business being sued is still stuck with the bill. The fee shifting provisions of the Innovation Act will make the trolls think twice before going to court over obviously weak and frivolous claims.

Another ruse that the trolls use to make things more complicated for innocent businesses is to hide behind shell companies, so that victims are in the dark about who is behind the assertion of the patent claim that they are allegedly infringing.  The Innovation Act includes heightened pleading standards and requires parties to do due diligence before filing suit, which will bring the trolls into the light, reduce legal fees and stop frivolous claims before they reach court.

The Innovation Act also takes steps to weed out low quality patents by amending the Patent and Trademark Office’s Covered Business Method program. This change would give more companies sued by trolls a way to challenge critically flawed patents at the Patent and Trade Office. This program is an effective and less expensive alternative to litigation that will result in increased patent quality across the board.  In fact, even the Patent Office acknowledges the poor quality of many business method patents and has called for an expansion of this important review program.

While some argue that these reforms will hurt legitimate innovators and make it harder to protect new ideas, we fundamentally disagree. The patent system has been used as a weapon by the trolls. This legislation narrowly targets abusive practices and the low quality patents that trolls rely on, ultimately strengthening the patent system.

The best news for businesses is that this legislation could become law. With Republicans and Democrats divided on nearly every issue, the Innovation Act is a rare example of bipartisanship. This spirit of bipartisanship extends to the Senate, where Judiciary Chairman Patrick Leahy (D-Vt.) is working on parallel legislation with Republican Sen. Mike Lee (Utah) and others. And last week, the White House and Patent and Trademark Office announced their support for many of the provisions included in this bill. We look forward to working with Congress and the Administration as this bill moves through the legislative process, particularly with respect to the standard for construing claims in PTO proceedings and expanding the scope of the PTO’s Covered Business Method review program.  With support on both sides of the aisle, and from both ends of Pennsylvania Avenue, patent litigation reform is well positioned to be signed into law. 

Beckerman is president and CEO of The Internet Association, which represents America’s leading Internet companies and their global community of users.