Releasing the chokehold on innovation

The United States Congress is on the cusp of passing legislation on an issue that impacts virtually all industries from hospitality to retail to high tech. Reforming our patent system will not only address the abuses of the U.S. patent system by certain non-practicing patent assertion entities, also known as “patent trolls,” but remove the threat of unnecessary patent litigation that has plagued businesses of all sizes for far too long.  

After the House of Representatives moved swiftly last year to pass strong bipartisan legislation, the Senate now is on the cusp of a bipartisan agreement of their own version of patent reform. Congress has the opportunity right now to make strong procedural and discovery reforms that would stop the abusive litigation tactics of patent trolls.

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As one of the largest patent-holding corporations headquartered in Alabama, ADTRAN has seen firsthand how the practice of “patent trolling” is stifling innovation. The patent troll business model involves aggressively pursuing litigation against businesses like ours for patent infringement. The majority of patent troll claims are groundless, but force settlements by strategically demanding money at or below the cost of dealing with burdensome discovery and protracted litigation. There is typically no recourse for victim businesses that face these meritless infringement suits because there is a very high legal standard the defendant must meet to obtain an attorney fee award. Further, a counterclaim for monetary damages usually is not feasible because the “troll” does not have a real business.

As a result, patent trolling serves as an impediment to the productivity, ingenuity and entrepreneurial spirit of the U.S. economy. Innovative companies, like ADTRAN, have to pull senior design scientists away from product R&D to research patent troll claims, causing them to spend countless hours on litigation instead of innovation. In addition, many companies undoubtedly are forced to pass the patent troll costs to American consumers through higher prices on products from groceries to hotel rooms to smart phones.

To stop this drain on our economy, our nation’s legislators are working toward a bipartisan agreement that will require compromise with those who prefer the status quo. It is of critical importance however, that patent reform legislation not compromise on providing real relief to the discovery and litigation abuses that we face. For instance, the legislation must include key reforms such as fee shifting and heightened pleading standards.

Done correctly, fee-shifting reform can help deter nuisance patent lawsuits. Today, the financial burden is placed squarely on the victim businesses that have to defend against patent-troll claims, thus creating enormous pressure to settle meritless lawsuits. Fee shifting can help alter the economics of assertion by patent trolls, but we must also ensure that the rights of legitimate patent owners are protected.

In addition, the requirements to bring a viable claim for patent infringement and get past the first stage of the case, known as pleading standards, must also be addressed. Pleading standards in patent cases should be heightened so that a patent plaintiff has to present enough factual detail for its claim to be “plausible,” just like the U.S. Supreme Court has required in many other types of cases.

All innovative American industries rely on a stable and predictable system for protecting intellectual property rights. The current patent reform legislation is on the right track to mend our broken patent system; however, we cannot allow critical elements of this legislation to be removed from the bipartisan bill.

Efforts to end abuse of the patent system should be applauded, and we strongly encourage our lawmakers to address the crippling impact that patent trolls are having on innovation in America. As we get down to the final pen strokes of bipartisan concessions and compromise, we encourage our legislators not to allow critical aspects of meaningful patent reform, such as fee shifting and heightened pleading standards, to be extracted in the final hours of negotiations.

Stanton is the chairman and chief executive officer of ADTRAN, Inc., a manufacturer of telecommunications network equipment and internetworking products. Its headquarters are located in Huntsville, Alabama.

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