House to crack down on 'patent trolls'

The House in December is expected to pass legislation aimed at discouraging abusive patent litigation, which supporters say would help free companies from expensive legal actions brought by "patent trolls."

The House will consider the Innovation Act, H.R. 3309, which sponsor Bob Goodlatte (R-Va.) says is needed to create higher hurdles to litigation that costs companies time and resources.

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"Abusive patent litigation is having a significant impact on American innovation, needlessly costing small and large businesses alike tens of billions of dollars every year — resources that could have been used to create innovative new products and services," he said last week.

"The Innovation Act contains needed reforms to address the issues that businesses of all sizes and industries face from patent troll-type behavior, while keeping in mind several key principles, including targeting abusive behavior rather than specific entities, preserving valid patent enforcement tools, preserving patent property rights, promoting invention by independents and small businesses, and strengthening the overall patent system."

The term "patent troll" is a derogatory term used to describe entities that don't produce a product but seek to enforce patent rights against other companies that produce goods. These entities can obtain patents through bankruptcies or other restructuring events, and may also base their legal challenges on broad patents that cover very basic ideas.

Goodlatte's bill would create layers of new requirements that plaintiffs would have to meet when filing a civil action that alleges patent infringement. Part of the goal is to weed out the frivolous cases by setting higher hurdles that only serious cases can meet.

For example, plaintiffs would have to include the details of each patent that has allegedly been violated, and information about the identify of the patent holders covered by the suit. It would limit discovery at the early phase of the case in order to protect defendants.

It would also seek to discourage suits by requiring courts to award reasonable fees and other expenses to parties that prevail in court. If the non-prevailing party cannot pay fees, the court would be allowed under the bill to make these fees recoverable against any interested parties that have joined the action.

The bill is co-sponsored by several Democrats, and was approved by the House Judiciary Committee in a 33-5 vote — both are signs the legislation will easily pass the House.

But there has been some vocal opposition to the bill already, including from Rep. Dana Rohrabacher (R-Calif.). He has spoken on the House floor three times in the last few weeks about the importance of defending patents in court, and said the bill would make it harder for smaller patent holders to defend their rights against large companies.

He charged that even the term "patent troll" is a derogatory term that was likely devised by large companies to help push the legislation through.

" 'Patent troll' is being used as a word, and they probably hired a very sophisticated public relations company to come up with that 'patent troll' term ... to fundamentally change our patent system, again, in order to diminish and damage the rights of small inventors," he said in late October. "They can't say that that is their purpose, so they have to come up with a scary word like 'patent troll.' "

Rohrabacher said Goodlatte's bill would essentially change the U.S. system of patent litigation to a "loser pays" system, which makes it harder for small patent holders to enforce their legitimate rights.

He said "patent trolls" are just companies seeking to protect their own patents, which are just as legitimate under the law as other patents.