Protect innovation in America

Our country’s patent system provides incentives to invent, invest in, and disclose new technology. And while many Americans may think our patent system only impacts large corporations, the fact is that entities called patent trolls are utilizing our current patent system to prey on unsuspecting victims.

How do they do it? Take for example the small coffee shop down the street that provides wifi service to its customers. They’re using a technology exactly how it’s intended to be used.

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But thousands of miles away, a patent troll purchases broad patents previously issued to someone else. Next, the patent troll sends vague and hostile demand letters to the coffee shop and thousands of similar businesses accusing them of infringing their questionable patents. The sheer volume of these threats, and often the lack of the target companies’ resources to fight in court, enriches the trolls who start the cycle all over again.

Patent trolls are often shell companies that do not make or sell anything – they just prey on those individuals and businesses who have, and they threaten the entire patent system.

But Congress is taking steps to end the patent troll’s cycle once and for all, and to protect innovation in America.

I recently introduced the Patent Litigation Integrity Act to stop patent trolls’ drain on our economy. This week, the Senate Judiciary Committee will begin the process of advancing patent trolls legislation, and just recently the House of Representatives passed a separate bill of their own. 

Putting a stop to this dangerous gambit requires hitting patent trolls where it matters most: their bottom line. The best strategy is to shift the costs and expenses of litigation to a prevailing party and give defendants the option to seek a bond to cover those costs and expenses. The legislation I’m introducing does both of these things.  

Why is this important? Because fee shifting creates a critical disincentive for improper, abusive, or meritless litigation. Many trolls target small businesses that agree to settle simply because they don’t have the resources for a full court fight. Those that do fight back are left with hefty legal bills; it costs millions to litigate these cases through trial. Money that could be used for innovation, investment, and job creation – what America’s founders envisioned for the patent system – is instead lining the trolls’ pockets.

Judges do have the power to shift fees, but that was done in only 10 out of nearly 3,000 patent cases files in 2011, primarily because complicated issues and technology make it difficult for judges to find that a case is “exceptional,” as the law now requires.  A more appropriate legal standard would make fee-shifting a more reasonable option in patent cases and do more to address the threat of patent trolls.

But since most patent trolls are shell companies with few or no assets, any court-ordered award still leaves defendants holding the bag. Giving defendants the option to seek a bond to cover litigation and other expenses from such a judgment-proof plaintiff would do two things. It would guarantee that a defendant that wins their case can cover its costs and, more importantly, it would discourage frivolous lawsuits by creating a real financial risk for patent trolls.

In my view, fee shifting without the option to seek a bond is like writing a check on an empty account. You’re purporting to convey something that isn’t there. Fee shifting coupled with bonding would stop patent trolls from litigating-and-dashing.

America’s ingenuity fuels our economy. Through common-sense reforms to our patent laws, we can ensure that resources are used to innovate and create jobs – not litigate frivolous claims.

Hatch is the senior senator from Utah, serving since 1977.  He is a current member and former chairman of the Senate Judiciary Committee and current chairman of the Senate Republican High-Tech Task Force.