Bill would force 'patent trolls' to pay legal costs

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Numerous technology companies have complained in recent years about being threatened with lawsuits by firms that have no plans to create any products. The so-called patent trolls buy-up cheap patents, find companies using similar technologies and then threaten to bring them to court for infringement unless they agree to an expensive settlement.

Many companies agree to settle because the cost of fighting the charges in court would be so high.

"Patent trolls add no economic benefit to our nation," Chaffetz said at a press conference on Capitol Hill. "They have captured a part of the system. They are exploiting it for their own personal financial gain." 

DeFazio and Chaffetz pushed the SHIELD Act last year, but the new version of the bill would apply to all industries, instead of just computer and software firms.

"This most recent series of troll suits is actually at the retail level," DeFazio said. He explained that businesses have received threats of patent lawsuits for using standard, off-the-shelf scanners in their offices. A firm is claiming that it has a patent on the technique of scanning a document and attaching it to an email, demanding that businesses pay $20,000 or face litigation.

"The burgeoning nature of this unproductive practice needs to be addressed," DeFazio said, noting that an academic study estimated that businesses paid out $29 billion to patent trolls in 2011.

The SHIELD Act received praise from lobbying groups that represent industries that have been plagued by frivolous patent litigation.

“This legislation will go a long way toward deterring opportunistic litigation by patent-assertion entities,” said Robert Holleyman, CEO of the software group BSA. “Innovative technology companies make huge investments in research, product development and general operations. Too many plaintiffs have no such market risks. Their only operating cost is litigating, which imposes disproportional burdens on their targets. The SHIELD Act would recalibrate that equation.”

Gary Shapiro, CEO of the Consumer Electronics Association, said that forcing losing litigants to pay for the legal costs is "a helpful and sensible first step to strike back at patent trolls."

“If we want to build American businesses and create jobs, we need to change the law that encourages baseless but disruptive legal threats for American businesses," Shapiro said.

The Electronic Frontier Foundation, a digital rights group, and a coalition of investors and entrepreneurs sent a letter on Wednesday to the House Judiciary Committee, urging the panel to investigate the problem of patent trolls

"Congress needs to make measures like the SHIELD Act a priority in 2013 so that innovative companies and entrepreneurs can continue to grow without the threats posed by non-practicing entities," they wrote.

In addition to EFF, the letter was signed by Dallas Mavericks owner Mark Cuban and Reddit co-founder Alexis Ohanian.

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) released a statement on Wednesday laying out his agenda for the new Congress. Among other priorities, he promised "to focus on reforms to discourage frivolous patent litigation and keep U.S. patent laws up to date." 

"The strength of our economy relies on our ability to protect new inventions and build on innovation in the 21st century," Goodlatte said.

Alexander Poltorak, CEO of the General Patent Corporation, a patent enforcement group, warned last year that the SHIELD Act would be a "gift to infringers."

In an op-ed in The Hill, he claimed that the legal system already protects against frivolous lawsuits and that the legislation "would intimidate patent owners whose [intellectual property] rights are routinely infringed by corporate bullies." 

—Updated at 12:45 p.m.