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Congress considers taking a bite out of the patent trolls

Patent trolls — those nefarious entities who clog the courts with frivolous patent lawsuits — are sweating. Patent litigation bills are advancing in both the House and the Senate, and President Obama has vowed to sign reform legislation before leaving office. If the reformers win, the patent trolls will have to scavenge elsewhere, and a broken system that has encouraged litigation rather innovation will finally get fixed.

The House Judiciary Committee has approved the Innovation Act (H.R. 9) by a 24-8 vote. This bipartisan bill would curb abusive patent litigation by requiring plaintiffs to cite specific harms caused by the alleged infringement, shortening the discovery period, and making it easier for interested parties to join the litigation.

{mosads}It would also shift litigation costs to the losing party if the underlying claim were deemed questionable and require disclosure to the United States Patent and Trademark Office of individuals having an interest in the patent. The bill also allows an innocent customer of an alleged infringing manufacturer to avoid getting entangled in protracted and expensive litigation.

Last session, an almost the identical bill passed the full House but died in the Senate, when then-Majority Leader Harry Reid (D-Nev.) torpedoed it after trial lawyers complained that it might cost their firms money.

The Senate is considering a bill similar to the one in the House, the Protecting American Talent and Entrepreneurship Act of 2015 (PATENT) Act. This legislation tackles many of the same issues as the Innovation Act, but does not go quite as far. For example, it does not presumptively award fees and expenses to the winning party. Instead, the trial judge must determine whether the losing party was not “objectively reasonable” before granting a fee award.

It is good news that both Republicans and Democrats agree patent trolling is a danger to our economy.

Trolls take a toll because they obtain seek patents not for the purpose of producing an invention or a technology, but in order to license and enforce dubious patents. They seek broad patents likely to be infringed in a particular industry — especially software and other computer-related products, and older technologies that might still be used in various modern products. Then they start to shake down their prey by sending demand letters and filing legal actions.

While both the Innovation Act and PATENT Act highlight real problems in patent litigation, both bills ignore the central problem: a one-size-fits-all patent system. Right now, the standard period of patent protection is 20 years. This uniform duration treats vastly different industries the same.

It is ludicrous to treat software like pharmaceuticals because their manufacturing and development costs and product lifecycles are so very different. Five years would be a gracious plenty for software. It would allow inventors to reap profits from their work but would effectively deny trolls the use of an older patent to threaten new inventors.

Here’s another idea that is absent from the bills under consideration: patent law could follow the lead of trademark law and require that a plaintiff prove an intention to make use of the patent. This would address the essence of the trolling problem: patent trolls have no intention to use an idea or invention and just want the right to sue.

Under trademark law, a person or entity may file a trademark application based on the intent to use the mark in commerce — that is, to sell products to the public with the mark attached. The rights to a trademark can be lost if the holder abandons or stops using the mark.

Likewise, patent holders who never show any intention of using the technologies covered would lose their right to sue. Trolls would undoubtedly try to devise nominal uses of the technology to meet the use requirement, but the courts could evaluate the alleged use and determine if it represents a good-faith attempt to practice the invention or is merely a minimal effort meant to secure an open courthouse door.

We should applaud the House and Senate for tackling the problem of patent trolls even though neither addresses the one-size-fits-all patent system or dares to consider a use requirement. Let’s hope that the compromise legislation that will likely emerge from Congress will have real teeth to deal with the trolling crisis. 


Watkins is a research fellow at Independent Institute and author of Patent Trolls: Predatory Litigation and the Smothering of Innovation.

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