Legislation aimed at making it more difficult for “patent trolls” to file unfair patent-infringement lawsuits is making its way through Congress. The Innovation Act, approved in House Judiciary Committee and currently before the full House, would require that patent trolls clearly explain their claims; make patent litigation more efficient; stop discovery abuses; and make the trolls pay the costs of meritless litigation. A similar bill, The Protecting American Talent and Entrepreneurship (PATENT) Act, is making its way through the Senate, and calls for heightened pleading and transparency requirements, including specific information about which patents and claims are being infringed, what product is infringing, and how. Both pieces of legislation are designed to promote and protect the innovation economy from frivolous lawsuits.
Both the Innovation and PATENT Act are responses to recent, increased complaints -- mainly from technology vendors -- of growing numbers of licensing demand letters and infringement lawsuits brought on by patent-holding firms. In many cases, the demand letters and lawsuits target small-business customers using the technology (e.g. Wi-Fi or card processing technology), not the vendors making the technology. Claims to the patent are often vague and highly questionable.
Just a casual glance at patent litigation statistics paints a bleak picture: in 1980, roughly 800 patent cases commenced; in 2012, over 5,000 (www.uscourts.gov). What explains this sharp increase? In part, the America Invents Act (2011) prohibits suing numerous defendants in a single case (separate, individual cases must be filed). Additionally, the increase can partly be explained by the fact that more patents are being issued. But those things alone cannot explain why the number of patent infringement cases has literally skyrocketed. Most of today’s patent infringement lawsuits never see the inside of a courtroom but are instead settled out of court for huge sums of money. One has to wonder if extortion by patent trolls is at play.
Technology trade groups are singing the praises of these two pieces of legislation but they are not without opposition. The Association of American Universities, the Medical Device Manufacturers Association, and the National Venture Capital Association claim the bills will “dramatically weaken intellectual property rights, harm U.S. competitiveness, and undermine a patent system that has been critical to incentivizing innovation and job creation in our country for more than 200 years,” those groups and three others said in a statement recently. Congress is listening to these criticisms and, despite the momentum behind patent reform, it remains unclear when the full House and Senate will vote on their respective patent reform bills. Last Congress, a similar version of the Innovation Act passed the House of Representatives but stalled in the Senate after then-Majority Leader Harry Reid (D-NV) stated he would not bring any patent reform bill to the floor given opposition from trial lawyers. The stakes are high on both sides of this argument. You can expect some good fights to emerge in the coming months as these two bills are considered.