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29
May
2014

Long Debated and Awaited Patent Troll Bill Fizzles in Senate

by Bill

patent trollPatent trolling, an increasing nuisance in the tech sector in recent years due to the rise of “patent assertion entities,” usually corporate organizations that acquire patents from failed businesses for the sole purpose of threatening litigation from other businesses in order to extract a monetary settlement and/or a licensing fee. Suits from Patent Assertion Entities (PAE), unheard of a decade ago, now account for between 40-60% of all patent suits, and multiple empirical studies have shown that 90% of the time, PAEs lose their suits when the clam is actually adjudicated by a judge of jury.

Some of the largest players in the tech sector, who are often the target of patent infringement suits, are also participants on the other side of the equation, witness the Rockstar Consortium, a patent assertion entity made up of Apple, Microsoft, BlackBerry, Ericsson and Sony among others, who bought approximately 6000 patents from the bankrupt Canadian telecom company Nortel for $4.5 billion in 2011, and has proceeded to bring suits against Google and nearly every manufacturer of Android smartphone devices, as well as bring a separate patent lawsuit against Google, , claiming that Google’s targeted advertising and AdWords system infringes on patents issued to Nortel for an “associative search engine.”

While the big boys fighting each other over patents is nothing new, and of course, Google is quite capable of defending itself, the rise of the “patent assertion entity” has led to significant abuses, as the patent litigation is expensive, and particularly for companies that don’t have the deep pockets and legal teams that the major players can muster, these patent trolling entities, often present their targets with a scenario where fighting even a spurious or tenuous patent infringement claim is more expensive than just settling quickly, and paying off the claimant.

A bill to curtail the abuses that have come to light, included provisions that would have allowed companies to shield their customers from patent suits and required those filing suits, to detail the time of filing, exactly how the defendant had violated a particular patent, and most importantly included a mechanism where the plaintiff would be on the hook to the defendant’s legal costs to defend the suit. In a rare case of bipartisan support, the bill, H.R 3309, dubbed the Innovation Act was supported by both President Obama and a large majority of house Republicans, passing out of the House with a vote of 325 to 91 back in December, and moving on to the Senate’s Judiciary Committee.

Although the bill had widespread support from the tech industry, as well as intellectual property law professors, some of the bills provisions, such as a requirement to identify those who have a financial interest in the case, and the payment of the defense’s legal fees, which was opposed by the pharmaceutical and university lobbies, both holders of many patents, as well as trial lawyers, who were opposed to the plaintiff being responsible for the successful defendant’s legal fees.

Senator Patrick Leahy (D-VT), announced last week that he had taken the bill off the Senate Judiciary Committee’s agenda, stating: “there has been no agreement on how to combat the scourge of patent trolls on our economy without burdening the companies and universities who rely on the patent system every day to protect their inventions. We have heard repeated concerns that the House-passed bill went beyond the scope of addressing patent trolls, and would have severe unintended consequences on legitimate patent holders.”

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