US Congress Reconsiders Anti-Patent Troll Law 19/02/2015 by Steven Seidenberg for Intellectual Property Watch 1 Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Steven Seidenberg is a freelance reporter and attorney who has been covering intellectual property developments in the US for more than 20 years. He is based in the greater New York City area and may be reached at email@example.com. It happened again on 5 February. The powerful chair of the House Judiciary Committee, Rep. Bob Goodlatte (R-Virginia) introduced the Innovation Act for a second time. This bill, aimed at hurting patent trolls by making a plethora of changes in US patent law, easily passed the House of Representatives last term. It subsequently bogged down in a Democrat-controlled Senate. However, now that the GOP controls both wings of Congress, many observers predict the bill will have soon become law. Other experts aren’t so sure, noting that the Innovation Act is drawing some powerful opposition – and not just from patent trolls. If enacted in its current form, the Innovation Act [pdf] would create a “sea change” in patent litigation, according to Marilyn Neiman, a member of the Cozen O’Connor law firm. She added, “The legislation will be effective in curbing the excesses of patent troll litigation, but it will have unintended consequences for normal patent litigation. It will add expense, motion practice and uncertainty to those cases. It may even cause some smaller firms to reconsider whether it is worthwhile to obtain patents.” One of the bill’s biggest changes would be to exclude patent suits from the so-called “American Rule.” That rule requires each side in a lawsuit to pay its own legal fees unless there are exceptional circumstances. This fee-shifting rule encourages patent trolls to bring dubious infringement claims against hapless businesses. Even if a business is sure it is not infringing any valid patent owned by the troll, fighting an infringement suit in court typically costs millions of dollars in legal fees. It is often far cheaper, faster, and less risky to simply pay off the troll. The American Rule thus gives businesses a strong financial incentive to accede to unjustified demands brought by patent trolls. The Innovation Act would remove this incentive. It would, for all patent infringement suits, replace the American Rule with the so-called “English Rule,” which is widely used in legal systems around the world. The bill would require the losing party in an infringement suit to pay all the winner’s reasonable legal costs – unless the loser’s legal position was “reasonably justified” or special circumstances (such as severe financial hardship) make it unjust for the loser to pay. This new fee-shifting rule would be a big blow against patent trolls, also known as non-practicing entities or NPEs. “This rule may ruin the economics of NPEs,” said Dale Lazar, a partner in the DLA Piper law firm. However, the new fee-shifting rule could create problems for more than just patent trolls. “It affects all parties bringing patent infringement suits,” said Lazar. “People will think twice before bringing patent litigation, because the stakes have gotten higher. Patent owners will want to be far more sure of themselves before filing suit, so they will do more pre-suit investigations [increasing up-front costs]. And in the end, there may be less patent litigation.” Complaining about Complaints The Innovation Act goes after patent trolls in various other ways, such as by increasing the specificity needed for a patent infringement complaint. Currently, patent trolls often make vague and conclusory allegations of infringement, without spending the time or money needed to determine whether a target truly has infringed. Such behavior is endorsed by the federal courts’ illustrative Civil Form 18 [rtf], which indicates that a patent infringement complaint need provide little more than a citation to the allegedly infringed patent and an assertion that this patent is infringed by the defendant’s product/service. This allows patent trolls to easily make a large number of scattershot accusations of infringement, which often end with financial payments to the trolls (because it is usually cheaper for targets to settle such nuisance suits than to fight them). The Innovation Act would end this lucrative troll behavior. The Act orders the Supreme Court to eliminate Form 18. It also requires patent infringement complaints to state specifically what aspects of an opponent’s product/service are infringing and to detail how the product/service infringes the relevant patent(s). If such information is not “readily accessible” to the patentee, the patentee must provide instead a general description of the infringement, explain why more detailed information was not readily accessible, and detail the patentee’s efforts to obtain the missing information. These tougher pleading requirements are “tremendously important for litigation reform,” said Prof. Robin Feldman, Director of The Institute for Innovation Law at University of California, Hastings Law School. “Under the current system, it is far too easy to use the threat of a patent lawsuit to extract licensing fees or a settlement. Heightened pleading filing requirements could make that behavior less lucrative and attractive, imposing some much needed discipline on the patent system.” This discipline, however, will come at a cost. While heightened pleading requirements may discourage patent trolls from bringing dubious patent suits, the tougher standards could increase the time and expense of patent suits that are filed. Drafting complaints would become more costly. Moreover, the new standards “would lead to more motion practice to dismiss complaints. This will add a level of expense to litigation – for increased motion practice – that wasn’t there before,” said Neiman. Battle on Capitol Hill The Innovation Act has strong support in Congress, but its prospects of becoming law are uncertain. “It should pass the House [of Representatives] easily, given the large margin by which it passed in the last Congress. It will have broad support in the Senate, but it is difficult to predict whether it will have enough support to overcome a filibuster,” said Jonathan Band, an attorney who lobbies Congress on IP and internet issues. Some experts are even more skeptical of the bill’s chances. “Last time, this bill went through the House so fast, there was no time for opposition to develop. Now, the situation is different,” said Lazar. “Pharmaceutical companies, biotech firms, and [research] universities are opposing this bill. And in the past, they have been effective in blocking bills they have opposed.” Opponents of the Innovation Act believe it weakens patent rights, and they want to keep these rights as strong as possible – for good business reasons. In the pharmaceutical and biotech industries, a best-selling product or service is often based on a single patent. So protecting that patent right is crucial. Anything that makes patent enforcement more difficult puts billions of dollars of revenue at risk. The bill is strongly supported by technology and internet companies, again for business reasons. They have borne the brunt of patent troll attacks and are eager to stop them. These firms, moreover, are not particularly worried about weakening patent rights. Tech and internet firms operate amidst a confusing welter of patents, providing products and services that often involve thousands of patents owned by many different patentees. These companies obtain patents largely in self-defense, to protect themselves from allegations of infringement and to use as counterclaims if they are sued for infringement. Weakening patents would thus allow tech and internet firms to focus more on innovation and less on fighting over patent rights. In short, the Innovation Act, like so many other patent reform proposals, comes down to a clash between tech firms and pharma/biotech companies. Such clashes typically produce legislative gridlock, but because anti-patent troll sentiment is so strong on Capitol Hill, legislators may be able to forge some sort of compromise. “I expect Congress to pass a patent reform bill this term,” said Feldman. “The question is what will be in it.” Image Credits: Diliff – Wikimedia Commons Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related Steven Seidenberg may be reached at firstname.lastname@example.org."US Congress Reconsiders Anti-Patent Troll Law" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.