Patent trolls secure patents and use them aggressively to leverage monetary settlements from unsuspecting businesses while never creating or selling anything themselves. That is, their contribution to the nation’s GDP is zero. The patent troll throws a wide net making broad claims of infringement based on sketchy or limited substance. They are single-handedly killing innovation in the United States and cost small and medium-sized $25 to $30 billion annually.
Rep. Bob Goodlatte (R-VA) is the chairman of the House Judiciary Committee and he and his bi-partisan coalition crafted the Innovation Act which is bill (HR 3309) to thwart the legal playbook of the patent troll. A troll’s greatest leverage is the cost of litigation as a threat to demand and extract a quick settlement from the defendant. Usually they start with their smaller targets and settle for pennies on the dollar. There is a two-fold strategy with this method: 1) begin the validation process with a settlement, and 2) use the settlement to fund on-going litigation expenses.
The bill is designed to curtail patent troll lawsuits by making a number of changes to how patents are litigated. Below are the key components of the Innovation Act from Rep. Goodlatte’s press release dated November 20, 2013:
Key Components of the Innovation Act: (Text from Rep. Goodlatte’s press release).
• Target Abusive Patent Litigation: The bill targets abusive patent litigation behavior and not specific entities with the goal of preventing individuals from taking advantage of gaps in the system to engage in litigation extortion. It does not attempt to eliminate valid patent litigation.
• Protects the Patent System: The patent system is integral to U.S. competitiveness. This legislation does not diminish or devalue patent rights in any way.
• Increases Transparency: This legislation includes heightened pleading standards and transparency provisions. Requiring parties to do a bit of due diligence up front before filing an infringement suit is just plain common sense. It not only reduces litigation expenses, but saves the court’s time and resources. Greater transparency and information is a good thing and it makes our patent system stronger.
• Modernizes Fee Shifting: The legislation includes a modernized version of Section 285 fee shifting that is fair, clear and will ensure consistent judicial determinations.
• Provides Greater Clarity: The legislation provides for more clarity surrounding initial discovery, case management, joinder and the common law doctrine of customer stays. The bill works hand-in-hand with the procedures and practices of the Judicial Conference and the courts.
• Small Business Education: The bill provides for small business education and outreach by the U.S. Patent and Trademark Office.
HR 3309 has the normal legislative “trip.” It first needs to make its way out of Committee to the House floor for a vote. Assuming the House supports the bill, it still needs to be introduced by Harry Reid (Senate Majority Leader) and voted on by the Senate before it gets to the President’s desk. This all seems a bit daunting given the recent ineptness of our politicians to do their jobs.
I do believe patent trolls are in the apolitical “bucket” so maybe this proposed legislation can bring parties together to upgrade the legal environment when it comes to this extortionist behavior.