Industry Groups See Progress in ‘Patent Troll’ Legislation, But More Work Needed

The House Judiciary and Senate Judiciary committees ended May with four separate bills under consideration that would address a series of issues related to abusive patent litigation that the America Invents Act (AIA) was not able to address. A fifth bill is waiting in the wings. Officials from industry groups that have been pushing for the reforms told us the current versions of the bills offer great ideas and starting points for discussion, but also believe a definitive solution will require more work.

Three of the four patent reform bills under consideration were introduced last month. They joined the Saving High-tech Innovators from Egregious Legal Disputes Act (HR-845), which Reps. Jason Chaffetz, R-Utah, and Peter DeFazio, D-Ore., introduced in late February (CD Feb 28 p16). The Patent Abuse Reduction Act (S-1013) would require a plaintiff who brings a patent lawsuit to disclose more detailed information to the defendant on the substance of their claim, and their identities of the patent’s owner and any real parties in interest. Like the SHIELD Act, it would shift responsibility for litigation costs to the party that loses the case, and would require any party to pay for discovery beyond core materials, which the bill said would “bring fairness” to the discovery process (CD May 23 p11).

The End Anonymous Patents Act (HR-2024) would require patent owners to provide their identities and the identities of “any real party in interest in the patent” to the U.S. Patent and Trademark Office when they register the patent with PTO, pay maintenance fees and transfer patent ownership. The bill would also limit the amount of damages a patent enforcement entity could seek to those that occur after the date at which the patent owner meets the bill’s identification requirements (CD May 20 p7). The Patent Quality Improvement Act (S-866) would expand and make permanent a PTO post-patent grant review process that allows a petitioner to request a PTO review of a covered business method patent. AIA established the review process as a temporary program that covered patents related to financial products and services. The Patent Quality Improvement Act would expand the program to include more technology start-up companies (CD May 7 p9).

House Judiciary Committee Chairman Bob Goodlatte, R-Va., released the draft version of a fifth bill just before the Memorial Day recess. The bill, like the Patent Abuse Reduction Act, would require the plaintiff in a patent infringement lawsuit to provide detailed information on the claims in the suit and information on the identities of the patent’s owner and any real parties in interest. It would require each party to be responsible for its own core evidence discovery costs, but require any party that requests additional discovery to pay the other party’s costs of meeting the request. Goodlatte’s bill includes a “loser pays” provision for litigation costs that is similar, but not identical, to the provisions in the SHIELD Act and the Patent Abuse Reduction Act. Goodlatte’s bill would also amend AIA by making improvements to PTO’s post-patent grant proceeding processes and close loopholes that let a patent owner obtain multiple patents on essentially the same invention (http://1.usa.gov/15kFUm9). Goodlatte’s bill has the support of Senate Judiciary Committee Chairman Patrick Leahy, D-Vt. Leahy’s office said he intends to introduce similar legislation soon.

When “you add them all up, they are pretty comprehensive in terms of addressing the issue,” said Keith Kupferschmid, Software & Information Industry Association senior vice president-intellectual property policy and enforcement. “The Goodlatte discussion draft in particular, I think, is a very good starting point for the discussion, especially in terms of fee shifting.” SIIA, still reviewing the bills, doesn’t believe a “one silver bullet approach” will effectively address the problems posed by “patent trolls,” Kupferschmid said. “I don’t think there’s one thing that’s going to fix the patent troll problem,” he said. “There’s a lot of different approaches that are necessary. ... The challenge is really not to just come up with one fix, but rather to look at the landscape of the issues and how patent trolls take advantage of these loopholes, and see where we can fill in these gaps."

Each of the current bills includes “attractive proposals that we should seriously consider, but I don’t want to point to any one particular bill and say this is the silver bullet,” said Matt Schruers, Computer & Communications Industry Association vice president-law and policy. “I don’t think anyone has put forward bad ideas, but no one bill is necessarily complete.” Further discussion will ensure that Congress is able to produce a “broad omnibus solution,” he said.

The bills should be combined and amended to get a “truly comprehensive set of reforms,” said Tim Sparapani, Application Developers Alliance vice president-law, policy and government. The Patent Quality Improvement Act “is a great way of giving people the right to invalidate business method patents that should never have been granted,” he said. The Goodlatte discussion draft and other bills include important language that would reform the discovery process, Sparapani said. “There are lots of good starts here, but let’s get them all together."

The current set of bills are promising, but “do not go far enough,” said Adi Kamdar, an Electronic Frontier Foundation staff activist working on patent reform issues. While the Patent Quality Improvement Act’s expansion of the PTO’s post-patent grant review program “is a great step, it doesn’t expand its provisions to third parties, who are often the biggest check when it comes to taking down bad patents,” he said. The End Anonymous Patents Act “addresses a huge problem with the patent system -- we don’t know who owns what patent -- but it only addresses that one issue,” Kamdar said. The Patent Abuse Reduction Act and Goodlatte’s draft “take huge steps towards crippling the patent troll model ... but we want to see more,” Kamdar said. “We'd love to see this energy channeled toward the higher level question of the patentability of software."

Fee-shifting will likely be a key component to any effective set of reforms, Kupferschmid said. “From our standpoint, if a bill does not include some sort of effective cost-shifting provision, we would not think that bill is adequate.” The early introduction of the SHIELD Act “has produced a very extensive, illuminating conversation” on that issue, Schruers said. “There’s a lot of interest in ensuring the costs of discovery are properly distributed. All of these bills are trying to properly allocate those costs."

Recent congressional hearings on patent litigation abuse have clearly shifted the debate beyond the question of whether legislation is needed to fix the problem, Kupferschmid said. “We're about a month into the second stage, figuring out what we need to do here to fix the problem,” he said. “In terms of whether it will happen, it’s fairly clear at this point. There are too many interested parties now that see this as a necessity.”