WASHINGTON (Legal Newsline) - On Thursday, U.S. House Judiciary Chairman Bob Goodlatte, joined by other federal lawmakers, re-introduced the Innovation Act -- the same patent reform legislation that passed in 2013.
Goodlatte, R-Va., was joined by U.S. Reps. Peter DeFazio, D-Ore.; Darrell Issa, R-Calif.; Jerrold Nadler, D-N.Y.; Lamar Smith, R-Texas; Zoe Lofgren, D-Calif.; and Ann Eshoo, D-Calif.
Issa serves as the chairman of the Subcommittee on Courts, Intellectual Property and the Internet; Nadler is the ranking member of the subcommittee; Smith is chairman of the House Committee on Science, Space and Technology; and Eshoo serves on the Energy and Commerce Subcommittee on Communications and Technology.
The bill, H.R. 9, like the one introduced in 2013, builds on the reforms that were made in the America Invents Act and addresses certain abusive practices.
“In recent years, we have seen an exponential increase in the use of weak or poorly granted patents by patent trolls to file numerous patent infringement lawsuits against American businesses with the hope of securing a quick payday,” Goodlatte said in a statement.
“American businesses small and large are being forced to spend valuable resources on litigation rather than on innovating and growing their businesses.”
Goodlatte said the legislation contains “common sense” reforms and makes the patent litigation process more transparent.
He noted the same legislation passed the House by an overwhelming bipartisan vote of 325-91 last Congress.
“Thomas Jefferson wrote that it is ‘part of the American character’ to ‘invent and execute; to find means within ourselves, and not to lean on others,’” Issa said in a statement.
“But increasingly, Americans find innovation obstructed, with attempts to enter the marketplace frequently shut down by well-funded patent trolls who exploit loopholes in our patent system, bullying inventors and small businesses with frivolous lawsuits to the tune of $29 billion each year.”
Issa said the bill aims to restore the American patent system to its original purpose: “catalyzing, rather than curbing, a new generation of great American ideas.”
H.R. 9 requires:
- Plaintiffs to disclose who the owner of a patent is before litigation, so that it is clear who the real parties behind the litigation are. Goodlatte says this will ensure that patent trolls cannot hide behind a web of shell companies to avoid accountability for bringing frivolous litigation;
- Plaintiffs to actually explain why they are suing a company in their court pleadings;
- Courts to make decisions about whether a patent is valid or invalid early in the litigation process so that patent trolls cannot drag patent cases on for years based on invalid claims. This prevents invalid patents from being used to extort money from retailers and end users;
- The U.S. Judicial Conference to make rules to reduce the costs of discovery in patent litigation so that patent trolls cannot use the high costs of discovery to extort money from small businesses and entrepreneurs; and
- The U.S. Patent and Trademark Office to provide educational resources for those facing abusive patent litigation claims.
Also, when parties bring lawsuits or claims that have no reasonable basis in law and fact, the Innovation Act requires judges to award attorneys’ fees to the victims of the frivolous lawsuit.
The bill allows judges to waive the award of attorneys’ fees in special circumstances. This provision applies to both plaintiffs and defendants who file frivolous claims.
The measure also creates a voluntary process for small businesses to postpone expensive patent lawsuits while their larger sellers complete similar patent lawsuits against the same plaintiffs, to protect customers who simply bought the product off-the-shelf.
A wide range of stakeholders have come out in support of the legislation, including companies like Amazon, Apple, Google, Microsoft and Ford Motor Company, and groups such as the American Banking Association, American Consumer Institute and Motion Picture Association of America.
However, there are those who believe the bill could end up doing more harm than good.
Adam Mossoff, a law professor at George Mason University and founder and senior scholar at the Center for the Protection of Intellectual Property, said Thursday the legislation “weakens” and “devalues” the patents of inventors.
“It broadly revises the entire American patent system by creating unprecedented hurdles for all owners of patented innovation who seek redress in court against infringers of their property rights,” he explained.
“Thus, this bill will directly hurt the very people and institutions who most rely on patents to secure their new innovation: the individual inventors, universities, startups, and small businesses across the country who are the drivers of American innovation.”
Mossoff said Congress should tread very carefully before making such “massive” changes to the patent system.
“Instead, changes should be incremental and targeted, like the TROL Act of 2014, which was never even voted on last year,” he said, referring to the Targeting Rogue and Opaque Letters Act.
“Unfortunately, the Innovation Act does not tread carefully. It goes far beyond what is necessary to achieve the stated goal of addressing abusive patent litigation.”
He continued, “There are clear winners and losers here, and the losers are the American innovators that form the bedrock of the innovation economy.”
The National Venture Capital Association issued its own statement Thursday in response to the bill’s introduction:
“We appreciate Chairman Goodlatte and his colleagues for reintroducing the Innovation Act and believe it includes several helpful provisions to curb abuses in patent litigation. However, as was the case when the bill passed the House during the last Congress, we have concerns with certain provisions in the bill which we believe would make patent enforcement so risky and expensive that it could dry up innovation in certain sectors,” President and CEO Bobby Franklin said.
“We are particularly concerned that the bill’s fee shifting provision would have a devastating impact on small startups trying to enforce their patents against larger incumbents and on small companies facing legal challenges by larger, well-financed competitors.”
He added, “Although startups vary in the extent to which they rely on patents, many innovative companies require strong patent protections to prevent others from copying their innovative ideas and will not survive otherwise.
“Should Congress move forward with patent reform legislation, we believe it’s critical that lawmakers balance the need for patent litigation reform with the needs of those startups that depend on strong patent protections to ensure their survival.”
Franklin said Congress also needs to take into consideration recent developments in the federal courts, as well actions taken by the PTO and Federal Trade Commission, which have already reduced the number of new patent cases.
Venture capitalists are, in particular, vital to the patent system because they fund many of the country’s top innovators.
From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.