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House passes measure aimed at curbing patent trolls

By Jessica M. Karmasek | Dec 9, 2013

WASHINGTON (Legal Newsline) -- The U.S. House of Representatives last week approved a measure aimed at curbing abusive patent litigation.

Lawmakers approved House of Representatives Bill 3309, known as the Innovation Act, in an overwhelming bipartisan vote of 325-91 Thursday.

U.S. Rep. Bob Goodlatte, R-Va., House Judiciary Committee chairman and chief sponsor of the legislation, applauded the bill's passage.

"In recent years, we have seen an exponential increase in the use of weak or poorly-granted patents by so-called patent trolls to file numerous patent infringement lawsuits against American businesses with the hopes of securing a quick payday," he said in a statement Thursday. "Everyone from independent inventors, to start-ups, to mid- and large-sized businesses face this constant threat."

Patent trolls are companies that purchase groups of patents without an intent to market or develop a product. The companies then target other businesses with lawsuits alleging infringement of the patents they bought.

Goodlatte said the bill's enactment is central to the country's competitiveness, job creation and the nation's future economic security.

"The bipartisan legislation takes meaningful steps to address the abusive practices that have damaged our patent system and resulted in significant economic harm to our nation," he said.

"I am encouraged by the overwhelming support the Innovation Act received in the House and I look forward to working with the Senate to see that patent litigation reform legislation is signed into law."

The legislation 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.

Some states are already addressing the issue.

In May, Vermont Gov. Peter Shumlin signed into law a measure designed to protect companies in his state from patent trolling.

Under Vermont's new law -- the first of its kind in the nation -- a court can consider as evidence a letter that does not provide the patent number, the name and address of the patent owner and/or assignee, or an explanation of how the target company's products or services infringed on the patent.

The court also can consider if the letter demands payment of a license fee or a response in an "unreasonably short" period of time.

The law also allows the state attorney general to conduct civil investigations and bring civil lawsuits against violators, and the court may award relief or damages.

A Senate committee hearing on the Innovation Act has been set for Dec. 17.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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