Removal of Patent Troll Bill

by Winstead PC
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Last Wednesday, May 21, the Senate Judiciary Committee removed a bill from their agenda that sought to protect companies against “patent trolls,” which are companies whose main business is to gather patents, threaten infringement lawsuits and then offer to settle for less than the cost of defending the suit.  The effort to write this new bill came two years after the America Invents Act (“AIA”) was signed into law in 2011 by President Obama.  The AIA was a sweeping overhaul of the patent system that attempted to reduce lawsuits by patent trolls; however, it had the opposite result and caused the number of lawsuits to soar.[1]

Similarly, the bill sought to reduce patent litigation by: (1) awarding attorneys’ fees to defendants if a judge rules that there was no reasonable basis for a patent infringement lawsuit; (2) limiting the scope of preliminary discovery; (3) requiring more detailed information regarding patent ownership; and (4) allowing a manufacturer to step in to defend a customer accused of infringement.  A very similar legislation was passed overwhelmingly by the House of Representatives in December.[2]

In the Senate, however, the bill was shelved due to the failure to reach a compromise on a provision that opponents feared would inadvertently punish legitimate inventors, such as universities, small businesses, and medical and drug companies.  That provision would have required a patent plaintiff to post a bond to cover the potential payment of the opposing side’s legal fees.  “We have heard repeated concerns that the House-passed bill went beyond the scope of addressing patent trolls, and would have severe unintended consequences on legitimate patent holders who employ thousands of Americans,” said Senator Patrick Leahy, chairman of the Senate Judiciary Committee.

In an effort to gain support, Senator Leahy had been working with other senators to address these concerns and also delayed committee consideration of the bill in hopes of reaching a compromise.  However, the bill failed to gain the broad bipartisan support needed to get patent-reform legislation passed by the Senate.  The bill was ultimately dropped when Senate Majority Leader Harry Reid said he would not bring the bill up for a vote due to objections from the pharmaceutical industry and trial lawyers.[3]  “Because there is not sufficient support behind any comprehensive deal, I am taking the patent bill off the Senate Judiciary Committee agenda,” Senator Leahy said.

Retail and technology companies, the main supporters of the bill and the most frequent targets of patent infringement lawsuits, expressed disappointment over the death of the bill.  “Patent trolls and their special interest allies are the only winners today,” said Matt Tanielian, executive director of the Coalition for Patent Fairness.  “Let’s hope this setback marks the last victory for patent trolls,” said David French, senior vice president for government relations of the National Retail Federation.  French also stated that the federation was “deeply disappointed that groups representing the status quo have continued to stall and stymie attempts at effective patent reform.”

Critics of the bill said they remain open to a compromise that will tackle the patent troll issue without hurting legitimate inventors.  “This shows pretty clearly that addressing these issues is more complicated than many may have thought,” said Q. Todd Dickinson, director of the American Intellectual Property Law Association.  “The key has always been to find the right balance: deal with truly abusive behavior, while making sure that real innovators can enforce their rights,” Dickinson said.

Senator Leahy stated that although legislation is needed to “address the problem of patent trolls,” there was not enough agreement on how to approach the problem without “burdening the companies and universities who rely on the patent system every day to protect their inventions.”  Nevertheless, Senator Leahy vowed to bring the bill up again if “stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls.”


[1]  Ron Katznelson, The America Invents Act at Work – The Major Cause for the Recent Rise in Patent Litigation, IP Watchdog (April 15, 2013), http://www.ipwatchdog.com/2013/04/15/aia-the-major-cause-for-rise-in-patent-litigation/.

[2] Timothy B. Lee, Patent reform bill passes the house 325 to 91. Here’s what you need to know., Washington Post (Dec. 5, 2013), http://www.washingtonpost.com/blogs/the-switch/wp/2013/12/05/the-house-votes-on-patent-reform-today-heres-what-you-need-to-know/.

[3] Kate Tummarello, Patent reform bill dealt fatal blow in Senate, The Hill (May 21, 2014), http://thehill.com/policy/technology/206793-leahy-takes-patent-reform-off-committee-agenda.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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