Why patent reform won’t wait for Congressional action

by Thompson Coburn LLP
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patent reform nexts steps - Jason Schwent

Last month, after repeated delays and countless compromises, Sen. Patrick Leahy took the Senate’s version of comprehensive patent reform legislation off the calendar — dashing the hopes of those seeking reform without even a vote.

So how did patent reform — the one issue that seemingly united ALL in Washington (Democrats, Republicans, the President, Congress, Big Business, and Small Businesses) — die on the vine? And what are the hopes for reform going forward? What does this mean for the so-called “patent troll” problem?

Fed up, looking for change
In 2013, close to a dozen patent reform bills were launched in both houses of Congress from both sides of the aisle. Although introduced with different goals and interests in mind, each of these bills overlapped in their desire to reform a patent system that many viewed as dysfunctional and broken. Common to these bills was a desire to address the “patent troll” problem — that is, to address the problem of entities whose sole business is to acquire patents for the purpose of suing others. These businesses made nothing, sold nothing, distributed nothing, and did not in any way practice the technology they were enforcing. They sought only to extract monetary payment from those who were using the technology.

Many viewed these so-called “patent trolls” — less pejoratively referred to as non-practicing entities — as profiteers and leeches who thrived off of the work and toil of others. They also viewed the existing patent system (largely designed to field the disputes of competitors with equal “skin in the game”) as ill-equipped to address the problem.

So, they called for legislative changes to the patent system to help relieve the burden those in the technology fields felt from these patent trolls. They called for heightened review standards to keep poor quality patents from issuing in the first place. They called for new and more economical administrative procedures to challenge poor quality patents that did issue. And they called for fee shifting provisions that awarded of attorneys’ fees to defendants who successfully thwarted patent troll litigation efforts to make sure that these non-practicing entities had some “skin” in the game.

Softening around the edges
These calls for reform were not new. They had been made during the debate which gave rise to the America Invents Act in 2012. But as that legislation made its way through Congress, many of these reforms were removed at the behest of various interested parties. Large patent-owning companies were concerned that the reforms aimed at patent trolls would unduly harm their efforts to protect their developed technology. Universities were concerned that they too would find themselves swept up in the patent troll witch hunt (as they often licensed their developed technology without practicing it). And the legal community was concerned with changes to the so-called American rule, which required parties to pay their own way in litigation (as opposed to the English rule where the victor’s fees were paid by the loser).

While these concerns were raised again as reform began in the House of Representatives on new patent reform legislation in 2013, they were not sufficient to quell the tide of reform that resulted in the passage of the House’s version of patent reform in December 2013.

But when the matter was taken up by the Senate, these concerns grew in power. As compromise became more and more necessary to legislative success, harsher penalties for unsuccessful patent trolls were softened. Early calls for bond requirements before patent trolls could proceed with litigation were removed by those concerned about the chilling effect of such provisions on small inventors or universities. As the legislation was plucked of its teeth, the bill failed to fundamentally address the rationale driving most of the changes in the first place. Predictably, support for the legislation waned. Eventually, the bill was scrapped.

Now what?
So now that patent reform is dead (at least for this session of Congress), what is the hope for reform going forward? Surprisingly, reform appears likely — although perhaps not through legislative steps.

While one branch of government has shown difficulty in addressing the perceived issues with the patent system, other branches of government have taken up the torch.

The Supreme Court, accustomed to taking one patent law case every several years, heard arguments from five patent law cases this session. The results of those arguments have already had an effect on patent troll litigation.

  • - The Supreme Court made it easier for parties charged with patent infringement to receive an award of attorneys’ fees when successful by lowering the burden of proof in such determinations.
  • - The Supreme Court also made it easier to invalidate patents that imprecisely or vaguely describe their technology by lowering the hurdle to show that a patent’s claims are indefinite.
  • - The Court also made it more difficult to prove induced infringement (a favorite of patent trolls) by heightening a standard lowered by the Court of Appeals for the Federal Circuit.

And the Court has yet to rule on perhaps the most highly anticipated patent case from this session, the CLS case, which asks the Court to set the standard for when computer programs are patentable. A ruling on that case could drastically curtail patent trolls’ ability to bring suit for infringement on software technology which, up to now, has been the single biggest area of technology exploited by patent trolls.

In addition, the Patent Office has continued to actively expand its role in curtailing patent abuses. The Patent Office has continued to expand its force of examiners (to ensure quicker and more thorough review) and has undertaken efforts to modernize and improve its internal processes to make examination more efficient and effective.

The Federal Trade Commission, too, has waded into the patent troll waters by investigating patent troll tactics and protecting consumers from the worse of patent troll activities. Even state governments have gotten in on the act, passing their own patent reform legislation prohibiting meritless blanket assertions of patent infringement in cease and desist letters within their borders.

Thus, while efforts at patent reform through federal legislation may have stalled, patent reform is still underway. Those affected by patent troll activity have created an awareness of the problem that is not dissipating. The repeated demands for change have been heard. And while a Congress which cannot seem to do much of anything these days not surprisingly failed to get patent reform passed, patent reform will continue through the courts, through administrative actions, and even through the states.

 

 

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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