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Movement Continues Against Patent Trolls

October 28, 2013

On Wednesday, House Judiciary Committee Chairman Bob Goodlatte (R-VA) introduced a long-awaited bipartisan bill, the Innovation Act, to combat the growing threat from patent assertion entities (PAEs), often called patent trolls. This bill requires heightened pleading standards for patent suits, including descriptions of which patents are actually infringed, as well as how they are infringed. Transparency is another key element, with the requirement that plaintiffs disclose any party which has a financial interest in the patent at issue, as well as an allowance for defendants to join these other parties in the litigation. There is a cost-shifting mechanism in the Innovation Act that can allow a court to require that the loser pays for the winning side’s litigation fees. In cases where there is litigation between a troll and a manufacturer, cases against end users are stayed until the resolution of the case against the manufacturer. The Innovation Act also expands the Patent and Trademark Office’s post-grant review authority of business method patents, which are frequently the subject of patent suits involving trolls.

Despite the divisions in Congress over a wide range of issues, efforts to limit patent trolling are an area with real momentum on both sides of the aisle. Republican and Democratic co-sponsors of the Innovation Act include, among others, Anna Eshoo (D-CA), Zoe Lofgren (D-CA), Jason Chaffetz (R-UT), and Spencer Bachus (R-AL). Additionally, Senate Judiciary Committee Chairman Patrick Leahy (D-VT) expressed his support for Chairman Goodlatte’s bill and stated that he is continuing to work on patent reform legislation with Senator Mike Lee (R-UT) and others.

Bad news for trolls might also come soon from the country’s highest court. Last month, the Supreme Court granted certiorari in two cases regarding the award of attorney’s fees in so-called “exceptional” patent infringement claims where it is determined that the claims were 1) brought in bad faith and 2) objectively baseless. In Highmark, Inc. v. Allcare Management Systems, Inc., the Court will evaluate whether or not a trial court’s finding that a case was exceptional (resulting in a subsequent grant of attorney’s fees) is entitled to deference at the appellate level. And in Octane Fitness v. Icon Health and Fitness, the Court will examine whether the test for “exceptional” cases used by the U.S. Court of Appeals for the Federal Circuit (which hears appeals of patent cases and creates patent case law) is too strict and, therefore, actually incentivizes trolling lawsuits. Reversals in either of these cases could potentially raise the stakes significantly for trolls in filing claims.

These newer developments all come in the wake of an investigation into patent trolling activities by the FTC, as well as actions against accused trolls by several state attorneys general. While the ultimate fate of the legislation and outcome of the Supreme Court cases remains unclear, patent trolling may soon become a much more risky game to play. We are hopeful that our members will keep us informed of any developments in this area that affect them.

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