Industry and Lawmakers Take Steps to Battle Patent Trolls

July 30, 2013

In a time when the Congress too often looks like it cannot agree on anything, one issue seems to be gaining both momentum and increasing bipartisan support. That issue is combating the growing business of patent trolling and the legislative proposals to curb it.

When used properly, patents foster innovation by granting limited exclusive rights to inventors. The public is served by the advent of newer and better technologies and products, and producers benefit by reaping rewards for expensive research and development. However, if abused, patent rights serve only to stifle growth and hinder economic progress.

In recent years, a growing number of patent infringement claims have been filed by patent assertion entities, also called “patent trolls.” They exist not by producing or manufacturing patentable products themselves, but instead by purchasing numerous patents with broadly defined terms and then filing infringement suits against manufacturers and service providers with deep pockets. The trolls also attack numerous end users like small businesses or advertisers with shallower pockets, but far less ability to fight extortionist demands.

The White House recently released a report showing that as many as 100,000 companies were threatened with litigation by patent trolls in the last year and that these suits inflict significant harm on both companies and the economy. Given the immense cost of patent litigation, most businesses settle with these trolls, even though the trolls would likely lose at trial. The trolls grow further energized and enriched and are only incentivized to repeat the process over and over again with new claims.

Members of Congress on a bipartisan basis have shown their mounting frustration with these practices with a burst of legislative initiatives just this year:

  • H.R. 2766, co-sponsored by Representatives Darrell Issa (R-CA) and Judy Chu (D-CA) would amend the Leahy-Smith Investments Act to expand the U.S. Patent and Trademark Office’s post-grant review authority for business method patents (those commonly used by patent trolls). Currently, only business method patents related to “financial services” are subjected to this stricter review. A similar bill, S. 866, was introduced by Senator Chuck Schumer (D-NY).
  • H.R. 2639, introduced by Representatives Hakeem Jeffries (D-NY) and Blake Farenthold (R-TX) would require heightened pleading standards in complaints for patent infringement suits with regard to the identity of the party bringing the suit and the actual infringement alleged. Further, it would allow for suits against end users to be stayed until suits against the manufacturer have been resolved.
  • H.R. 2024, introduced by Representative Ted Deutch (D-FL) requires the owner and any other parties with interests in a patent to disclose themselves to the U.S. PTO when the patent is filed. Should the patent owner change, the new owner must likewise disclose all parties with interests. The collection of damages in a suit is barred if entities have not complied with these requirements.
  • H.R. 845, co-sponsored by Representatives Peter DeFazio (D-OR) and Jason Chaffetz (R-UT) would allow for the recovery of legal fees in any wrongful patent infringement suit.
  • Senator Patrick Leahy (D-VT) and Congressman Bob Goodlatte (R-VA), the chairmen of the Senate and House Judiciary Committees respectively, released draft legislation in May incorporating many different approaches to diminishing patent trolling.

The White House, in June, announced seven legislative recommendations, as well as five executive directives, designed to combat abusive practices by patent trolls. Federal Trade Commission Chairwoman Edith Ramirez said in a June speech that she believes the FTC should use its investigative authority (basically, subpoena powers) under Section 6(b) of the FTC Act to investigate these practices. And the Attorney General of Vermont recently filed suit against an alleged patent troll that had sent demand letters to a number of Vermont organizations, including nonprofits.

ANA is working as a part of several coalitions to address these abusive and economically damaging actions. We are focusing on indemnity issues, as well as proposed legislative fixes. We signed a letter to congressional leadership, along with more than 50 others organizations from nearly every sector of the economy, encouraging legislative action against patent trolls. We are working to collect data on demand letters and the numbers of suits threatened against our members.

There is serious momentum to address this problem. Advertisers need to step up to fight these entities in order to protect themselves and the consumers they ultimately serve. Please let ANA know if your company is confronted with patent troll issues so we can effectively stay on top of trends in this area and help combat these problems.

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