Do Courts Need Congress To Assist In Fight Against Patent Trolls?

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Peter Fricke Contributor
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Most folks agree that frivolous patent infringement lawsuits are detrimental to the innovation that drives America’s economy, but whether Congress needs to take action is a different story.

At a House Judiciary Committee hearing Thursday on the Innovation Act, a bill that is intended to discourage abusive patent litigation known as “patent trolling,” witnesses representing the intellectual property (IP) industry gave conflicting testimony as to whether the bill would protect or inhibit innovation. The bill is sponsored by Republican committee Chairman Bob Goodlatte. (RELATED: Intra-Conservative Debate Over Patent Reform Heats Up)

“In recent years,” Goodlatte says, “we have seen an exponential increase in the use of weak or poorly granted patents by patent trolls to file numerous patent infringement lawsuits against American businesses with the hope of securing a quick payday,” forcing companies to spend resources on legal defense that could otherwise be spent on “innovating and growing their businesses.”

The Innovation Act would require plaintiffs to disclose the owner of the patent in question, and provide courts with their legal reasoning at the start of infringement cases, which Goodlatte says “will ensure that patent trolls cannot hide behind a web of shell companies to avoid accountability for bringing frivolous litigation.”

In addition, the bill “requires courts to make decisions about whether a patent is valid or invalid early in the litigation process,” and when a case is declared frivolous, forces the plaintiff to pay the defendant’s legal fees.

Goodlatte sponsored nearly identical legislation last year, but after passing the House with bipartisan support, the bill failed to pass out of committee in the Senate. (RELATED: Patent Reform Splitting Republicans, Business Community)

Since then, the Supreme Court has issued rulings in several cases that some experts believe removes the need for congressional action, and could potentially even make legislation like the Innovation Act disruptive to American innovation.

Robert Taylor, founder and owner of RPT Legal Strategies PC, an intellectual-property consulting firm, told the committee that while he supports efforts to rein in patent trolls, he is concerned that the Innovation Act “will have a chilling effect on investment in patent intensive companies, which in turn will have a depressing effect on innovation in general.”

Not only would the bill make it “more difficult, risky, and expensive for emerging companies to enforce their patents,” he explained, but it would also “raise the cost and risk confronting smaller companies trying to defend against patent litigation brought by their larger, incumbent competitors.”

Moreover, Taylor pointed out that, “In recent years, the Supreme Court has rekindled its interest in patent law … tackling some of the most important issues defining the patent system” and implementing many of the reforms contained in the Innovation Act.

In the past year, for instance, the court handed down decisions in two cases that, “allowed prevailing parties in patent litigation to recover their costs, and their lawyer and expert witness fees, from the losing party,” just as Goodlatte’s bill calls for.

“Unfortunately,” countered Krish Gupta, senior vice president and deputy general counsel for EMC Corporation, “these decisions have been only moderately successful in increasing the success rates of defendants who seek to recover their attorneys’ fees when they are faced with baseless patent litigation.”

While the court’s recent rulings have been “helpful,” he explained, they “do not make fee‐shifting the default rule rather than the exception,” and therefore do not provide the level of certainty that is necessary to deter patent trolls. (RELATED: Congress’ Patent Reform Efforts Don’t Go Far Enough)

“I am certain that unless Congress acts, the problem [of patent trolling] will continue, unabated,” Gupta concluded.

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