To Some, Patent Litigation Reform Paints With ‘Broad Brush’
Panelists disagreed whether a newly released patent reform bill took a “broad brush” approach to patent law or just narrowly targets the patent trolling behavior it intends to stymie. The bill’s sponsor, House Judiciary Committee Chairman Bob Goodlatte, R-Va., took his case for the Innovation Act (HR-3309) to a Thursday event at the American Enterprise Institute event, calling the legislation a “necessary” improvement and a fix to the “current asymmetries surrounding patent litigation.” An Internet industry association representative and law professor agreed, praising the bill’s fee-shifting and transparency measures. But a tech giant’s intellectual property counsel cautioned the bill could create “collateral damage” in the patent ecosystem with it’s “one-size-fits-all” approach to patent litigation.
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The bill would alter patent litigation in several significant ways, Goodlatte said. It would raise pleading requirements; shift more litigation fees to the “nonprevailing party;” delay the discovery period until the “claim construction phase” is concluded; allow stays in cases against end-users of a patented product until a case with the product manufacturer is settled; and enhance transparency throughout the process. He made many of the same points when introducing his bill Wednesday (CED Oct 24 p3).
The changes address a patent system that individuals are exploiting, causing innovators to lose revenue and customers, said Boston University School of Law Professor Jim Bessen, who studies patents. Lawsuits per patent have tripled since the 1980s, he said, and companies can lose millions of dollars in revenue, suffer lowered stock price and face legal fees while defending a lawsuit. “The defendants are the innovators themselves,” Bessen said, saying the number of defendants in patent litigation has more than doubled in the past five years. “So the people being sued are the people we actually want” creating new products, he said.
A significant portion of that proliferation was the result of patent trolling, said Internet Association CEO Michael Beckerman. The new bill is intended to curb those bringing lawsuits with little explanation or fear of repercussions, he said. The bill targets this behavior by introducing heightened pleading requirements and fee-shifting, he said. Under the bill, plaintiffs would have to explain exactly which patent has been infringed and how. And the fee-shifting requirement -- consistent with the requirements in the Equal Access to Justice Act -- “discourages the bad actors from going after patents,” he said. “They're going to say, ‘we can lose money here.'"
We should not legislate all patent cases based on “edge cases,” said 3M Chief Intellectual Property Counsel Kevin Rhodes. “The bill reflects a uniform view of what a patent case looks like,” he said. “It reflects a defendant’s view.” He said 3M frequently is both a plaintiff and defendant in patent litigation. Delaying discovery could tack six months to a year onto the already elongated patent litigation procedure, which can take more than a year as is, he said. By that time, “the market developed by our technology has been destroyed,” Rhodes said. “The most experienced courts across the country in dealing with patents have adopted a whole host of local rules” to make patent cases more effective, he said. “I don’t know a single one of those local rules that stays all discovery pending the claim decision.”
The bill’s extension of the covered business method (CBM) program, set to expire in 2020 under the America Invents Act, is also misguided, Rhodes said. The program has had little demand to this point and has negative implications for the future, Rhodes said. Other large tech companies such as Microsoft, IBM and Adobe echoed 3M’s position in a letter to Congress (http://bit.ly/15ran5O). The companies worry the program gives the Patent and Trademark Office wide-ranging authority to take a second look at a patent after it’s granted or reissued. The inclusion of “data processing patents used in any ‘enterprise, product, or service’ ... means that any party sued for or charged with infringement can always challenge an extremely broad range of patents,” the letter said. “Subjecting data processing patents to the CBM program would thus create uncertainty and risk that discourage investment in any number of fields."
The program will not become a universal patent review, Beckerman said. Only patent holders suing or threatening to sue somebody are subject to review, he said. This strategy will target only bad actions, not specific companies, Goodlatte said. “If you have a legitimate patent that is deserving of protection under the law,” he said, “you'll find this law makes it easier” to protect it.