Senators Introduce PATENT Act; Opponents Claim it Misses the Mark, Supporters Call it ‘Strong’ and ‘Balanced’

Original Source

WASHINGTON (Legal Newsline) – A bipartisan group of U.S. senators introduced their own legislation aimed at ending patent abuses Wednesday.

Sens. Chuck Grassley, R-Iowa and chairman of the Senate Judiciary Committee; Patrick Leahy, D-Vt. and ranking member of the judiciary committee; John Cornyn, R-Texas and committee member; and Chuck Schumer, D-N.Y. and also a committee member, all are sponsors of the PATENT, or Protecting American Talent and Entrepreneurship, Act.

Judiciary committee members Mike Lee, R-Utah; Orrin Hatch, R-Utah; and Amy Klobuchar, D-Minn. are cosponsors of the bill.

The senators argue their legislation — the fourth patent reform bill to be introduced this Congress — makes “necessary and commonsense” reforms to stop abusive patent litigation practices and prevent “bad actors” from further undermining the nation’s patent system.

The bill would clarify pleading standards; protect end users; reasonably limit early discovery; create more risk for bad actors; curb abusive demand letters; and increase transparency.

“Abusive patent litigation is a threat to our economy and costs consumers and businesses billions of dollars each year. Too often, small business owners are being targeted for doing nothing more than using off-the-shelf products. These types of frivolous lawsuits cost them millions of dollars and force them to settle despite having a strong defense,” Grassley said.  

“The meaningful reforms in our bipartisan bill are needed to ensure that the innovation and entrepreneurship our patent system was designed to protect isn’t undermined.”

Schumer said so-called patent “trolls” are taking a system meant to drive innovation and instead using it to stifle job-creating businesses.

“Main Street stores, tech startups and more are being smothered by the abuse that is all too common in our patent system, and it’s time for that to end,” he said. “This bipartisan bill shifts the legal burden back onto those who would abuse the patent system in order to make a quick buck at the expense of businesses that are playing by the rules.

“I’m hopeful we can move quickly and in a bipartisan way to get this bill passed in committee and on the Senate floor this summer.”

Klobuchar noted the legislation will protect patent holders against trolls without impinging on the ability of good-faith actors to enforce their patent rights.

“Minnesota has one of the highest rates of patents per capita in the nation — we’ve invented everything from the Post-It Note to the pacemaker — and this bill will help our businesses and those across the country reap the reward of their innovations, while being protected from abusive lawsuits,” she said.

Not everyone is convinced.

Innovation Alliance Executive Director Brian Pomper said Wednesday that while the bill incorporates some “welcome improvements” over earlier versions, the group, made up of research and development-focused companies, must oppose its adoption as introduced.

“Passage of this act would cripple the ability of legitimate U.S. patent owners to protect their ideas from infringers, both in the United States and overseas,” he said.

“A strong patent system has been the engine of innovation in this country for over two centuries, and remains the fundamental driver of economic growth and job creation in this new technology-driven economy. U.S. competitive advantage depends on strong, enforceable patent rights that incentivize innovators to invent.

“A law that would make it harder to enforce U.S. patents will encourage the infringement of American ingenuity and innovation and embolden competitors in China and elsewhere.”

The American Conservative Union, one of the nation’s largest conservative groups, said lawmakers continue to be “way off the mark.”

“If this bill were to signed into law, it would give President Obama’s top campaign bundlers in Silicon Valley the ability to take the intellectual property of legitimate patent holders with impunity,” the union said in a prepared statement.

“The American Conservative Union opposes the PATENT Act because it violates the bedrock conservative principle of strong property rights and restricts the rate of innovation. This legislation unfortunately is misguided and overly broad in its reach.

“Rather than do more damage to our already fragile economy and stagnant rate of economic growth under President Obama, we should work to preserve our strong patent system that has allowed the U.S. to be a global leader in innovation.”

Ken Blackwell, former Ohio Secretary of State and who currently serves on the board of directors of the Club for Growth and the National Taxpayers Union, argues the legislation is unnecessary.

“We do not need any more government intrusions into the American economy, or legislation that hinders small business,” he said. “This legislation will have a terrible impact on small business and inventors that represent American ingenuity and exceptionalism.

“This legislation is as bad or worse than the House patent legislation and will undermine the U.S. patent system, American innovation and free enterprise.”

Erik Telford, president of The Franklin Center for Government and Public Integrity, contends the PATENT Act is nothing more than “another crony kickback” for Google, one of Obama’s largest political donors.

“China would like nothing more than to see legislation pass that weakens U.S. patent protection and property rights so even more of American invented products can be ripped off,” he said.

But some argue the legislation is an important step forward.

“We strongly support the provisions that will improve transparency, create higher pleading standards, and enforce limits on document discovery,” the Software and Information Industry Association, a group for software and digital content industries, said in a statement. “While we see areas for improvement, we believe that the combination of these components creates a strong reform package.

“Increasing assaults from patent assertion entities (PAEs) are hurting American innovation and having a very real economic impact on our businesses and our economy. Since the passage of the last patent overhaul, it has become clear that the problem can only be addressed through further legislative action.”

The Coalition for 21st Century Patent Reform, or 21C, agreed.

“It represents a significant, thoughtful and constructive contribution to the patent reform effort,” Kevin Rhodes, 21C chairman and chief intellectual property counsel for the 3M Company, said of the legislation.

The National Association of Realtors also applauded the bill’s introduction.

“Realtors lead the real estate industry by embracing new technology and innovation that provide consumers with services that are fast, convenient and comprehensive. Unfortunately, avid technology users are unknowingly putting themselves at risk for litigation brought on by so-called patent trolls who buy questionable and overly vague patents, often by the hundreds or thousands, and use them to demand that operating companies pay a licensing fee or face litigation,” NAR President Chris Polychron said. “NAR members know firsthand that patent trolls divert significant time and money away from their businesses and strongly support legislation to curb those abuses.

"The comprehensive reforms proposed in the PATENT Act, including to demand letters, are a good first step toward strengthening and restoring an essential balance to the patent litigation system, which has been urgently needed for years.”

The Application Developers Alliance also says it is encouraged by the proposed reform.

“Without legislation, small innovators will continue to make unjustified payments to predatory patent trolls, simply because paying is less costly than hiring expensive patent lawyers,” said Jon Potter, president of the alliance. “Abusive patent trolls are a tax on innovation and threaten small companies nationwide.”

Matthew Shay, president and CEO of the National Retail Federation and a leader of the United for Patent Reform Coalition, commended the senators for their work in crafting the bill.

“Patent trolls plague businesses large and small from every sector of the American economy,” Shay said. “They don’t make anything, or provide valuable services; all they do is extort money from hard-working, productive businesses that do. They kill jobs, increase consumer prices, reduce capital investment, and force businesses out of business.”

The National Venture Capital Association, which opposes the House’s Innovation Act, called the PATENT Act a “step in the right direction.”

“As the legislative process moves forward in the Senate, we look forward to working with lawmakers to arrive at a balanced approach that addresses abusive behavior in the system while also protecting the rights of small businesses that rely on strong patent protections for their survival,” said Bobby Franklin, president and CEO of NVCA. “The worst thing we could do would be to pass a bill that tips the balance of power in patent enforcement cases in favor of larger incumbents.” 

Gary Shapiro, president and CEO of the Consumer Electronics Association, argues the bill will close the “legal loopholes” currently being used by abusers of the system.

“Bogus patent demand letters, threats and actual litigation are a massive anchor on American innovation, and make it even more difficult for American businesses to compete globally,” he said.

“We’re encouraged by the introduction of this bill and ask the Senate to move forward on the PATENT Act as soon as possible. As the number of troll demand letters, threats and lawsuits reach epidemic levels, now is the time for comprehensive reform. American innovation can’t afford to wait any longer.”

To view a copy of the bill, click here.