Imagine receiving a vague, threatening, but perfectly legal letter demanding that you either pay tens of thousands of dollars or fight an expensive lawsuit in a court halfway across the country. For many small businesses and entrepreneurs, America’s patent system turns this nightmare into a reality.
Last year, nearly half of all new patent infringement cases filed in the United States were filed in a single judicial district in East Texas – one of 94 federal judicial districts across the country. In fact, one judge based in Marshall, Texas – a city with 0.0075% of the U.S. population – was assigned 20% of all patent cases filed in 2014 in the United States. This gross imbalance in case distribution speaks to the systemic abuse in the patent system.
Patent Assertion Entities, or patent trolls, are non-practicing entities that file unworthy, predatory patent-assertion suits against businesses large and small based on patents that never should have been issued. Many of those suits are filed in the Eastern District of Texas because judges there are notoriously friendly to patent trolls. Current law only requires these trolls have some sort of presence within the district to file suit, and as a result, trolls often have only post office boxes, small storage spaces, or empty offices within the district to gain standing in court. Patent trolls are a problem and abuse the system at the expense of American businesses.
Fortunately, Senator Jeff Flake (R-Ariz.) has introduced a bill, with the support of Senators Mike Lee (R-Utah) and Cory Gardner (R-Colo.), to address this issue. S. 2733, The Venue Equity and Non-Uniformity Elimination Act (VENUE Act) would require these lawsuits to be brought to court in the defendant’s location or where alleged infringement occurred, and not in a location “primarily for the purpose of creating venue.” This bill would bring equity and fairness to the patent litigation process so that courts are chosen based on their connection to the defendant, not based on their friendliness to patent trolls. It would also reduce the number of frivolous lawsuits intended to extort companies who cannot afford an expensive legal battle in a court thousands of miles away.
Patent trolls are a drain on the U.S. economy and destroy over $60 billion in wealth every year, stifling innovation and economic growth. The VENUE Act of 2016 represents an important step in the fight against these predatory litigants by taking away one of their most powerful weapons. However, addressing venue shopping is just one of several needed reforms within the patent litigation system. Prohibiting abusive and vague demand letters, promoting efficiency in the litigation process, making predatory trolls pay for court costs when they bring forth frivolous cases, and providing less expensive alternatives to court proceedings are all critical reforms that must be realized to fully address patent trolls. Many of these issues are included in the PATENT Act (S. 1137) in the Senate and the Innovation Act (H.R. 9) in the House, which are bipartisan bills that were reported out of committee and await action in their respective chambers. These two bills deserve floor votes and are also worthy of Congress’ support.
Congress must use its legislative powers to put an end to venue shopping by patent trolls who abuse the court system to shake down and extort American entrepreneurs and innovators. The livelihood of tens of thousands of small businesses, and hundreds of billions of dollars, is at stake. There is no time to waste. Congress must act now and send this bill, along with other broad litigation reforms, to the president’s desk without delay.
U.S. Policy and Government Relations Associate