In recent months Congress has debated several bills designed to stop the abusive litigation brought by patent assertion entities, also known as patent trolls. While there are legitimate lawsuits for infringement, real patent trolls typically don’t focus on innovating themselves; instead, they acquire vague, overbroad patents and then aggressively pursue litigation, sometimes against hundreds or even thousands of companies at the same time. It is this abusive behavior that Congress should, and is, targeting, while not devaluing intellectual property.
The American Enterprise Institute’s Center for Internet, Communications and Technology Policy held a patent reform event with a panel discussion moderated by AEI’s Claude Barfield with panelists Michael Beckerman of the Internet Association, Boston University School of Law professor Jim Bessen, and 3M’s Kevin Rhodes. The keynote address was delivered by House Judiciary Chairman Bob Goodlatte (R-VA).
Chairman Goodlatte discussed his newly introduced Innovation Act, which is aimed at solving the abusive practices surrounding the patent system. It contains a transparency provision, which requires the patent holder to keep records or forego enhanced damages. In order to overcome the lack of awareness of patent issues, it provides small business education through the Patent and Trademark Office. The Act also requires plaintiffs to be more forthcoming as to what specific patent has been violated; in the past, claims have been vague and specifically cited what patent is being infringed upon. This leads to costly discovery for defendants before a case can even go to trial. In this way, cases are often settled because the costs of going to court are prohibitive.. Chairman Goodlatte believes the Innovation Act will make the patent litigation process more transparent and fair.
Bessen, of the Boston University School of Law, said that the number of patents has escalated rapidly since the 1980s. Critics say this is because the number of patents granted has increased, but the number of lawsuits per patent has tripled. Lawsuits have enormous legal fees and settlement expenses. There is also evidence that patent lawsuits make consumers less likely to buy innovative products, therefore costing the defendant business. The average troll patent is 12 years old, he said, and many patents used by trolls are written in a vague manner which covered inventions that didn’t even exist at the time. The patents are so vague that they almost never stand up in court, and often if the defendant refuses to settle the patent troll drops the case because they know they won’t win. Bessen also took aim at software patents, claiming that they are generally too broad and abstract, causing them to overlap with each other. Eighty-four percent of patent troll lawsuits deal with software and 40% of software claims are reversed on appeal.
Indeed vague patents are a problem and reforms included in the Innovation Act will greatly diminish the practice of uses vague patents to sue unwitting companies. However, just because there are some bad patents in existence does not mean that all software patents should go. In knowledge based economy it is important that we protect the creations of innovators and maintain incentives to create.
Beckerman, Internet Association, emphasized that patent trolls impact all businesses, not just technology related companies. Business method patents have lead to lawsuits over simple issues such as online shopping carts, showing nutritional information on a website, or allowing people to select airplane seats when they buy their tickets online. Business method patents are nine times more likely to be litigated than other patents. Even though 85% of the time when these cases go to court the patent trolls lose, the litigation is still expensive for businesses. Often it’s cheaper for an innovator to settle even if he knows he’s in the right.
Rhodes, 3M, warned of a false dichotomy between innovators versus litigators, when in fact innovators are often litigators too. Often legitimate patent owners must protect their inventions against real threats to their business, and labeling certain types of patent owners with the term “patent trolls” can be damaging to them as they are then held to a different standard. He expressed concern that the Innovation Act viewed all patent litigation as falling under the same pattern, when in fact not all cases fit that model. A fair judicial system must acknowledge that reasonable minds can differ on how broad the scope of a patent ought to be and focus on the merits of the case.
Not all litigation in the patent arena is troll based, and it is important to remember that, but Chairman Goodlatte’s reforms including heightened discovery and fee shifting will go along way to curb abusive actions without harming legitimate patent owners and secondary markets for patents. It is clear that there is a major issue and Congressional action is necessary. The Innovation Act goes a long way to curb abuses without damaging intellectual property.