House Democrats, Republicans agree to end patent trolls

House Democrats, Republicans agree to end patent trolls

Summary: Democrats and Republicans may disagree on almost everything, but they can agree on one thing: They all hate patent trolls. The anti-patent troll Innovation Act has passed in the House of Representatives.

SHARE:

If you had to use one word to describe the current Congress, that word would be disagreement. Healthcare, budgets, foreign policy, you name it, they'll disagree on it — except when it comes to patent reform. 

legal

But in a surprising move, the House of Representatives passed Representative Bob Goodlatte's (R-VA) Innovation Act (PDF Link) by a vote of 325 to 91 that crossed party lines. Goodlatte introduced the bill in October saying that, "Abusive patent litigation is a drag on our economy. Everyone from independent inventors, to startups, to mid- and large-sized businesses face this constant threat. The tens of billions of dollars spent on settlements and litigation expenses associated with abusive patent suits represent truly wasted capital — wasted capital that could have been used to create new jobs, fund R&D, and create new innovations and technologies."

Patent trolls, aka patent assertion entities (PAEs), are businesses that search for companies that create devices or services which might be covered by the troll's patents — and then threaten them with lawsuits to gain licensing fees. The troll itself makes no effort to use its patented "inventions" to create commercial products.

Most technology companies agree with Goodlatte that patent troll lawsuits have hurt the economy and innovation. Such diverse groups and businesses as the Electronic Frontier Foundation, Microsoft, Google, and Cisco all support the bill. It's easy to see why. For all that the companies may use patents against each other, ala Apple vs. Samsung,  patent trolls cost all of them more money. 

The evidence shows that patent trolls have become an ever greater drag to the innovation economy. Lex Machina recently found that 56 percent of all patent lawsuits are from patent trolls. That's only part of the story. The patent problem is actually far bigger than the number of filed patent lawsuits.  

That's because most patent troll lawsuit shakedowns never get to trial. "Much monetization behavior, such as bargaining, posturing and payment, concludes without any party filing a lawsuit." As a result, the authors conclude that "increasing anecdotal evidence suggests that patent litigation represents only the tip of the iceberg, and that the vast majority of patent monetization activity never progresses to the point at which a patent infringement lawsuit is filed."

And, why do businesses pay off? Easy. It's cheaper than fighting.

The American Intellectual Property Law Association reported in 2011 that if a company defended itself against a less than $1 million patent lawsuit, its total legal bill would average $650,000. If you're facing a patent troll lawsuit of more than $25 million you're looking at median legal costs of $5 million.

That was two years ago. Legal fees have only gone up since then. Matthew Bye, Google's senior competition counsel, wrote on April 5 that patent trolls cost the U.S. economy nearly $30 billion a year. I can well believe it.

The Innovation Act is meant to both cut these bills and the sheer number of these lawsuits. To do this its major provisions:

Require lawsuit specificity: Today in a patent lawsuit it can be unclear about exactly what it is in your service or product that infringes their patents. Under the new law the troll will be required to spell out why you're being sued rather than rely upon vague claims. Today, with some boilerplate lawsuits, it really is impossible to tell what exactly you're being sued for.

Reveal patent ownership: Patent trolls often use shell companies to hide who really owns the patent and thus who's really suing you. Under the new law plaintiffs will be required to name everyone with financial interests in the lawsuits.

Make losing trolls pay: Today, even if you win a patent lawsuit getting your legal fees paid can be difficult because the shell company that sued you may have no assets. No wonder patent trolling has become so popular, almost all you need is a shell company, a patent, a paralegal, and a post-office box, then you can start suing for patent profit without any consequences! With the Innovation Act, if the shell company can't pay up, others who might have profited from the suit may be ordered by the court to pay your bills.

Delay discovery procedures: If you're unlucky enough to be sued today, you'll often find that you must delivery your internal documents and e-mails to the defendant so they go on a fishing expedition through your business to find something they can use against you. Besides being incredibly annoying, it's also extremely expensive. With this law, the patent claims themselves must be cleaned up in court and only then would discovery start. 

Protect the innocent: It used to be that only vendors got suited for patent violations. That was then. This is now. Today patent trolls, such as Innovatio, make money from suing end-user businesses such as hotels and coffee shops that offer Wi-Fi. No, I'm not kidding, and neither are they. With this new law, the technology vendors can more easily get involved in the case so Ma and Pa's Coffee and Tea Shoppe won't be forced to pay a patent licensing fee to avoid the cost of a lawsuit.

The passage of the bill through the House has its supporters hopeful that it will soon become the law of the land. In a statement Horacio Gutierrez, Microsoft's Deputy General Counsel and Corporate Vice President of Legal and Corporate Affairs, said, "Today's overwhelming, bipartisan House vote to pass the Innovation Act (H.R. 3309) marks a significant milestone toward enactment of common-sense reforms to curb abusive patent litigation. Abusive patent lawsuits create a heavy burden on the US economy — slowing innovation, undermining competitiveness, and stunting economic growth."

Next up the Senate must come up with a companion bill and, if it passes there, a House and Senate conference committee must then reconcile two bills. After that, if all goes well, the final bill will be sent to President Obama to be signed into law. Obama has already indicated that he'd sign a patent reform bill and that he hopes it will happen this year. At this rate, even after years of delays in most governmental issues, it looks like it might happen.

Democrats and Republicans may disagree on almost everything, but it seems they can agree on one thing: They all hate patent trolls.

Related Stories:

Topics: Enterprise Software, Government US, Legal, Patents, Software

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

61 comments
Log in or register to join the discussion
  • good news.

    and check spelling in the article title.
    pantent trolls are an entirely different species.
    BitBanger_USA
    • Should have gone to Specsavers

      Get your eyes tested it says patent.
      dfruk@...
      • (It does now...)

        (It's been fixed.)
        Zogg
  • Pleasant surprise

    It's still a band-aid over the underlying problem (too many booby-trap patents), but it does appear to be an improvement over the status quo and thus worth supporting. Usually, the House Republican leadership tries to craft bills to pass on as close to a party line vote as possible, but this is a welcome exception (but I suspect that if I look at the numbers, I'll find that enough Republicans voted for it that no Democratic ones were required, as usual).
    John L. Ries
    • Republican bashing again? IN reality, what you said applies more often

      with democrats in the house and senate, where they'll craft bills to pass on as close to a party line vote as possible. Biggest example, and one which points to the radical positions with democrats, is Obamacare, which didn't get even a measly vote in the congress; not from the house and not from the senate. In fact, democrats even went against majority opinion in the country, where most people opposed that monstrosity of Obamacare.

      So, check your facts, and check your politics, and check your way of thinking, because, your mind-set hardly ever reflects reality.
      adornoe
      • John likely has one of those

        "why should I read to understand anything the Democrats put out, as it has to be awesome since the Democrats put it out" mentalities.

        Yes that goes both way, but many people on both side prefer to live with blinders, as it's all about "trust", even the closed door laws created.

        ;)
        William.Farrel
        • You're no better a mind reader than Adornoe is

          Note how both of you conveniently ignore any of the many anti-partisan comments I routinely put out, together with the ones where I'm at odds with the established positions of the Democratic Party (this is not rare).
          John L. Ries
          • BullDroppings!, John...

            You are a shill for the democrats, and you take every opportunity to bash republicans, and you've never said a kind word about republicans, other than the seldom used phrases like, "both parties are to blame" or some such; those are generic utterances without real meaning, as they're used to try to try to claim some sense of credibility or fairness, before launching into an anti-republican rant.
            adornoe
          • I suppose it's easier...

            ...to insult people than it is to argue with them, but you're not going to persuade anybody by doing it.

            And I didn't actually insult the Republican Party; the cultural differences between the two parties are well documented and have endured since the GOP was founded in 1854. The Republicans have *always* had tighter party discipline than have the Democrats; that's why the latter had a large conservative wing throughout the 20th Century and the former had a much smaller liberal wing. It has nothing whatever to do with whether one agrees with policies espoused by either. I despise party discipline and gamesmanship and think they detract from democracy instead of facilitating it (I've long had a weakness for maverick politicians for that very reason), but people in most of the world (and many if not most Americans) accept it as standard procedure. If you think they're legitimate, then say so; if not, then criticize them (even when you think your party is right on policy); but don't deny that they exist.

            And American legislators regardless of party usually vote their districts before they vote their parties. I expected Rep. Gohmert to vote against the bill because it is contrary to the economic interests of his district and that is indeed what he did (but he'd have to explain his reasons himself). I would expect my Congressman to vote against a bill to abolish the national parks for the same reason. I would expect any member of Congress, regardless of party, to vote in the perceived interests of his state or district, even if it conflicts with his party's platform or otherwise professed principles, or if most of his copartisans vote the other way; it's one our oldest political traditions and in some ways, it's a good thing, as it means that every state and Congressional district has an advocate in Congress.
            John L. Ries
      • The Hastert Rule...

        ...is a Republican innovation that the Democrats have never followed (it was actually introduced by Newt Gingrich when he was elected Speaker in 1995). And party discipline on the Democratic side has been notoriously lax since the days of Andrew Jackson (hence Will Rogers' famous joke about not belonging to any organized political party). It's an interesting footnote that the bill to renew the charter of the Bank of the United States that Jackson famously vetoed in 1832 was passed by a Congress controlled by his own party (the Democrats). Another is that the Presidents who vetoed the two largest numbers of bills (Franklin Roosevelt and Grover Cleveland) were both Democrats and Roosevelt never had to deal with a Congress even partially controlled by the opposition. The Republican Party, on the other hand, has always had stronger discipline than the Democrats, though weaker than that of parties in most other Western democracies. I attribute this long standing cultural difference between Republicans and Democrats to the origins of the two parties (the Democratic Party grew out of Andrew Jackson's presidential campaigns, while the Republicans were originally an anti-slavery party focused more on platform than personalities). I find it interesting that the cultural differences have endured even as the platforms have shifted radically since the 19th Century.

        Interestingly enough, I thought and still think that the ACA was a step in the wrong direction in what we really need to do is to reduce/eliminate the need for insurance for routine care, not to make insurance mandatory. But unconditional repeal would do nothing but to restore the unworkable status quo ante, which I don't favor either (bag the stupid repeal votes; focus on creating a better system). I also thought and still think that the effort to push it through on party line votes was a mistake. It would have been better to have followed regular order and let the chips fall where they may.

        And I noted elsewhere my suspicion of bills passed on a party line vote, which the Goodlatte bill wasn't.
        John L. Ries
        • IN reality, the status quo, or current system, is a lot better than what

          Obamacare brings to the American people. The system might have been somewhat broken, but why replace a broken system with something far worse?

          The only fix to Obamacare and to the "current system" that would take us in the right direction, is to repeal Obamacare, and work with the current system and make it better and affordable. It can be done. Just take the politics out of it, and we'll be a huge step towards a better healthcare system.
          adornoe
          • But why...

            ...is unconditional repeal a prerequisite for the right sort of reform? Are you saying that absolutely nothing can be done until/unless the ACA is repealed in full? Or can proposals be made that are likely both to move things in the right direction and to actually pass some time before 2017?
            John L. Ries
          • John: Yes, repeal is an absolute must before any kind of real progress can

            be made.

            Obamacare is the absolute worst case for healthcare, and as such, it's unworkable from the start. Why start from a failed starting point? We need to start fresh, and with as little government involvement as possible. Government can be there for the regulations, but not for the implementation or for the design of the replacement(s).
            adornoe
          • So we're going to do nothing until 2017?

            ...and maybe not then if the votes still aren't there for full repeal (together with a President willing to sign the bill)? That doesn't seem reasonable to me, but maybe there's some logic that you see and I don't.
            John L. Ries
      • Surprised

        Republicans know what a patent or a troll are. :-)
        Gisabun
  • It still isn't what was meant.

    Ending patrent trolls brings up a vision of putting them up against a wall and plugging them full of holes.

    Ending patent trolling, while less entertaining, is what was meant.
    retiredSoftwareFlunky
  • Must show relevance.

    One of the things mentioned that people buy patents and do nothing with them. A patent holder must prove that the patent is active, in that, they have manufacturing facilities and that they are actively using that patent in the manufacturing of a product. If not, then the patent is considered dead and not enforceable. This would halt patent trolling.
    Cueball433@...
    • It's more complicated than that...

      They are tasked with attempting to eliminate silly patent suits, whilst still enabling a company to protect itself from imitators.

      If you produced a coffee machine that you designed from scratch and tested and then put into mass production, created your own retail division, corporate offices, customer support, marketing... And you become nice and successful from your $200 machines; well you're going to be pretty pissed if another company starts selling 100% identical coffee makers for $150 as soon as you try and replace yours with a new design aren't you?

      By your argument you stopped manufacturing the old design, giving up all rights to it, So do you scrap the new design and just adapt the old one limiting innovation, or manufacture both at the same time and saturate your market? After all that first coffee maker was your invention, your research? Your money, and now you just give it away? Your new shareholders won't like that... Everyone involved in the company would rather you just licensed the underlying technology and sue companies that take but don't pay.
      MarknWill
    • This is a bogus argument

      I sold out to a firm that could be called a patent troll. The reason after successfully patenting some technology and spending years trying to sell it under NDA for the presentations, I and my partners discovered that one large company had taken the exact approach of the patent that we had presented and put it into open source software. Even worse, they presented a great paper at a conference on their invention. Ironically the "inventors" were two engineers who when we first did our NDA'd presentation swore the technology could not work.

      We approached the company and tried to sell them the patents since we were never going to be able to get funding to do a product that had a competitor in open source. They kept ignoring us, so in the end we sold out to a firm that could mount the legal challenge.

      Now with your argument, we would have had to invest millions to make a product we could not sell so that we could sue people who stole our technology.
      oldsysprog
      • Typical

        Those with the cash win its why money likes patents.
        Altotus