Magazine article Information Today

Reining in Patent Trolls: Congress Rides Again

Magazine article Information Today

Reining in Patent Trolls: Congress Rides Again

Article excerpt

Recall from your high school civics class that any congressional bill that has not been enacted into law at the end of the 2-year congressional session is said to have "died." What your civics teacher may or may not have said is that it is common for some legislative proposals to be reintroduced in the next Congress, to either build on the work that already took place or to give the bills a new lease on life in the changed political climate that often accompanies a new congressional session.

Such is the case with the Innovation Act, a patent reform proposal first introduced in 2013 in the House of Representatives. The bill died at the end of 2014 but has just been reintroduced in the new Congress (as H.R. 9, available at The proposal was and is a response to the perceived problem of "patent trolls," people or companies that buy up patents and then target enterprises and entrepreneurs who work in the same area of the patent and charge them with patent infringement. The classic and most objectionable patent troll business model is not the legitimate exploitation of the patent for innovation, but the generation of revenue through lawsuits, lawsuit settlements, or licensing fees under the threat of a lawsuit.

Patent Assertion Entities

Both the original and the latest version of the Innovation Act seek to target patent trolls--known formally in the industry as "patent assertion entities" (PAEs)--through several proposed changes in patent law. Among those changes are new requirements for the amount of information that must be included when a lawsuit is filed. Under existing law, all that is required is a "short and plain statement of the claim" from the person or company filing the suit. As a result, much of the information that might go to prove or disprove a patent infringement claim is only generated after the lawsuit is filed, through a time-consuming, invasive, and expensive process called "discovery." With defense against patent lawsuits frequently costing hundreds of thousands of dollars in legal fees--much of that spent during discovery--many companies find it cheaper to settle.

The Innovation Act would require that in order to even file a lawsuit, each claim within a patent that is alleged to have been infringed must be specifically identified and tied specifically to a "process, machine, manufacture, or composition of matter" by the alleged infringer. The owner of the patent (including any PAE, holding companies, or other complex owners) would need to be fully disclosed. In addition, the lawsuit would have to disclose any other filed or pending lawsuits that involve the same patent. Collectively, these provisions require that a patent owner provide more upfront information prior to discovery, giving the alleged infringer--and the court--a better means for gauging the legitimacy or lack of legitimacy of the claims.

The act would also reduce the costs of discovery by shifting that step to later in the process. In patent lawsuits, there is a stage called a "claims construction hearing," in which a judge determines exactly what the patent encompasses. It is not uncommon for the court to determine whether infringement has taken place by deciding how broad or narrow the patent actually is. The act would shift most of the discovery process to after this hearing, thus reducing costs for defending against frivolous or questionable patent claims.

Loser Pays

The Innovation Act would also create a "loser pays" presumption with regard to an attorney's fees. …

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