Trying to please everyone: the patent troll conundrum

In May this year, the inevitable happened. Lawmakers in the US realised you simply cannot keep everybody happy.

Senator Patrick Leahy, who had been sponsoring the proposed Patent Transparency and Improvements Act, said there had been “no agreement” and that, for the time being, it was on hold.

The proposed legislation, which was passed by the House of Representatives, was the latest effort to curb abusive patent holders that assert patents they do not use—often accompanied by hefty demands for damages and the threat of lawsuits.

Known as non-practising entities (NPEs), and in some circles as ‘patent trolls’, the problem of how to clamp down on them has been debated endlessly on Capitol Hill and legislation has long been called for.

But despite widespread agreement that change was needed, Leahy’s statement outlining the reasons for the latest suspension contained an air of inevitability about it.

“I have said all along that we needed broad bipartisan support to get a bill through the Senate. Regrettably, competing companies on both sides of this issue refused to come to agreement on how to achieve that goal,” he said.

The proposed legislation is not the first to stumble along the way.

As Eric Schweibenz, partner at Oblon Spivak McClelland Maier & Neustadt LLP in Virginia, notes, the Innovation Act, introduced by Bob Goodlatte, has also stalled in the Senate.

Paul Devinsky, partner at McDermott Will & Emery LLP in Washington, DC, recalls several other attempts that have “died on the vine”.

The names he reels off include the Patent Abuse Reduction Act introduced by Senator John Cornyn, the Patent Litigation Integrity Act introduced by Senator Orrin Hatch and the Patent Litigation and Innovation Act introduced by Congressman Hakeem Jeffries.

Given those failures, and the collapse of the latest attempt at legislation, questions must surely be asked about what, if anything, can be done.

Schweibenz is not optimistic. “The practical reality is that there are certain special interest groups that will strongly oppose any new patent reform legislation because such groups believe that the current system in the US works well as is,” he says.

Schweibenz suggests that although there is “overwhelming” agreement that the patent troll problem is a serious issue, attention should perhaps be focused on improving current laws instead.

“In my view, the real debate centres around whether some of the other new laws that have been enacted should be given time to work, or whether additional measures should be put in place,” he says, pointing to the America Invents Act as an example.

But Devinsky says that while Leahy’s bill does include “some controversial provisions” there should be “room for compromise”, for example on aspects such as the “loser pays” provision and another provision requiring disclosure of anyone having a financial interest in the asserted patent.

Michael Oblon, partner at Perkins Coie in Washington, DC, stresses the effect the loser-pays provision could have had.

“The fee-shifting proposals in the legislation would have applied to all patent litigation, which could have had dramatic and negative effects on legitimate, potentially-beneficial patent enforcement,” he told WIPR.

“Perhaps the best way Congress could curb abusive patent troll behaviour is to legislate what damages are available when the patent is not practised,” he said.

Unintended consequences

It seems that many others agree. In the month prior to Leahy’s admission, a coalition of groups, including the Association of American Universities and the Association of American Medical Colleges, sent a letter to the senator expressing “serious concerns with the direction of patent legislation”.

The letter warned that changes to the patent system would weaken it and favour patent infringers at the expense of genuine patent holders.

It was this theory that contributed to the bill’s downfall.

Leahy’s admission of defeat added that the US Senate Judiciary Committee—which he chairs—had heard “repeated concerns” that the bill went beyond the scope of addressing patent trolls, and would have had “severe unintended consequences” on legitimate patent holders.

But Schweibenz says its failure was also due to some senators blocking the bill despite support from the House of Representatives, a bi-partisan group of other senators, and President Barack Obama.

“The legislative effort failed in large part due to bad timing and the rules of the US senate, which permit a very small number of members to block a bill from even coming to the floor for a vote,” Schweibenz says.

He adds that the results of the forthcoming November elections that will determine which political party controls the Senate and which controls the House may be the most important factor determining whether the legislation becomes law.

But, says Devinsky, the problem at election time will be that, with an inevitable focus on the economy, “almost every candidate” will say he/she is pro-patent and anti-troll.

“I expect very little clarity on anything more specific than ‘we have to do something about the NPE problem’ and ‘when I am elected I will take effective measures to combat the troll problem’,” he adds.

In July this year, in an apparent attempt to have some form of legislation passed quickly, the wheels were put in motion for another attempt to stall the advance of troll-type behaviour.

With a majority of 13 to 6, a House of Representatives subcommittee approved a draft of a new Targeting Rogue and Opaque Letters (TROL) Act.

If approved, it will allow the Federal Trade Commission (FTC) to pursue companies that demand excessive licensing fees for patents and threaten lawsuits.

But again, Schweibenz says, there are stumbling blocks.

“We believe that it is too early to tell whether it will gain bi-partisan support for a number of reasons, including whether a majority of the members of Congress, and ultimately the Supreme Court, would support expanding the reach and power of the FTC over patent issues,” he explains.

Guidance from the Supreme Court

Although no legislation has yet to make its way into law, and the future composition of the government is uncertain, a trio of Supreme Court decisions suggests the problem can be reduced without the need for new laws.

The Alice Corp v CLS Bank, Limelight Networks v Akamai Technologies and Nautilus Inc, v Biosig Instruments cases all provided interesting guidance. The hotly-anticipated judgments centred on the patentability of computer-implemented inventions, divided infringement and how patent claims should be phrased, respectively.

Devinsky says these judgments will “almost without doubt” have an impact on how troll-type operators behave in the future.

“The Nautilus decision already seems to be provoking a swell of support, both at the US Patent and Trademark Office (USPTO) and in the courts,” he says.

In that case, the Supreme Court said the US Court of Appeals for the Federal Circuit had set the bar too low in allowing patents to be written too vaguely.

The patent in question concerned technology built into fitness machines and used to monitor a user’s heartbeat. The court rejected the Federal Circuit’s previous definition that a patent claim passes the threshold as long as it is “amenable to construction” and not “insolubly ambiguous”.

"there are certain special interest groups that will strongly oppose any new patent reform legislation because such groups believe that the current system in the US works well as is."

Devinsky says: “It seems that not only will the USPTO insist on more definite claim language for cases under examination, the effects of which will only be seen long term, but courts will now be more amenable to pronouncing claims invalid where the language does not comport with the new standard.”

“Similarly, the Alice Corp decision [which held that computer-implemented inventions were not patentable] has provided defendants, attacked by patents that can be fairly and accurately characterised as little more than an abstract idea, with a powerful defence,” he adds.

Creating legislation that pleases both lawmakers and those who legitimately enforce their patents is clearly a thankless task—you only have to look at the repeated failure of attempts to have legislation passed to see the sensitivity of the issue.

There are some positive signs, the outcome of the US elections may prove crucial and Supreme Court decisions could yet have an impact. However, a solution still seems some way off.