A committee in the lower house of US Congress has approved an amended bill aimed at clamping down on frivolous non-practising entities (NPEs).
The Innovation Act, which was passed by The House of Representatives Judiciary Committee on November 20 by 33 votes to 5, will now be sent to the full House for a second vote.
It is the latest attempt by the government to stop companies, sometimes referred to as "patent trolls", from using patents to file frivolous lawsuits in pursuit of a payout.
According to Rory Radding, partner at Edwards Wildman Palmer LLP in New York, there were interesting aspects to the bill, such as a requirement for plaintiffs to provide disclosure on patent ownership.
“A lot of troll-type companies are owned by a company, which is then owned by another company, and it makes it hard to determine who has the real interest in the patent. They [the troll] can hide behind a web and it’s hard to determine exactly who you are dealing with,” Radding told WIPR.
Other recommendations in the bill include allowing judges to award fees to the winner and asking companies filing infringement lawsuits to provide specific details about what patent is infringed and how it is used.
The bill calls for “an identification of each accused apparatus, product, feature, device, method, system, process, function, act, service, or other instrumentality … alleged to infringe the claim”.
On determining costs the bill says the court “shall award a prevailing accused infringer reasonable attorney fees and expenses incurred”.
Radding said: “The loser pays attorneys fee is a deterrent to trolls in England and Europe and this is another issue that’s been percolating for the last few years.”
In June, the White House urged Congress to take steps to curb frivolous lawsuits by NPEs. The suits are especially common in the technology sector.
In September, The Federal Trade Commission launched a study on the issue and announced it would be using its subpoena power to gather facts and information about trends relating to frivolous litigation.
Among the proposals to have been dropped from the latest bill, which was first introduced by House Representative Robert Goodlatte earlier this year, include plans to expand the covered business method (CBM) examination procedure.
CBMs, which came into force following the America Invents Act, allow companies accused of patent infringement to seek a validity challenge at the US Patent and Trademark Office, without the need for litigation in the courts, provided the patent is related to finance.
However, the proposals, which would have expanded CBM’s scope beyond finance, were met with opposition by technology companies with large patent portfolios, including Microsoft and IBM.
House Representative Zoe Lofgren said in a statement that the amendments “improved the bill and further efforts to resolve additional issues will receive attention between today and House floor action”.
However, Radding added that as the bill is in its early stages, it was still a long way off being implemented.
“This [passing a bill into law] can be a drawn out process and I anticipate there may be further changes yet before anything becomes law.”
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