Schumer Bill Aims to Stop Patent Trolls
U.S. Senator Charles Schumer (D-New York) will be introducing legislation next week that could stop many patent suits from proceeding in court.
Schumers bill, which will be introduced after Congress resumes work on Monday, would expand a provision Schumer and Senator Jon Kyl (R-Arizona) added to the 2011 patent reform legislation known as the America Invents Act. That provision instituted a program that allowed companies in the financial services industry to challenge business-method patents at the U.S. Patent and Trademark Office. The senators new bill would allow more businesses, including technology start-ups, to request that the PTO review the patents asserted against them before the lawsuit continues in court.
The proposed legislation is a response to outrage over the large number of lawsuits filed by companies that exist primarily to assert patentsoften called patent trolls. While companies have complained about these non-practicing entities for some time, studies released over the past two years examining their cost to businesses and their impact on innovation have gotten the attention of lawmakers on Capitol Hill.
Patent trolls are bullying New Yorks technology companies, stymieing innovation, and dragging down growth, Schumer said in a statement. This legislation will provide small technology start-ups with the opportunity to efficiently address these claims outside of the legal system, saving billions of dollars in litigation fees.
Schumer said his program would not only help resolve existing suits in a low-cost way, but would also deter non-practicing entities (NPEs) that bring such suits from filing in the future. Such companies often acquire low-quality patents that use broad language and then wait for another company to develop a similar technology. They then file suit, knowing it is often less expensive for the accused infringer to settle rather than fight in court.
Schumer pointed out that in 2011 alone, NPEs cost operating companies $29 billion. The average settlement, he said, costs a small or medium-sized company $1.33 million, while an in-court defense would cost the same company an average of $1.75 million per case.
Under the Schumer-Kyl provision in the patent reform legislation, experts at the PTO can review a challenged business method patent in what is called a post-grant review. If the PTO finds it more likely than not that the patent will be deemed invalid, it will take a second look and return a decision quickly. Since the program began, about 20 patents have been challenged through the PTO, Schumer said. The number of suits brought by NPEs against tech companies, however, is much greater than those involving business method patents.
The provision was given only temporary status within the AIA, so Schumers bill not only seeks to expand it to include businesses outside the financial services industry, but would also remove its temporary status.
Another bill attempting to tackle the patent troll problem, called the SHIELD Act, (Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 ), has been introduced in the House by Representatives Peter DeFazio (D-Oregon) and Jason Chaffetz (R-Utah). That bill proposes that a plaintiff who loses such a case pay the cost of the litigation for both parties. This, the congressman have said, would thwart attempts to bring cases that are unlikely to prevail but are likely to win them a quick settlement.