In Senate, Optimism Grows for Patent Reform This Year

In Senate, Optimism Grows for Patent Reform This Year Photo: Diego M. Radzinschi / NLJ Senator Patrick Leahy (D-VT)

The Senate Judiciary Committee plans to move forward on patent system reform as soon as next week, and senators expressed optimism Thursday that compromise on key proposals could allow a bill to pass this year.

Sen. Patrick Leahy, D-Vt., chairman of the committee, announced during a hearing that he would introduce a new version of the leading bill, the Patent Transparency and Improvements Act. Leahy introduced the measure with co-sponsors Mike Lee, R-Utah; Sheldon Whitehouse, D-R.I.; and Amy Klobuchar, D-Minn.

The bill aims to stop so-called “patent trolls” from filing frivolous lawsuits, and includes provisions intended to strengthen the patent-challenge process and improve transparency of patent ownership. The House passed a patent reform bill last year, and President Obama called for patent reform in his State of the Union speech in January.

Leahy said during a committee hearing that the new language would require entities that pursued lawsuits with no reasonable basis to pay reasonable attorney fees. Such a fee-shifting provision was not in the original bill but has been championed by sens. John Cornyn, R-Texas, and Orrin Hatch, R-Utah.

Leahy said he was working with Hatch on a provision to make it harder to use shell corporations to avoid paying judgments or fees. Following the hearing, Hatch said plaintiffs would post bonds to cover any costs—something he included in his version of patent reform last year.

“I appreciate the many different perspectives on these provisions, but we know we have to strike a balance,” Leahy said. “We’re not going have 10 different bills, we’ll have one.”

Leahy said in a written statement that discussions would continue and he hopes the panel would “come together on an agreement in the next few days.” The changes follow a series of briefings in January and February that allowed many sides—inventors, businesses, practitioners and consumers—to weigh in. The process has made the bill better, Leahy said.

As a result, Leahy said, he is making changes to the “customer stay” provision, although he did not detail what the change would be. Groups including the National Retail Federation expressed concern that the existing language would make it harder for retailers and other businesses to defend themselves from abusive patent litigation.

The customer-stay provision would automatically hold patent infringement suits against businesses sued for using a manufacturer’s product while that manufacturer fights the patent case, the retail group wrote in a letter to the committee in December.

However, that is “undermined by the additional language of the provision explicitly intended to bind retailers to decisions made in the manufacturers’ cases,” the retail group wrote.

During the hearing Thursday, Cornyn expressed optimism despite some news reports suggesting election-year politics could scuttle a bill. “We’re not at the finish line yet, but I know we’re close,” he said. “I think this could get done if we keep our nose to the grindstone.”

Sen. Dianne Feinstein, D-Calif., however, said she was “finding herself between sixes and sevens.” California is home to the top five patent-producing cities and more than 40 percent of the country’s venture capital, she said.

“Behind these words, for a California senator, is a number of conflicting interests,” Feinstein said. “That’s what I have to try to reconcile in whatever bill that comes out—that not only is Silicon Valley satisfied, not only is the biotech industry satisfied, but the universities and the small inventors are as well.”

Sen. Chuck Schumer, D-N.Y., said it would be “a very difficult line” to walk between a bill so weak it does virtually nothing and one that can win majority support, given the many competing interests. He specifically cited the fee-shifting idea, saying it might work for a big corporation but not for a little company that might lack the resources to sustain a protracted lawsuit.

“They can’t wait five years. They can’t afford $100,000 a year of expensive litigation,” Schumer said. “We have to do something for the small little companies and not just have the big boys get in a room and decide what to do, and I will be carrying that banner in this committee.”

Contact Todd Ruger at truger@alm.com. On Twitter: @ToddRuger.

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