Postmortem For Patent Reform Bill

Postmortem For Patent Reform Bill Diego M. Radzinschi / NLJ Patrick Leahy (D-VT)

After months of intense lobbying and negotiation on Capitol Hill, the push to reform patent litigation rules this year lost its momentum in the Senate.

The leading bill, the Patent Trans­parency and Improvements Act, languished on the Senate Judiciary Com­mittee agenda without a vote for almost two months, testing the optimism of senators who insisted in April a deal would be reached.

Sen. Patrick Leahy, D-Vt., chairman of the Judiciary Committee, last month pulled the plug — removing the bill from the agenda and not giving any timeline to put it back on. Before the announcement, staffers were still meeting about compromise language to confront abusive patent litigation tactics against technology companies and retailers without restricting access to the courts for legitimate patent holders.

Sen. Chuck Grassley, R-Iowa, the top Republican on the committee, said in a written statement that Leahy’s move to abandon the reform bill “surprised and disappointed” him.

At the time of the bill’s demise, a draft had already taken shape with the potential to pass the Senate, lawyers and lobbyists close to the negotiations say. But the process fell victim to political pressures connected with the November elections, and to opposition by groups such as the American Association for Justice, a trial lawyer advocacy organization that often opposes congressional attempts to tinker with how lawyers fight in court — and what they can win.

The finger-pointing began almost immediately. “Competing companies on both sides of this issue refused to come to agreement” on how to craft bill provisions with broad, bipartisan support to get through the Senate, Leahy said on May 21. “If the stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the committee,” Leahy said in a written statement.

Sen. John Cornyn, R-Texas, who handled much of the negotiations, directed his criticism at Senate Majority Leader Harry Reid, D-Nev., and alluded to opposition from the American Association for Justice. “It’s disappointing the majority leader has allowed the demands of one special-interest group to trump a bipartisan will in Congress and the overwhelming support of innovators and job creators,” Cornyn said.

Compromise gets more difficult as it gets closer to the elections in November, and Reid would want to avoid bringing forward a patent reform bill that would have split the Senate Democratic caucus, lawyers and lobbyists following the legislation said. When the House passed a version of patent litigation reform, The Innovation Act, on a 325-91 vote in December, 64 Democrats voted against it and 27 for the measure.

A STRONGER HAND

The looming election also meant patent reform advocates who liked provisions of the House bill would be more keen to wait. If Republicans gain control of the Senate, they could bring a bill with stronger language to the floor.

The negotiations on the Senate bill centered on provisions including heightened pleading requirements and the limits of discovery. But it was the debate over fee-shifting that highlighted the competing interests trying to shape the bill — and the challenges of trying to move those opposing forces into alignment.

The House bill included a provision that would require entities that pursued meritless suits to pay reasonable attorney fees. Leahy said in March that he would add similar language to the Senate bill. Cornyn championed the change as a way to undermine so called “patent trolls” that file frivolous lawsuits in the pursuit of quick settlements. Retail groups and business advocates have clamored for relief from lawsuits, and the White House has supported reforms.The American Association for Justice, which spent $2 million on lobbying between Oct. 1 and March 31 on issues that included patent reform, has long opposed fee-shifting and other provisions. The trial lawyers contend that such measures could restrict access to the courts and lead to additional restrictions on litigation.

“These types of proposals, which add unnecessary and unfair requirements to patent holders, will serve as a template for additional significant and burdensome tort ‘reforms,’ ” Linda Lipsen, the group’s chief executive officer, wrote in a letter to the House Judiciary Committee in November.

The organization maintains a low public profile on the issue of patent reform. Its online archive of news releases contains no information related to patent litigation reform, and the topic is not included on a list of issues posted on its website. A representative from the association did not respond to requests for comment.

The group found an ally in Sen. Dick Durbin, D-Ill., the majority whip, who expressed opposition to fee-shifting soon after the patent litigation reform bill was introduced.

“I start with some skepticism when the premise is to reduce the access to the judicial system,” Durbin said during a hearing in December.

Durbin, who referred to a letter from three Illinois universities opposing fee-shifting, said the provision would “create a powerful disincentive for universities to enforce their patent rights.

“The argument, I believe, is that you need pretty deep pockets to live under this new system, fee-shifting system, because you may end up, if it doesn’t go your way, you may holding a big bag of obligations,” Durbin said then.

Another complication came not from lobbyists but the U.S. Supreme Court. A unanimous high court issued two rulings April 29 that served as warning shots to lawyers who bring frivolous patent infringement suits. The decisions in Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare Health Management System gave additional discretion to judges to award fees in patent cases.

The high court ruling pleased the technology and manufacturing industries, which pushed for fee-shifting on Capitol Hill. But tech advocates said the justices’ decisions didn’t go far enough on their own to change the patent-troll business model.

Leahy said he hopes to bring back a patent reform bill later this year. A coalition of technology and innovation groups that advocated for change were displeased at the sudden demise of the Patent Transparency and Improvements Act in the Senate.

“The decision is particularly disappointing as the Innovation Act passed with a strong bipartisan vote in the House, and there was the basis for a bipartisan agreement in the Senate Judiciary Committee just weeks ago,” said Dean Garfield, president and chief executive officer of the Information Technology Industry Council.

Contact Todd Ruger at truger@alm.com.

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