A key bill cracking down on patent trolls just got closer to becoming law

  ·  Brian Fung   ·  The Washington Post   ·   Link to Article

More than a year after Senate leaders thwarted an update to the nation's patent system, a new bill targeting so-called patent trolls has cleared a key hurdle in the chamber, paving the way for a vote on the Senate floor. Here's everything you need to know.

Fill me in. What just happened?

The Senate Judiciary Committee just approved a version of the Patent Act, a bill that makes it harder for patent owners to file lawsuits against businesses such as start-ups, restaurants, coffee shops, florists and building contractors.

Restaurants and coffee shops? What do those guys have to do with patents?

According to advocates, many were getting sued by companies that owned patents on technologies they were using in their businesses — WiFi, for instance, or large fans.

The folks filing the lawsuits are known as "non-practicing entities," companies that control patents but don't use them to manufacture anything. In recent years, some of these entities have become known as "patent trolls" because they go around making money from companies that choose to settle rather than fight the suits in court. These types of cases have been on the rise since 2007, though last year the pace of new cases declined for the first time in five years.

"If you believe in patents, you believe in curbing their abuse" by trolls, said Sen. Chuck Schumer (D-N.Y.). "You cannot let these tapeworms on the body politic keep sucking the lifeblood out of us."

What does the Senate's bill do?

It does a few things. Broadly speaking, it raises some requirements on what you have to do when you file a patent lawsuit. For instance, under the legislation, plaintiffs have to clearly state which patents they think are being infringed, which isn't really the case now.

It attempts to put limits on the amount of "discovery" that takes place in a lawsuit — essentially, the amount of work that either side must do to produce evidence that may be relevant to a case. Small companies who get hit with patent troll suits often say they settle because they can't afford the costs of discovery.

And it lays out conditions where the loser in a patent suit will have to cover the winner's legal fees — a move that the bill's backers say will help deter patent trolls from filing dumb suits they know they're likely to lose if they go to trial.

Sounds like some rather small changes around the edges.

It might sound like that, but there are millions, if not billions, of dollars at stake in this bill. That's because everyone from universities to tech companies to pharmaceutical companies to trial lawyers have an interest in shaping the legislation.

On one side are tech firms and retail businesses who've been hit the hardest by the patent troll suits. On the other side, biotech and pharmaceutical industries have been particularly active in trying to keep the bill from changing patent litigation too much -- because they rely on the system to protect their tremendous investments into new medical breakthroughs.

"I'll readily concede there are people who abuse the current system," said Sen. Dick Durbin (D-Ill.). "But this bill goes too far."

So, this bill is a win for tech?

Overall, yes. But the tech industry is livid over a last-minute addition to the bill that changes another aspect of the patent system.

What's that?

Separate from the patent litigation system is a process at the U.S Patent and Trademark Office that allows companies to challenge the validity of a patent. So for instance, if a company believes a patent troll is coming after them, it can ask the PTO to review the underlying patent that the lawsuit is based on.

This tactic, known as post-grant review, has become a powerful weapon in the hands of tech companies. It's been tremendously effective at neutralizing what the industry has taken to calling "bad patents," or patents whose claims are so flimsy that the PTO finds they should never have been granted in the first place. Nip the patent in the bud, and so goes the patent lawsuit with it.

But critics of the review process say it's too easy to get a patent invalidated — and so new provisions have been added that could lead to fewer patents getting invalidated through post-grant review.

What happens next?

There's still some negotiating to be done before the bill goes to the Senate floor. Some tech advocates are asking Congress for other measures in exchange for what they view as a now-weakened post-grant review process.

For instance, they want the Senate to extend the "covered business method," which is another form of post-grant review that deals primarily with financial services patents. By temporarily extending it so that non-financial services patents are also eligible for that type of review, the tech industry hopes to offset some of the effects of the last-minute amendments.

Then there's the matter of the House, where another patent bill, the Innovation Act, is awaiting its own markup.

Patents are an issue that policy analysts have said lawmakers would be able to address rather easily in this Congress. The reality has been a bit more complicated. Liberals from tech-heavy states like California and New York have found allies across the aisle, not to mention opponents in other Democratic states (some with large higher-educational institutions). It's a delicate dance that has fallen apart before. But now this bill is one step closer to being law.