S.1720: A Real Solution to Patent Trolling?

Patent trolls have long been a problem in the realm of intellectual property, but companies have yet to devise a solution to successfully combat against them. As the years have gone by, patent trolls have no longer solely affected the technology industry but have begun to target many other businesses as well.

Well, now the government is getting involved in this widespread issue. The Senate is considering a bill, the Patent Transparency and Improvements Act that would force the losers of patent lawsuits to cover the winner’s legal fees in order to minimize patent trolling. The bill is similar to one that passed the House this past December. Diane Feinstein, a Democratic Senator from California, stated, “I think we are united on the troll. The troll must go.” The White House also has said it supports the measure.

Will Congress’ actions, if implemented, help to prevent patent trolling? There is evidence that suggests it will.

Making the losing party pay the other party’s legal fees will discourage patent trolls from pursuing legal action. Engaging in litigation can be a taxing and costly process, especially for small businesses, who lack the funds to engage in huge lawsuits. And in 2011, small businesses encompassed 90 percent of patent troll victims. The cost to defendants in a patent lawsuit can range from two to six million dollars. However, now faced with potential consequences, these companies engaging in patent trolling will have to think twice before filing lawsuit and extract licensing fees.

In addition, the bill would help protect true innovators. The bill’s provisions deter patent trolling companies, which exist solely to make a profit and do not actually contribute real innovation. These companies don’t create anything themselves; instead, they buy old patents and use them to file suits against other companies. Since patent trolling companies make their money off of legal cases, the potential cost not only deters these companies from filing lawsuits but also discourages anyone from forming these ventures in the first place.

Meanwhile, businesses that are actually creating innovative products or services can benefit from the bill. 40 percent of small businesses affected by patent trolls stated that the lawsuits they were forced to undergo hurt their business and ability to innovate. With the decreased threat of patent trolls, businesses will feel freer to create unique and new products without worrying about frivolous lawsuits.

The bill potentially also evens out the bias in the legal system that has long worked in favor of plaintiffs in intellectual property cases. Suing a company or individual over patent rights is relatively simple and inexpensive, but defending them can be extremely complex and costly. The fact is, patent cases are difficult to defend, many businesses are forced to settle out of court, which still costs them. Knowing that losers will have to pay for legal fees will encourage businesses to hold out for court settlement, whereas patent trollers will have a much harder time to defend their bogus claims.

While the bill exhibits many benefits against patent trolling, another question arises in the discussion of the bill: How will it affect legitimate patent litigation?

Some worry that the bill, while working against bogus patent troll lawsuits, could also affect litigation of serious infringements on patent rights. Skeptics of the bill argue that the bill goes too far and it could make it more difficult for inventors to profit from their innovations. Combatting this fear, several senators note that any legislation they support will protect the rights of companies that have legitimate claims to sue. Plus, parties with real claims of patent infringement still have the advantage of being the plaintiff in lawsuit, and can be confident of winning if their claim is truly legitimate. While fears of protecting innovation are not unfounded, those entering lawsuits to protect their legitimate patents need not fear of taking legal action.

If the bill passes in Congress and is signed into law by President Obama, businesses entangled in frivolous lawsuits will gain vital help in protecting their companies from patent trolls.

[Reuters] [Forbes] [Nextgov] [The Hill]

—

Sarah Helden (@shelden430)

Sarah Helden

Sarah Helden is a graduate of The George Washington University and a student at the London School of Economics. She was formerly an intern at Law Street Media. Contact Sarah at staff@LawStreetmedia.com.