Patent trolls and the US Innovation Act

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Businesses worldwide are becoming increasingly familiar with the “patent troll”. This is a person or company that attempts to enforce patent rights against alleged infringers beyond the actual value or scope of the patent. In many, probably most, cases the troll does not actually manufacture the goods or supply the services based upon the patent in question and often the business it targets is completely innocent. Nonetheless the business may feel it has no choice but to enter into an expensive settlement agreement with the troll.

The US Congress is currently debating legislation intended to address the harm caused by patent trolls. More specifically, it is debating two pieces of legislation – the Patent Act in the Senate and the Innovation Act in the House of Representatives. Reportedly, lawsuits brought by patent trolls were up nearly 42 per cent in the first quarter of 2015 as against the previous quarter.

The draft legislation before the House of Representatives, which appears to go further in tackling the problem, proposes to:

  • require that patent infringement claims can only be addressed in judicial districts where both parties have a clear presence;
  • advise district courts on how to create efficient guidelines to curb excessive discovery costs, which are a weapon employed by patent trolls to force unnecessary settlements from innocent businesses;
  • require a losing party who has made a groundless claim to pay the winning party’s legal fees; and
  • ensure that claims between patent trolls and product manufacturers are addressed before those between trolls and companies simply using the products.

Both bills, however, have been criticised by rights owners, particularly the pharmaceutical industry, as being unfairly weighted against their interests. Indeed the amendments made in Congressional hearings, which appeared to row back towards rights holders, have been criticised as not going far enough and jeopardising the effectiveness of a patent system that has worked well for over 200 years. Accordingly whether legislation finally emerges from Congress, and in what form, is not yet clear.