Patent News

Jul. 9, 2015

The Hill Blog: A little known part of patent reform endangers all patents, by David A. Kappos

This post originally appeared in The Hill on July 9, 2015.

The stories follow a now-familiar theme, evoking sympathy for the victim and indignation calculated to spur political action.

The victim: an older couple’s family-owned restaurant, or a young inventor’s breakthrough tech start-up, or a small town’s general-merchandise store that’s beloved by generations of local residents.

And the threat? “Patent trolls”. More specifically, a letter informing the victim that she uses, say, a Wi-Fi router or computer scanner with patented technology inside and demanding a hefty fee lest the patent owner take the victim to court. The well-meaning but anxious victim, unacquainted with the intricacies of patent law, has little choice: Pay up, hire a lawyer and face exorbitant legal fees, or close their business.
What could be more unfair?

This narrative is driving one of the least understood but most insidious measures in the patent bills currently on their way to floor votes in the House and Senate: the so-called “covered customer stay” provision. In essence, “customer stay” allows a manufacturer to step in and take on accusations of patent infringement in court, shielding retailers, consumers and other “covered customers” whose own lawsuits would be “stayed” (or suspended) until the patent owner and manufacturer have sorted out their dispute.

Sounds like a solid solution. Except that it’s not. The “customer stay” language in the pending legislation could ravage intellectual property rights, while ironically causing more patent litigation instead of less. Not the kind of “two-for” we need for our patent system right now.

Misdirected patent litigation is a problem worth addressing, but the reform narrative is grossly overwrought and vastly exaggerated, yielding a correspondingly overbroad solution. The “customer stay” language in front of Congress uses a hazy definition of “customer” that encompasses everyone from the end-user of a technology to commercial entities up the supply chain all the way to the overseas manufacturers. Worse yet, the bills dictate a rigid application of “stay” by making it mandatory for judges.