Patent News

Jan. 30, 2014

National Journal: IBM, Microsoft, and friends renew fight against patent-troll measure, by Dustin Volz

This article originally appeared in National Journal on January 30, 2014.

A powerful coalition of large tech firms and other business stakeholders are rising up once again in opposition to a contentious patent-reform provision, as the Senate weighs a path forward on legislation to slay so-called patent trolls.

BSA | The Software Alliance and over a hundred other groups sent a letter to leadership of the Senate Judiciary Committee on Thursday warning that expansion of a patent-review program housed at the Patent and Trademark Office will “hurt America’s innovators—both small and large—and weaken America’s competitive advantage around the world, at a time when we can least afford it.”

The missive is endorsed by several large tech firms, including IBM, Microsoft, and Qualcomm, and it arrives a day before Senate Judiciary staffers are to sit down with key stakeholders for a briefing on the measure and other patent quality issues, the third of four such educational meetings that have been scheduled. Other signatories include groups representing American universities, telecommunications and pharmaceutical companies, and financial services.

The provision, known to patent wonks as “covered business method” review, would expand the patent office’s ability to reject certain infringement claims made on low-quality patents. Currently only financial services patents that are not technological in nature are eligible for such review, a mechanism that was adopted with the passage of the 2011 America Invents Act.

Many supporters of the review method expansion view it as the Excalibur necessary to win the war against patent trolls, the term du jour given to companies that purchase cheap patents and use them for profit by filing questionable infringement lawsuits, often against small software startups that struggle to afford legal representation.

But BSA and others contend that allowing the patent office to discard more patents considered poor in quality overcorrects a system enshrined in the Constitution that has been the envy of the rest of the world for 200 years. Expanding the review “would be to turn ill-advisedly and irrevocably in a new direction—discriminating against an entire class of technology innovation,” the groups write in their opposition letter.

Parts of the letter are nearly identical to one sent to the House Judiciary Committee in September, which led to the review expansion’s eventual removal by Chairman Bob Goodlatte, a Virginia Republican, in a manager’s amendment during the markup process. Goodlatte originally favored the expansion, but determined to get his Innovation Act passed in 2013 and avoid a messy fight, he left the measure on the cutting-room floor during committee markup.

Goodlatte quickly muscled his edited Innovation Act through the House, earning a sweeping 325-91 victory with strong support from both parties. The omnibus bill would require plaintiffs to be more specific in patent lawsuits, increase transparency of patent ownership, reduce the costs of discovery and protect end users, such as retailers or coffee shops. It additionally makes it easier for those who successfully defend themselves against patent trolls to recover legal costs, a process known as fee-shifting.

The letter touts its victory in killing review method expanison in the House, noting that “the provision was removed [from the Innovation Act] because it had become clear that maintaining the measure was creating a roadblock to passing any legislation. We believe the same is true in the Senate.

“Expanding the CBM program is not just ill-advised from a political standpoint, but from a policy perspective as well.”

Sen. Chuck Schumer has favored the CBM expansion, introducing a bill last year that would allow the review method for all industries and make it permanent. In December, the New York Democrat declared that “a patent-reform bill that does not address patent quality is like treating the symptom instead of the disease.”

“If anyone thinks they have valid patents, they shouldn’t be afraid of a preliminary proceeding,” Schumer said during a Judiciary hearing examining patent litigation. “The only people who are afraid of this are those who know their patents are invalid.”

Patent-litigation reform is capturing some renewed interest in Washington after a brief lull following the passage of the Innovation Act. On Tuesday, President Obama urged Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.”

Those 19 words may have been a fleeting nod to reformers, but the patent community took it as a reassuring sign that this time, at least, Congress and Obama agreed something needed to be done soon to curb the growing abuse of patent trolling, which by some estimates cost the economy tens of billions of dollars a year. The White House has endorsed Goodlatte’s Innovation Act and also urged expansion of covered business method review.

“It was a brief mention, but a strong mention,” said Michael Beckerman, president and CEO of the Internet Association. “This does need to be on a little bit of a quick timeline, by Senate standards, because this is an election year.”

Minority Leader Mitch McConnell, who resolutely remained sitting with his arms folded during much of the president’s speech, even leapt out of his seat to applaud the call for patent reform.