Patent News

Dec. 5, 2013 Bill to crack down on patent ‘trolls’ could hurt innovation at research universities like UNMC, by Joseph Morton

This post originally appeared in on December 5, 2013.

WASHINGTON — Patent trolls. Corporate executives cringe at their very mention.

These are no fairy-tale monsters hiding under bridges. The term applies to all-too-real people who blanket companies with baseless patent infringement claims.

The growing problem has produced calls for Congress to crack down on what some view as essentially extortion. The House of Representatives is expected to vote today on legislation aimed at doing just that.

Sponsored by Rep. Bob Goodlatte, R-Va., the bill previously seemed on course for passage. But some caution flags have been thrown up this week, as research universities and others warned that innovation could be undermined as an unintended consequence of the bill.

What everyone seems to agree on is that the stakes are substantial.

“It’s a national concern to companies both large and small,” said Bob Batt, Nebraska Furniture Mart executive vice president.

Patent trolls typically acquire — or claim to hold — rights to some minor element used in a software package or computer or fax machine. Then they send letters to companies that have used that software or device, claiming that the business owes them piles of dough to cover years worth of unpaid licensing fees.

Even when the claims are clearly without merit, companies are faced with an unpleasant choice: hiring expensive patent lawyers to fight the claims or throwing money at the claimants to make them go away.

Nebraska Attorney General Jon Bruning testified last month before a Senate subcommittee that an overhaul of the patent system is needed to deal with aggressive patent-enforcement firms.

Batt has been urging lawmakers to tackle the issue for years, and he gets a little emotional talking about a practice he describes as inherently un-American. Baseless patent claims add to the cost of retail goods to consumers without creating a single job, he said.

“You’re not adding value to the economy, you’re just sucking away from it,” he said.

Rep. Lee Terry, R-Neb., said this week that he has been urged by Batt and area businesses such as Hy-Vee to support the legislation.

But the University of Nebraska Medical Center is telling him to vote “no” because it could hamper efforts to develop profitable products from its research work.

Michael Dixon, president and CEO of UNeMed Corp., said the university licenses its research discoveries to companies, who invest in turning those advances into products. The companies hold exclusive patent rights, while the university receives royalties.

Dixon said the legislation has provisions that could force universities to be party to patent lawsuits, which they are not now. The bill also would make it more likely that dispute losers would have to pay the winners’ legal fees.

That combination means that universities would risk significant potential liabilities, Dixon said.

“If there’s a risk, I think you’d see universities throttle back and not patent and not license, and if that happens we lose a big chunk of our innovation ecosystem,” Dixon said.

Terry and his GOP colleagues from Nebraska, Reps. Jeff Fortenberry and Adrian Smith, all said Wednesday that they were still weighing the legislation.

Terry noted that he has opposed patent legislation in the past out of concern for small-time inventors who could be disadvantaged.

“There is a real problem. Everyone admits that the trolling issue is a real problem,” Terry said. “The issue is, does the House bill go too far and have the unintended consequences of really quashing the garage tinkerer?”