Patent News

May. 21, 2014

POLITICO: Patent reform hits dead end in Senate, by Erin Mershon and Tony Romm

This article originally appeared in POLITICO on May 21, 2014.

One of Silicon Valley’s top legislative priorities — curbing litigious “patent trolls” — appeared dead Wednesday after Senate Judiciary Committee Chairman Patrick Leahy pulled it from his panel’s agenda, citing weeks of fruitless negotiations.

The measure had been slated for consideration by the committee on Thursday, marking the sixth attempt to bring it up for a vote. But less than 24 hours before the scheduled markup, Leahy announced that members again had failed to reach a compromise — and that the bill would be put on hold indefinitely.

“I have said all along that we needed broad bipartisan support to get a bill through the Senate,” Leahy said in a statement. “Regrettably, competing companies on both sides of this issue refused to come to agreement on how to achieve that goal.”

Leahy expressed hope the panel can return to the issue this year, but he sounded less optimistic in an interview off the Senate floor: “We’re trying to protect people from patent trolls, but too many special interests don’t want to protect” them.

The announcement marks a major setback for Internet companies and other industries that have been pressing Congress to rein in patent trolls. Such firms threaten patent lawsuits to extract licensing fees from businesses — which critics say put a drag on innovation and the overall economy.

“Stakeholders that range from Internet companies to retailers to hospitals to restaurants, we’ve all compromised; we’ve all been at the table, trying to be helpful to negotiators,” said Michael Beckerman, president of The Internet Association, which represents Google, Facebook and other leading Web firms. “There are a handful of companies, and the patent trolls themselves, that oppose any kind of reform,” and they’ve tried to “slow this process down,” he said.]

The developments represent a sharp reversal for the reform effort, which has boasted strong political support, including from President Barack Obama. The House passed its own anti-troll legislation, the Innovation Act, with bipartisan backing in December.

The tech industry itself, while broadly supportive of cracking down on trolls, had been split on many of the specifics, with companies like Google and Cisco pushing to give the government more power to reject weak patents, and companies like Microsoft aiming to preserve businesses’ ability to defend their intellectual property in court. About 500 companies — including Google, Cisco, Microsoft and others — did come together May 14 to sign a letter in support of a compromise package of reforms.

But long-simmering disputes on the Hill intensified as Leahy moved toward a markup of his own measure.

One of the biggest friction points was over fee shifting, the idea of making the losing party in patent lawsuits pay the winner’s legal fees. Republicans on Senate Judiciary and pro-reform groups made it a top goal, but some Democratic members and trial lawyers warned that fee shifting could keep companies from pursuing legitimate lawsuits.

Earlier this month, Senate negotiators began to coalesce around compromise language from Sens. John Cornyn (R-Texas) and Chuck Schumer (D-N.Y.) that included milder litigation reforms. That effort, however, frayed as universities and other major patent holders argued the measure would have negative consequences for the patent system.

Senate Majority Leader Harry Reid (D-Nev.) played a decisive, behind-the-scenes role in the legislation’s fate, according to sources on and off the Hill. Reid told Leahy he could not put the bill on the floor given the opposition from trial lawyers, pharmaceutical companies and biotechnology giants, the sources said. Reid’s office did not comment for this story.

Despite signs that the legislation was in trouble, Leahy’s announcement caught some Republican Senate offices by surprise, arriving in the middle of a meeting on patent bill language, according to multiple staffers. With reform off the table for the foreseeable future, the finger pointing has begun.

“It’s disappointing the Majority Leader has allowed the demands of one special interest group to trump a bipartisan will in Congress and the overwhelming support of innovators and job creators,” Cornyn said, echoing the Republican line that that Reid caved to trial lawyers.

But skeptics of the patent reform push expressed relief.

“The first rule of patent legislation should be to do no harm,” said John Vaughn, executive vice president of the Association of American Universities. Efforts to address abusive behavior shouldn’t “undermine” a patent system that preserves the U.S. role as a “global innovation leader,” he said.

“The proposed legislation would have had severe unintended consequences on legitimate patent holders,” said Russ Merbeth, chief policy counsel for Intellectual Ventures, a company that’s been derided as the world’s biggest patent troll. Merbeth said he hoped lawmakers could move forward on “targeted” legislation focused on patent “demand letters” and ways to discourage frivolous lawsuits against small businesses.

The bills in Congress were primarily focused on curtailing patent trolls but did not address the explosion of patent lawsuits between big technology companies, such as Apple and Samsung.

Leahy’s co-sponsor on the measure, Sen. Mike Lee (R-Utah), said he remains “committed to doing something to alleviate this problem” of patent trolls, but gave no timeline.

Senators and reform advocates have repeatedly warned that if a deal can’t be reached this month, the chances for legislation wither as Congress goes into election mode this summer ahead of the 2014 midterms.

“The closer we get to the election, everybody knows what happens … it becomes more difficult to get things done,” Beckerman said.