Patent News

Dec. 12, 2013

POLITICO: Patent warfare: Trolls vs. inventors, by Erin Mershon

This article originally appeared in POLITICO on December 12, 2013.

Trolls are invading Washington.

Hairy green monsters wield clubs and sneer menacingly in advertisements across Hill publications and websites — part of a campaign to curb litigious firms known as patent trolls.

Opponents paint a different picture: that of the tinkering inventor, a modern-day Thomas Edison whose innovative efforts could be quashed by patent legislation that goes too far.

The dueling images add a visceral edge to what is normally a dry and legalistic intellectual property issue. And the intense debate — which has drawn in major U.S. companies like Google, Microsoft, Qualcomm and General Electric — underscores the high stakes for a range of industries.

The rhetoric from both camps is heating up after the House last week passed a bill to rein in expensive troll lawsuits. With the White House supporting the effort and the Senate Judiciary Committee poised to take up its own measure, patent litigation reform could be one of the few pieces of tech legislation to come out of the 113th Congress.

Critics say the simplistic image of the villainous troll obscures the complexities of the modern patent system — and the protections it affords to small-time inventors.

“It’s unfortunate that that cartoon image has become somewhat defining of what the debate is about,” said Russ Merbeth, chief policy counsel for Intellectual Ventures, a major patent holder that has been widely characterized as a troll. “This is really complicated stuff and [reform] has implications for legitimate holders of intellectual property. Their concerns really are warranted.”

Patent trolls — also known as patent assertion entities, or PAEs — don’t manufacture products based on the patents they hold but instead sue or threaten to sue companies for infringement. According to critics, trolls often deploy vaguely worded, poor-quality patents — and use them to extort licensing fees or legal settlements from companies ranging from tech giants to small businesses.

Many of the biggest U.S. companies are lobbying heavily on troll legislation, reflecting the issue’s high-priority status in corporate America.

Google, Microsoft and other major tech companies have all fought hard to shape the legislation, working with groups like the Internet Association and the Application Developers Alliance. On the other side, patent-heavy tech companies like Qualcomm and General Electric have joined with pharmaceutical giants like Eli Lilly to oppose the bills through trade groups like the Innovation Alliance and the Coalition for 21st Century Patent Reform.

Reform advocates say they want to rid the patent system of abusive behavior by bad actors — and argue the “troll” label fits.

“A troll sits under a bridge, and he jumps out and charges you a toll. He wants something from someone who’s otherwise just going about their business,” said Jon Potter, president of the Application Developers Alliance. “They find a business model that’s popular, build some patents around it or buy some they can broadly interpret, and start sending demand letters and suing companies.”

The House bill, sponsored by Judiciary Committee Chairman Bob Goodlatte (R-Va.), has moved relatively swiftly, getting the nod from the full chamber just six weeks after it was introduced — a sharp contrast to the last major patent overhaul in 2011, which took years to negotiate before final passage.

The rapid advance is due in part to industry groups like the National Retail Federation, National Restaurant Association and American Hotel & Lodging Association that have joined the legislative push, saying their members are increasingly on the receiving end of troll demands.

“This bill is geared toward making patent litigation a fairer process, reducing the cost of it, and that really benefits everybody in the process — not just defendants, certainly not just the big companies. It’s those little guys, the end-users,” Goodlatte said after the House vote to pass the bill.

But opponents of the legislation say they are the true defenders of “the little guy.” While they agree with the goal of eliminating bad actors, they say the provisions lawmakers are debating would actually harm inventors by devaluing their patent rights and their ability to defend intellectual property in court.

And they’re deploying their own public relations weapon — prominent inventors like Dean Kamen, the man behind the Segway electric vehicle, and Greg Raleigh, who did pioneering work on 4G communications — to make the case that antitroll bills could do collateral damage to innovators working on the next big thing.

“There’s a lot of concern that [the House bill] not only won’t [stop the trolls], but it will serve to dramatically increase the barriers, especially for small inventors, to get and protect their IP, which will prevent the public from getting access to great technology,” Kamen said last week.

Navigating the dueling arguments is no easy task for lawmakers and others not versed in the arcane details of intellectual property law. Members of Congress who themselves hold patents are divided on the issue: Rep. Darrell Issa (R-Calif.), who holds 37 car alarm patents, is a supporter of the Goodlatte bill, while Rep. Thomas Massie (R-Ky.), who holds over 20 patents related to touch technology, voted against the legislation.

The research on the topic is similarly split. Opponents point to a Government Accountability Office report from August that showed a majority of patent lawsuits aren’t brought by patent assertion entities, while advocates cite a 2012 study that comes to the opposite conclusion.

And the Federal Trade Commission, which has authority to enforce regulations against “unfair and deceptive business practices,” has stayed neutral in the fight, choosing instead to undertake a study of patent assertion entities. It seems unlikely that Washington will have the patience to wait for the results of the FTC review, which agency officials have said could take two years to complete.

Supporters and opponents are already focusing attention on the Senate as the legislative work moves to the upper chamber. Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.), who’s holding a legislative hearing Tuesday, says he’s committed to passing “meaningful” patent reforms during the current Congress.