Combatting Patent Trolls: Federal Legislation Is The Solution
- By Don Erickson
- Nov 01, 2016
During this unusual political season, the presidential nominees
have focused on significant national issues that receive constant
media coverage such as border security and immigration, race relations,
criminal justice reform, and taxes. The major presidential
candidates and the national media have dedicated far less attention
to a serious threat that affects our economy, small businesses, and future innovation
by manufacturers. That threat is the patent troll litigation which is filling
up the dockets in our federal courts.
For years, patent trolls have ensnarled many security manufacturers – particularly
those who have made significant R&D investments – in convoluted legal
extortion schemes that have no other effect than to compel the settlement of baseless
patent infringement claims. Fortunately, there have been recent government
actions taken that may slow the proliferation of patent troll litigation. However,
mobilizing and amplifying the industry’s voice behind federal patent reform legislation
is the single most effective solution that can be taken to reverse the trend of
security manufacturers finding themselves trapped in these legal fights.
The negative reach and impact of patent troll litigation filed against manufacturers
across industries is staggering. Nearly 4,100 companies were sued by patent
trolls last year and the total number of patent infringement suits filed by patent
trolls increased five-fold between 2010 and 2015. Through its active involvement
in a powerful multi-industry coalition known as United for Patent Reform, the
Security Industry Association (SIA) has been working to persuade members of
Congress to pass federal legislation to curtail these unscrupulous practices by patent
trolls. Regrettably, sensible patent reform legislation remains stalled in Congress,
blocked by special interest groups determined to protect the race-to-thecourthouse
approach regularly practiced by patent trolls.
Executives from security manufacturers are mindful of how future innovation
could be severely impacted by increased patent troll litigation. For these leaders,
having to wait for the highly polarized Congress to prescribe a legislative remedy
to the patent troll epidemic does not enhance business confidence in our nation’s
patent system. Despite understandable pessimism, a legislative fix by Congress
is the least costly, most far-reaching, and ultimately the most effective long-term
solution to reversing the impact of unscrupulous businesses aggressively abusing
the patent system.
Skeptics of the prospect for enactment of meaningful patent reform legislation
by the end of this year or during the next Congress should consider the limitations
of other well-intentioned potential solutions. According to the National Conference
of State Legislatures (NCSL), approximately 27 states have enacted legislation
since 2013 to curb patent abuse. State laws are steps in the right direction
but these statutes vary in scope and the patent system is derived from the U.S.
Constitution and federal law. In the federal arena, changes made at the end of last
year to the Federal Rules of Criminal Procedure will make it more difficult for
patent assertion entities (PAEs are firms that buy and assert patents as their business
model) to file suits and increase the burden to justify why plaintiffs should be
granted relief in patent cases. While these are promising actions, patent abuse will
continue to be a major legal expense for security manufacturers unless federal law
is significantly changed.
With the strong support of SIA and the United for Patent Reform coalition,
the U.S. House and Senate Judiciary Committees have each passed similar legislation
to combat patent troll practices through a number of key provisions including
Targeting abusive patent litigation. The bills target abusive patent litigation behavior
and not specific entities with the goal of preventing individuals from taking
advantage of gaps in the system to engage in litigation extortion. It does not attempt
to eliminate valid patent litigation.
Increasing transparency. The bills include heightened pleading standards and
transparency provisions. Requiring parties to perform due diligence before filing
an infringement suit is just plain common sense. This not only reduces litigation
expenses, but saves the court’s time and resources. Greater transparency and information
is a good thing and it makes our patent system stronger.
Modernized fee shifting. The legislation includes a modernized version of Section
285 fee shifting that is fair, clear and will ensure consistent judicial determinations
on who should pay legal costs.
Customer stay. This provision in both bills allows the stay of an infringement
case against an end-user while the manufacturer of the product litigates the alleged
infringement. This prevents duplicative lawsuits from clogging federal court dockets
and provides relief for American businesses that have been unfairly targeted.
As the industry prepares for certain change in Congress and the White House
following this month’s elections, this is a critical time for the security industry to
mobilize more effectively in support of such sensible patent reform legislation and
participate in a campaign to advance this cause. In September, the United for Patent
Reform coalition launched the “Don’t Bully My Business” campaign to tell
the stories of countless small business owners who have expended considerable
resources against the threat of patent trolls. Security manufacturers, particularly
small businesses, should support the coalition’s efforts by sharing their story. Collectively,
the industry should seize this opportunity to protect R&D dollars and
restore confidence in our intellectual property system.
This article originally appeared in the November 2016 issue of Security Today.