Industry Commentary

Combatting Patent Trolls: Federal Legislation Is The Solution

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 the following:

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.

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