19 Comments

Summary:

A bill to curb abuses of the U.S. patent system was going full steam — supported by Republicans and Democrats, and the President. Now, one of the year’s few bipartisan initiatives is set to fail: here’s why.

Sen. Patrick Leahy

For a second there, it looked as if Congress was about to fix the country’s dysfunctional patent system. The House passed a bipartisan bill in December, supported by the White House and a coalition of retail and tech giants, that would have stopped the legal and economic mayhem wrought by so-called patent trolls. The Senate was racing to do the same — and then pfffftttt. Progress ground to a halt in committee last month.

Patent reform is now on life support, and time is running out before Congress decamps for the midterm campaign season. So what happened? According to people close to the process, a new lobbying push by the troll camp and old-guard patent companies has led Senate Democrats to get cold feet, which has set the table for the second major failure for patent reform in the past three years.

Bottled up

As the National Journal reported on Tuesday, patent reform legislation promised a rare bipartisan “feel-good moment” for a fractious Congress, but suddenly the wheels came off. The culprit is the Senate Judiciary Committee, which had originally scheduled a vote for March that would have led the bill to go the Senate floor, then on to mark-up and on to President Obama’s desk.

Instead of taking place in March, though, the vote has been postponed multiple times. Sources say the earliest day for a vote is now next Thursday, at which point Chairman Patrick Leahy (D-VT) could introduce a long-awaited Manager’s Amendment that would consolidate the latest proposals and spring the bill from committee. But based on previous delays, Leahy appears more likely to sit on his hands and let the bill languish until it dies.

Staff members of the Senate Judiciary Committee, who did not want to be named, said by phone that the hold up is due to disagreements over two new points of contention: a provision that would require patent plaintiffs to provide detailed descriptions of alleged infringement in the pleadings they file, and one that would alter the legal process known as discovery (in which each side has to produce documents and witnesses). The latter reform is important because patent trolls rely on the economic asymmetries of patent litigation — especially the threat of discovery, which is extremely time-consuming and expensive — to force their victims into settlements.

These proposed pleading and discovery reforms have until now been uncontroversial. Instead, the main points of contention had been over so-called “covered business methods” (which makes certain patents eligible for a quick out-of-court challenge) and fee-shifting, which would make it easier for targets of abusive patent suits to recoup legal costs. The “business method” reform is now considered dead, however, while the committee members have reportedly overcome the fee-shifting logjam.

So why the new delays? It may be the result of renewed lobbying pressure on a pivotal Senator.

Bipartisan support not enough

At a time of extreme gridlock in Washington, patent reform appeared to be one of the few areas on which Republicans and Democrats could come together. The House bill led by Rep. Bob Goodlatte (R-VA) passed by a wide margin and, in the Senate, the companion measure has influential champions; conservative Sen. John Cornyn (R-TX) supports it as a means to curb abusive lawsuits, while liberal Sen. Chuck Schumer (D-NY) has hailed patent reform as way to protect startups and his state’s emerging tech industry.

Chairman Leahy, too, has been a longtime champion of patent reform, especially when patent trolls mauled the small businesses and nonprofit groups in his home state of Vermont. Recently, though, he has sounded more ambivalent. Speaking to Politico Pro (sub req’d) this week, Leahy cautioned that proposed reform must avoid “unintended consequences” — a favorite talking point of patent trolls like Intellectual Ventures, which regularly invoke it in hopes of thwarting reforms that threaten their business model.

According to a tech industry source, Leahy has changed his position in part as a result of pressure from the Coalition for 21st Century Patent Reform, a lobbying group whose law firm Akin Gump recently hired Leahy’s long time chief-of-staff. The source added that Leahy is prepared to let the reform bill founder, and then draw political cover by casting blame for the failure on committee members’ inability to produce a suitable compromise. Meanwhile, the bill’s momentum has also been sputtering as a result of the trial lawyer bar pressuring other Senate Democrats to slow the bill.

This account of the Senate patent bill’s slow death is consistent with a source cited by Reuters, who said “It’s somewhere between sinking like a rock and air going out of it, like a balloon,” 

Judiciary Committee staff reached by phone angrily denied, however, the suggestion that the fix is in, claiming the Senator’s Leahy’s office is working nights and weekends to ensure the bill gets passed. Meanwhile, another tech industry source claimed the bill could still make it to the Senate by June.

Failure is an option

Those familiar with the patent debate will recall how the last grand attempt at reform proved a bust. In 2011, President Obama signed the America Invents Act, but the reform law did little to solve the ongoing wave of questionable patent lawsuits (including nearly 200 of them filed in one day in April).

The outcome was expected to be different this time around, in part because of growing awareness over the patent problem, and because reform is no longer regarded as just a parochial concern of the tech industry.

Now, however, the clock has almost run out. If Sen. Leahy fails to spring the bill soon, companies large and small can look forward to paying the trolls (who filed a record number of suits last year) for years to come — and passing the costs along to their customers.

You’re subscribed! If you like, you can update your settings

  1. Jeff,

    I disagree with almost your entire post and view on the subject matter. It’s subjective to the extreme and misleading in a few areas:

    #1 “Second Major Failure for Patent Reform in 3 Years”. This is utterly false. How can you claim the AIA was a failure when it’s impact hasn’t even been felt yet? The AIA even called for a study 18 months after it’s implementation that still hasn’t been done yet.

    #2 The Trolls are the only ones lobbying to stop the Innovation Act. What you’re failing to mention, and Dave Kappos went on record as saying, is that the Innovation Act sped through the House without any feedback or testimony from inventors, startups or small businesses that hold IP. Obviously there were players lobbying the House to push this bill through as quickly as possible – without consideration of the effects the bill would have on legitimate startups and inventors. Thankfully, anti-Innovation Act lobbying came into effect for the Senate to slow down this bill and think through some of the ramifications.

    I’m not going to disagree that there is a problem with patent trolls. However, based on the latest Supreme Court rulings, there has already been precedent set to shift fees to loser pays to halt some of the more notorious and ridiculous troll behavior. The larger issue though is that the Innovation Act would have made it near impossible for any startups or inventors to enforce their IP and patent rights. As a startup with IP, we feel very strongly that the Innovation Act would do more harm than good and at least the Senate is having a meaningful dialogue on it’s impact. I wrote more on our position as a startup here – http://venturebeat.com/2014/04/28/the-innovation-act-wins-startups-a-battle-but-loses-them-the-war/. I would hope you check that out to see that the Innovation Act would actually harm startups more than help them.

    Matt

    1. Tip of the hat to you, Matt. I couldn’t have said it better. I also am an inventor with IP, and the ramifications of the Innovation Act would definitely harm innovation from startups, small business, and inventors. If we cannot enforce or protect our IP, we cannot innovate in confidence without fear of a bigger fish coming to eat our meal (or us, for that matter).

      As to the AIA, and as an inventor, I find the “first to file” provision a hindrance for innovation. Pre AIA, during the “first to invent” era, once an invention is formulated, inventors had the freedom of at least one year to bring their invention to fruition or to find investors or perform market research before having to file with the USPTO. Now, with the AIA “first to file”, rather than spend energy and effort actualizing inventions, inventors have to stop product creation and file with the USPTO in haste, lest their idea be claimed by another.

      So as far as I, an actual inventor, am concerned, the AIA was indeed a failure. Not regarding curbing patent troll behavior, but in encouraging inventors to bring their inventions to the market. Now, rather than create, we must rush to find money, time, and attorneys, and rush to draft, edit, review, and file patent applications with the PTO. The First to File provision of the AIA was a BAD IDEA. It directly affects our business and greatly hinders us from focusing on creating products and bringing them to the market.

      1. Mike,

        I agree that “first to file” is not optimal for startups, but I believe the intent was to get the U.S. patent system on the same page with the rest of the world where first to file is already used. With that being said, I do think first to file definitely benefits larger corporations as they can pump out patent filings as needed. For a startup, you’re now faced with a bigger dilemma – keep your invention secret but lose out on potential investment or risk larger entities filing patents on your invention before you have a chance to file your own. As for us, we’re keeping as much as we can close to the vest and filing at least provisional patents as needed.

        Matt

    2. Bill Harding Matt Sunday, May 18, 2014

      You sound a lot like someone that has yet to be sued. Speaking as a startup that is being sued, and is on path to have to spend hundreds of thousands in discovery fees on a patent that is 100% bogus/overreaching, it is not enough for us to hope that the supreme court will fix this.

      I’m happy for you to have IP. But for every one mid-sized company like yours (has IP, wants to use it to sue big company), I read several stories, including my own, where smaller startups are getting punished without recourse by NPEs. Doing nothing is going to kill a lot more companies than doing something that’s not quite perfect.

  2. Politics ruins things faster than a few minor issues in a system that works well. No changes are needed to the patent system.

    1. I agree BongBong. No changes are needed. The courts are handling trolling behavior just fine, and companies in patent battles are realizing that being frivolous just passes money to attorneys and leaves everyone else in the same place.

      See here:

      http://gigaom.com/2014/05/16/apple-and-google-declare-patent-truce-will-dismiss-all-current-lawsuits/

      If we murk with the patent system, we must be very careful not to damage the ability for small inventors to be able to enforce their rights against big infringers.

  3. Patent Trolls & Lawyers are loving this broken system

    Making them lots of $$$

  4. The AIA was also poorly thought out, as the backers (groups like the EFF) thought it would be cute to make patent owners sue every infringer separately. They somehow believed this would “curtail” lawsuits.

    Anyone involved in the real world of patents knew this would be a disaster. Instead of one case with 20 defendants all in the same place, you now have 20 separate lawsuits. Wow, what a litigation REDUCTION tool. No wonder the defense bar loved it, it multiplied litigation by a factor of 10 overnight (10 answers, 10 motions to transfer, and so on).

    Fast forward a year or two and the usual anti-patent pundits are feigning surprise over the “rise” in litigation! How can this be?! These clowns are reaping what they sowed, sometimes not knowing they were doing big defense counsel bidding.

    1. Jingross, you cut right to the core of this alleged “issue.” The alleged dramatic rise in patent infringement suits has been caused by only one thing — the AIA prohibition of joinder. Now, there is no economy in filing suits against infringers of the same patent, because it simply isn’t allowed. Litigators love this aspect of the AIA. Every patent litigation law firm in the country (both plaintiff and defendant) is hearing a steady drumbeat of KA-ching!

      What’s really going on here, and everybody knows it, is that Google, Apple et al. are happy with their monopolies (which they obtained with the help of the patent system) and want to eliminate any and all competition and threats, and they have the money to raise the visibility of the alleged “troll” problem with politicians. The current situation is no different than Rockefeller, Morgan, Carnegie et al.’s purchase and control of the Federal Government for 40 years before Teddy Roosevelt cleaned up the mess they created. Are we really, as a people, ready to put our faith in the top monopolists in the country and create another ravaged underclass which wasn’t allowed to prosper until after the antitrust laws were enacted in the early 1900s? Google, Apple et al. are very bad operators, just as the oil, steel and financial barons of the late 1800s were, but the new monopolists have added a new wrinkle–they are hiding behind alleged “startup” mouthpieces. The Senate appears to have finally woken up to the grand mistake it was close to making.

      J

  5. I have an idea. Why not let the Supreme court invalidate software patents. After all you cannot patent mathematics, you cannot patent language and you cannot patent a logical train of thought. If software is a mathematical language which follows a logical train of thought then how it is patentable? Copy-write seems a better fit. It would solve all the patent troll problems, as it seems to all be coming out of that area anyway.

    1. I see an attempt to invalidate software patents might prove unsatisfactory. This is because almost all software requires hardware in order to function, and, as such, thereby involves changing or transforming a thing from one state into another state. So the hardware implementation of the software would remain patentable subject matter.

      The same is with mathematics/formulas. You cannot patent a mathematical formula, true, but if you were to invent a device that carries out the mathematical formula, then the device having the mathematical formula would qualify as patentable subject matter.

      Regarding copyrighting being a better fit for software, I agree with Cathy’s comment here — http://gigaom.com/2014/05/09/tech-world-stunned-as-court-rules-oracle-can-own-apis-google-loses-copyright-appeal/#comment-1461406 — in that “software/code is not just expressive language, but functional language, wherein bits of information are manipulated or processed, operating together as a utility”, and that copyrighting software would not really provide same/correct type of protection available for software operating as it operates as a utility, while at the same time, opening the floodgates on copyright infringement suits simply because, by nature or by being “user-friendly” or by following industry standards, most all software contains similar copy across many different software implementations.

  6. Um, do you get the sense that these commenters are astroturfers? I wonder if you tracert’d their IP addresses you wouldn’t find them all on K Street.

    1. AA,

      No, I wouldn’t say any of these commenters are from ‘K Street’ including myself. I included a link to an oped I wrote and I have a startup. The issue is that most startups don’t have IP in their first few years given it generally takes 3-5 years to get a granted patent. As a result, most startups are only looking at this via the prism of ‘patent trolls’. Not from the prism of how they would protect their IP and innovations in the marketplace against larger companies.

      Since we have a granted patent (and a few pending) we’re concerned with how the Innovation Act will affect not only ourselves, but other startups as they mature and secure their own IP. The Innovation Act will make it nearly impossible for any startup to enforce it’s IP against larger entities. Unfortunately, the larger fortune 500 tech companies have been controlling the messaging and media regarding the Innovation Act. This act only benefits them…

      Matt

  7. Erik Henderson Sunday, May 18, 2014

    I think you smeller is working great. Smells like fresh cut plastic in here.

  8. ‘A bill to curb abuses of the U.S. patent system’

    The bill will do no such thing. What it will do is further legalize theft.

    All this talk about trolls and so called ‘patent reform’ is just spin control by large infringers and their paid puppets to cover up their theft.

    http://www.npr.org/player/v2/mediaPlayer.html?action=1&t=1&islist=false&id=276448190&m=276545654&live=1
    http://www.npr.org/2013/11/06/243022966/secret-persuasion-how-big-campaign-donors-stay-anonymous

    The patent system now teeters on the brink of lawlessness. Call it what you will…patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: “we’re using your invention and we’re not going to stop or pay”. It’s a pure red herring by large invention thieves and their paid puppets to kill any inventor support system. Their goal is to legalize theft. The fact is, many of the large multinationals and their puppets who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so. To infringers the only patents that are legitimate are their own -if they have any. Meanwhile, the huge multinationals ship more and more US jobs overseas.

    It’s about property rights. They should not only be for the rich and powerful -campaign contributors. America’s founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity and the jobs the commercialization of those inventions bring. For 200 years the patent system has not only fueled the US economy, but the world’s. If we weaken the patent system, we force inventors underground like Stradivarius (anyone know how to make a Stradivarius violin?) and in turn weaken our economy and job creation. Worse yet, we destroy the American dream -the ability to prosper from our ingenuity for the benefit of our families and communities. To kill or weaken the patent system is to kill all our futures. Show me a country with weak or ineffective property rights and I’ll show you a weak economy with high unemployment. If we cannot own the product of our minds or labors, what can we be said to truly own. Life and liberty are fundamentally tied to and in fact based on property rights. Our very lives are inseparably tied to our property.

    Prior to the Supreme Court case eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the eBay decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back into the patent system with injunctions fully enforceable on all infringers by all patentees, large and small.

    Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

    For the truth about trolls and so-called patent reform, please see http://truereform.piausa.org/default.html#pt.
    http://piausa.wordpress.com/
    http://www.ipwatchdog.com/2014/04/18/for-whom-the-bell-tolls-the-us-patent-system/id=49067/
    http://www.hoover.org/publications/defining-ideas/article/142741

  9. Richard Frank Monday, May 19, 2014

    We wouldn’t have the very devices that most use to access the Internet right now if it wasn’t for the fact that 99% use to not infringe. Patents have become to generalized. Get rid of most if not all software patents and exploratory protection. Sorry but most software patents equate to putting an eraser on the end of a pencil.

  10. shoreline view Tuesday, May 20, 2014

    Amazon patenting photography in front of a white background ought to be all the warning anyone needs to realize reform is needed and needed now. Thanks to Stephen Colbert for pointing it out on his show last week.

    1. And that’s the point everybody’s trying to make – the Innovation Act won’t solve anything in regards to what USPTO grants. If anything, effort should be put forth on the patent office to better crowdsource prior art, limit or reduce claims that broad in nature, etc.

Comments have been disabled for this post