Richard Lloyd

The patent market might be a year older and, one hopes, a year wiser, but you wouldn’t know it from watching yesterday’s action in Washington DC. In the US capital it was deja-vu all over again as Congressman Bob Goodlatte, Chairman of the House of Representatives’ Judiciary Committee, effectively reintroduced the Innovation Act, the bill that sailed through the House in late 2013 and which represents his attempt to address what he claims are the litigation abuses which plague the American patent system, stifle innovation and harm the US economy.

Chairman Goodlatte and a group of other members of Congress hailed the reintroduction with some familiar rhetoric around “patent trolls”, even though he has previously said he dislikes the term because the issue is really about behaviours not actors. But, with $130 million worth of specifically anti-troll lobbying power making very clear its support for the legislation, maybe he has had a rethink. 

“In recent years we have seen an exponential increase in the use of weak or poorly granted patents by patent trolls to file numerous patent infringement lawsuits against American businesses with the hope of securing a quick payday,” Goodlatte commented in a statement. He went on to add: “With our current patent laws being abused in ways that are threatening the survival of American innovation, the Congress must act to curb abusive patent litigation.”

Congressman Issa, who was installed as Chairman of the Subcommittee on Courts, IP and the Internet after last year’s mid-term elections, also got in on the rhetorical act. “Increasingly Americans find innovation obstructed with attempts to enter the marketplace frequently shutdown by well-funded patent trolls who exploit loopholes in our patent system, bullying inventors and small businesses with frivolous lawsuits to the tune of $29 billion each year,” he said, repeating the discredited Bessen and Meurer research that was rendered meaningless following the pair’s redefinition of what “troll” means late last year. While reportedly being the richest member of Congress, Issa is also the owner of 37 patents which should give him an insight into the system that few other legislators have. 

The widespread use of the term “patent troll” is nothing new, of course, but we’re still waiting for a member of Congress to tell us what it means. Without that we’re left in a Kafkaesque world where we know the name of the guilty party, but not who they actually are. And that matters – a lot. If you frame legislation as being designed to impede a specific kind of entity – as was the case yesterday – it is incumbent on you to say who the entity is and how your plans will affect it but no-one else. When you are planning to fundamentally change a patent system that has served the US so well for so long that becomes even more important. The silence on this from the members of Congress introducing the Innovation Act was deafening.     

The fact is that if you want to target the problem actors in the system – those plaintiffs who genuinely abuse it - you go after their primary weapon, demand letters, you offer end users a good level of protection and you seek to enhance transparency around ownership. And if your focus really is litigation abuse, you also do something about the behaviour of some defendants, most of them deep pocketed and many of them operating in high-tech. The broader based package of plaintiff-focused reforms reintroduced by Goodlatte suggests very strongly that “trolls” are not the real target.

Matt Levy, patent counsel of the Computer and Communications Industry Association, said in the most recent edition of IAM: “I think that part of the purpose of the patent system should be to advantage those that actually want to do something with their patents.” Many in the pro-reform camp would probably agree with Levy, but let’s have that debate, look also at defendants and stop clinging to a loosely defined, poorly understood moniker that might play well in parts of the press but does little for the legislative process except to distort it.

The other notable aspect of Goodlatte largely reintroducing the Innovation Act was that it ignores many of the changes to the patent landscape that have occurred over the last year.

As any keen market observer knows, we have had a series of decisions from the Supreme Court, including two on the high-profile topic of fee-shifting and one relating to the patentability of software; there has been a decline in patent litigation filing rates, with some recent analysis even suggesting that the fall might be much more pronounced than originally thought; more specifically, non-practising entity litigation rates are in freefall; the Judicial Conference has announced changes to heightened pleading requirements; and the impact of the PTAB regime at the USPTO introduced by the America Invents Act is getting ever-stronger. All of that has caused many – including Senators Durbin and Coons – to question the pace of reform, and whether broad-based change is needed in the first place. Apparently, Goodlatte believes that they are all wrong and nothing much has changed at all.

Should we be surprised that the congressman simply reintroduced his bill? Probably not. For starters version one received bipartisan backing and was approved by a vote of 325 to 91. So why water something down that received such overwhelming support in the House? Plus, this legislation represents a starting point, with Goodlatte marking out the areas which he thinks need to be addressed. He knows that compromise may come in the Senate, particularly if the likes of Durbin and Coons can successfully advocate a change of pace or a whittling down of the package and a general desire among senators to look for consensus among stakeholders rather than overtly favour one side.  

With opposition to wide-ranging reform much more organised than it was last time and some prominent Republicans outside Congress making their concerns very clear, it is possible that what we started with yesterday will look very different by the time it ends up on President Obama’s desk. With that in mind, it is worth nothing that USPTO director-designate Michelle Lee has stated that she dislikes talk of trolls: “I don’t find the term helpful. It means different things to different people. We need to focus on behaviour.”

Lee is absolutely right, of course; but if that really is to be the case, yesterday’s rhetoric, as well as Goodlatte and co’s seeming refusal to accept the huge transformations in the patent landscape that have occurred over the last 12 months, need to be challenged effectively, coherently and in language that US legislators and their staffers can understand. Opponents of profound change have a funding mountain to overcome, but they have strong arguments on their side. The battle has begun. The identity of the victor has yet to be determined.