House bill addresses patent problems, but falls short
The term “patent troll” refers to a company that collects patents to use as its primary source of income instead of using them in its own product designs. These holding companies collect patent portfolios, and then use the threat of litigation to pressure companies into paying licensing fees.
Congressman Bob Goodlatte (R-Va) brought the bill to the House bill with wording that would've helped reduce the number of low quality patents that are issued. The updated version, according to the Washington Post, doesn't include that provision, which leaves a big tool in the pocket of patent trolls.
The argument that Microsoft, IBM, and a few other big companies used to get the wording cut was that it would unnecessarily undermine the rights of patent holders. They said the provision would discourage innovation because companies won't feel they can adequately protect the ideas and designs they invent. That, ironically, lets the trolls continue using many of the same patents they've historically relied on for frivolous lawsuits designed to essentially extort money out of big companies like Microsoft and IBM.
Rep. Goodlatte's bill isn't, however, a total loss because it requires plaintiffs filing infringement lawsuits to provide more details on the patents they're targeting and exactly how they are used.
His bill isn't the only one making the rounds in the House. Reps. Ted Deutch (D-Fl), Jared Polis (D-Co), and Tom Marino (R-Pa) have their own version they feel will help protect companies from the patent trolls.
Congressman Deutch said,
Intimidating small businesses, entrepreneurs, and nonprofits with vague demand letters has become one of the most common ways that patent trolls take advantage of the lack of transparency in our patent system. The targets of these demand letters are often left to decide whether or not to enter into expensive litigation without knowing any of the details regarding the patent in question, whose rights are being infringed, or how often similar demand letters are sent.
Their version of the bill would require much more disclosure from plaintiffs, accountability to the Patent and Trademark Office for the number of lawsuits filed, a public database of demand letters, and strict guidelines that require specific details in demand letters about the targeted patents.
Senators Patrick Leahy (D-Vt) and Mike Lee (R-Ut) are getting in on the action, too, with a Senate bill that requires more transparency in demand letters from patent holders. Their bill would require patent holders to identify who owns the patents, and would also let manufacturers join in lawsuits to protect their customers.
The idea behind the Senate bill is to stop frivolous patent lawsuits. Senator Leahy said,
When small businesses in Vermont and across the country are threatened with lawsuits for offering wi-fi to their customers or using document scanners in their offices, we can all agree the system is not being used as intended.
The measures proposed in all of these bills are a nice step forward in addressing the overwhelming issues with frivolous infringement lawsuits from patent trolls, but the concessions Congressman Goodlatte made in his bill may give us some foreshadowing. Even though it's ultimately in their best interests, big companies don't seem to want the Patent and Trademark Office reform that could help cut down on troll lawsuits.
Lodsys is a prime example of a company that's gaming the patent system as its revenue source. The company gained notoriety when it began threatening, and the suing, smaller developers that were using the in-app purchase mechanism Apple offers for iOS apps.
Apple paid licensing fees to Lodsys for patents related to in-app purchases, but then the company started targeting developers saying they needed to pay licensing fees, too. Lodsys used the threat of lengthy and expensive lawsuits to pressure developers into paying licensing fees even though it is Apple that provides the infrastructure and service.
Since most developers couldn't afford the potential lawsuits, they simply paid what Lodsys wanted to make the threat go away — which sounds surprisingly similar to extortion.
Even if the Goodlatte bill doesn't make it through a full House vote, another version will, and it probably won't include the cut patent reform provisions, either. The Senate will ultimately pass its own version of the bill, too, which then needs to be reconciled with the House's bill.
Since passing any bill is always an elaborate series of compromises, we can look to early versions to see what lawmakers are most willing to let go. This time, it's serious reform to help stop patent trolls from abusing the legal system. The message the hous is sending to patent trolls is that they can keep on with business as usual, just include more details in their threat letters.