‘All Options’ Should Be Considered to Curb Patent Litigation Abuse, House Judiciary’s Coble Says
Patent litigation abuse “strikes at the very heart of American innovation and job creation” -- and Congress should consider ways to fix problems in the legal system that patent assertion entities (PAEs) exploit in abusive lawsuits, said House Judiciary Committee Chairman Bob Goodlatte, R-Va., Thursday during an IP Subcommittee hearing. While the America Invents Act was the “most significant reform to the patent system in my lifetime,” addressing issues related to patent quality, issues that directly related to PAEs or “patent trolls” did not make it into the final bill, he said. “All options should be on the table” for addressing patent litigation abuse, including remedies instituted by Congress, the U.S. Patent and Trademark Office (PTO), the courts and industry stakeholders, said Subcommittee Chairman Howard Coble, R-N.C.
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The legislation that got the most attention at Thursday’s hearing was the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act, which would force any plaintiff who the court designates a “patent troll” to pay all costs and attorney’s fees associated with a patent infringement lawsuit if the plaintiff loses the case (WID Feb 28 p6). Other possible legislative fixes deal with patent discovery abuse -- limiting initial patent discovery and requiring the party seeking the documents to pay all costs for seeking out additional documentation -- and allowing stays of action when a patent lawsuit involves a PAE, Coble said.
House Judiciary Ranking Member John Conyers, D-Mich., questioned the need for the SHIELD Act. Current U.S. patent law already provides for a “balanced approach” on fee shifting; while the SHIELD Act is designed to protect against meritless patent claims, “I suspect the tools to do this already exist,” he said. It would be better to fix the patent abuse problem by improving patent quality and institute rules that improve notice requirements for patent ownership, Conyers said.
Any legislative fix Congress decides to use should be mindful of the effects that fix will have on the entire patent system, said Subcommittee Ranking Member Mel Watt, D-N.C. “I'm concerned that an insular view that only seeks to deter one class of conduct without examining the incentives that may unintentionally be provided to others is wrongheaded and may result in today’s prey becoming tomorrow’s predators,” he said. “Erecting overly broad barriers to enforcing patents could lead to infringers having little or no incentive to respect the patent owner, which would in turn destabilize the marketplace and devalue patents."
Rep. Jason Chaffetz, R-Utah, said he agreed with Conyers that a legislative remedy on patent litigation abuse should be balanced and ensure protections for the “little guy.” Chaffetz and Rep. Peter DeFazio, D-Ore., introduced the SHIELD Act in late February. The bill is a “straightforward approach” to a “massive problem” that will help protect small businesses that often fall prey to PAE lawsuits, Chaffetz said.
Representatives of Adobe, Cisco and the SAS Institute told the subcommittee their companies want Congress to draft laws that will address patent litigation abuse. Dana Rao, Adobe’s vice president-intellectual property and litigation, said Adobe supports the SHIELD Act and advocates for strengthening Rule 11 of the Federal Rules of Civil Procedure. Rao said he was also speaking on behalf of BSA/The Software Alliance. The SHIELD Act would reduce the number of PAEs over time, he said. “If you change the incentives, you'll see the numbers go down,” Rao said. Cisco General Counsel Mark Chandler said Cisco supports the SHIELD Act, along with fixes that would curb PAE use of the International Trade Commission, improve technical language in the AIA and amend the reach of prior use rights (WID Mar 14 p7). The “patent troll problem” is entirely a federal government issue, said SAS Chief Legal Officer John Boswell. “Only another federal institution, Congress, can fix this problem,” he said. In addition to the SHIELD Act, SAS advocates for the patent discovery abuse fix, which builds on the Model Order on Electronic Discovery proposed by Federal Circuit Chief Judge Randall Rader, Boswell said. “We believe that this approach is narrowly tailored, without restricting the ability of parties to get evidence that would be enlightening,” he said. “What it does do is remove the ability to use discovery as an abusive weapon."
Congress should be cautious about “taking legislative steps that could have unintended consequences for a system that is critical to our economic growth and dynamism,” said Graham Gerst, a partner at the Global IP Law Group, a law firm that has represented a range of clients from “Fortune 100 companies to individual inventors” on patent issues. “We already have weakened patent enforcement rights to a great degree, and, as a result, we have hurt companies we intended to help. … Our patent system is still digesting several significant changes made over the last couple of years. We should wait to understand the full effect those changes are having before any new significant legislation in this area.” Additionally, while PAEs and non-practicing entities are “politically unpopular,” they are not new, Gerst said. “They serve an important role in the patent ecosystem, providing a mechanism to reward innovators, which is the goal of the patent system,” he said.
The Software and Information Industry Association applauded the committee for tackling the subject of patent trolls. Adobe and SAS Institute are members of SIIA. “Without federal action, patent trolls will continue to damage the economy, hurt America’s tech industry and threaten innovation,” but “sensible changes” to the law -- such as the SHIELD Act and shifting cost burdens for excessive discovery requests -- will curb abusive litigation, said SIIA President Ken Wasch.