SEMA eNews Vol. 18, No. 26, June 25, 2015

Legislation Advances in U.S. Congress to Combat Patent Trolls

By SEMA Washington, D.C., Staff
 


The Judiciary Committees in both the U.S. House of Representatives and U.S. Senate passed legislation targeting “patent trolls,” which are companies that aggressively enforce their patents rights beyond the scope of the actual patents. Patent trolls frequently obtain patents for goods and services they have no intention of offering and on common technologies or business practices. The trolls then send “demand” letters threatening patent-infringement lawsuits against unsuspecting businesses unless the business pays for a license. Companies may settle claims rather than risk court action, and settlements fund the trolls and encourage more trolling.

The bills approved by the House and Senate Judiciary Committees make patent ownership and licensing more transparent and would help to curtail patent-troll activity by requiring entities claiming patent infringement to clearly outline their claims in patent demand letters and to the courts. Costs associated with patent litigation would be controlled by providing mechanisms to delay the discovery process, which can cost non-infringing entities significant sums of money, and by allowing retailers at the end of the supply chain to continue to sell a product subject to patent litigation. The bills also create a small-business education and outreach program within the U.S. Patent and Trademark Office to assist companies caught in patent-infringement cases.

The two bills differ in a few ways, with only the House bill requiring patent-infringement suits be brought in judicial districts that have some reasonable connection to the dispute. The House bill also includes a "loser pays" provision to help prevent frivolous lawsuits by requiring the loser to pay the winner's legal fees. The Senate bill requires the loser to pay if a court determines the losing party was not objectively reasonable in initiating the lawsuit. The respective bills now go to the House and Senate floor for consideration.

The House Energy and Commerce Committee also approved legislation earlier this year to create a federal standard regarding patent trolls, which would preempt 20 different state laws on the issue. This bill outlines unfair and deceptive acts, provides the Federal Trade Commission with authority to investigate abusive practices and enforce the proposed law, and creates civil penalties of up to $5 million for related violations. This legislation also awaits consideration by the full House.

For more information, please contact Eric Snyder at erics@sema.org.

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