As I've written before, patent trolls drain billions of dollars from the U.S. economy every year by exploiting a complex patent system to extort money from thousands of legitimate companies around the country. The troll business model is as simple as it is malicious: Because the patent system is heavily weighted towards patent owners, it's easy for a patent troll to mount an infringement suit and it's costly -- often $2-5 million -- for others to defend against it. That means large and small companies alike are willing to pay a troll solely to settle and avoid the time and expense of a protracted legal battle.
Because the costs of being a patent troll are comparatively low, this business model can be extremely profitable, and more and more companies are starting up for the sole purpose of using patents to extract money from honest businesses. Nobody is immune to being a patent troll target, and that fact is beginning to drive some innovators away from founding new startups.
President Obama recognizes the problem; he called for patent reform both a year ago and again in his State of the Union address this year. And the House of Representatives has already passed the Innovation Act by an overwhelming bipartisan vote (325-91).
Now it's the Senate's turn to act, and the Senate Judiciary Committee has been working long hours on its bill. Just before the Senate left for a two-week recess earlier this month, Chairman Patrick Leahy (D-Vermont) announced a "broad bipartisan agreement" on patent reform. Senator Leahy plans to release the revised bill when the Senate returns.
The drafts that have circulated so far include balanced, bipartisan solutions that would address the patent troll problem in a few ways. First, they would require a patent holder to provide basic but important details, most critically what the defendant is actually accused of doing. Under the current law, a patent owner need only identify the patent it's asserting and state that the defendant is infringing, without having to point to anything more specific. This leaves businesses in the frustrating position of having to spend thousands of dollars just to find out what they're being accused of.
Second, the drafts also discourage frivolous patent infringement suits by making it easier for those unfairly targeted to obtain an award of fees and expenses. Until now, courts have rarely awarded attorney fees even in meritless cases. And by putting limits on discovery, the Innovation Act can prevent the trollish tactic of driving up discovery costs as a way to bully defendants into negotiation and settlement. These provisions work together to disincentivize the troll business model of manipulating patent litigation.
Regrettably, the bill does not include a provision to address patent quality. Such a provision would have made the bill even more effective.
I am gratified to see the time and intellect the Senate Judiciary Committee has devoted to getting this right amid enormous pressure from those misusing the patent system. Committee members spent weeks listening to stakeholders and holding substantive, in depth discussions. Now we're likely see the bipartisan agreement in principle that Senator Leahy mentioned reflected in a manager's amendment later this week.
The House has already acted; the White House has said enough is enough. It's time for the Senate to do their part to reform the patent system so that it rewards innovation -- not trolls trying to manipulate the system. The legislation Senator Leahy plans to propose this week would bring us one step closer to a balanced, workable solution that will take some of the profit out of the patent troll playbook. It's one that anyone who understands the role of patents in innovation and cares about the overall economy should support.