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By Tony Dutra
Sept. 9 — Patent litigation legislation has “a lot of support,” House Judiciary Committee Chairman Bob Goodlatte (R-Va.) said, vowing to push his Innovation Act for a vote on the House floor.
Goodlatte, speaking to a crowd of congressional aides at a Sept. 8 meeting on Capitol Hill, parried a question about why H.R. 9 had been delayed after it had been scheduled for vote in July.
He instead pointed to a growing list of organizations—now over 330, he said—who support a measure to stop so-called “patent trolling” behavior in courts.
“There's a lot going on right now,” he said, referring to other legislative priorities such as budget authorization. “But there will be opportunities to bring this to the floor and I think this will come to the floor very soon.”
Goodlatte also continued to defend the most controversial aspect of the Innovation Act—“loser pays” fee shifting.
The bill's main purpose overall is to change the economics of suing for patent infringement.
Today, the cost of defending against a charge of infringement is so high that a patent owner can file a lawsuit without ever having to address the merits of the case, because the alleged infringer will often settle for a value lower than the expected cost of litigation.
By making it harder to plead infringement and moving high-cost discovery later in litigation, for example, H.R. 9 gives an alleged infringer more information about its likelihood of winning the case before the bulk of the costs are spent.
Fee shifting, however, is Goodlatte's biggest club: The more likely it is that a plaintiff with a frivolous case will end up paying the attorneys' fees of the improperly charged defendant, the less likely the lawsuit will be filed in the first place.
Critics argue that the fee-shifting provision of H.R. 9 virtually mandates an award of attorneys' fees and is “binary”—all or none.
They would prefer that judges have more discretion on when to give an award and how much.
Goodlatte disagreed, saying the provision reserves awards for only “the most egregious of actors.”
The Federal Circuit Bar Association sent a letter to Goodlatte this summer saying that the grant rate for requests for attorneys' fees was 50 percent for the first three months of 2015, reflecting district courts' increased willingness to shift fees since the U.S. Supreme Court's decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 2014 BL 118431, 110 U.S.P.Q.2d 1337 (2014).
In the Capitol Hill session—the latest in the Software and Information Industry Association’s Tech Policy Speaker Series—Goodlatte rejected the idea that codifying Octane Fitness would be sufficient to capture only the most egregious examples of patent trolling, despite the success rate for prevailing parties.
“It's a step in the right direction,” he said. “But the language we have in this legislation was very carefully negotiated. There will not be a huge number of cases where fee shifting will be awarded based on this language [compared to the standard set in Octane Fitness].”
A panel of stakeholders then presented the case in favor of the bill.
Mark MacCarthy, vice president of public policy at SIIA, moderated the session, joined by John Boswell, chief legal officer of SAS Institute Inc., Cary, N.C.; Mark Bohannon, vice president of corporate affairs and global public policy at Red Hat Inc., Raleigh, N.C.; Beth Provenzano, vice president of federal government relations of the National Retail Federation in Washington; and Daniel Zadoff, managing partner of Nutritionix, a web-based startup.
Boswell and Bohannon focused on the inequity of patent assertion entities—a neutral term for “patent troll”—being able to sue in the patentee-friendly U.S. District Court for the Eastern District of Texas, regardless of an alleged infringer's location.
H.R. 9 Section 3(g) limits venue to a defendant's location or in courts in districts where the invention in question was conceived or where the patentee has a manufacturing presence.
Patent assertion entities by definition do not manufacture anything, and they buy patents from inventors all over the world.
Many of the National Retail Federation's members have been targeted by “demand letters”—mass mailings to users of a patented technology, rather than the manufacturer, demanding a royalty to avoid a lawsuit.
The comparable Senate bill, S. 1137, addresses the demand-letter problem.
Goodlatte did not include demand-letter language in his bill. A separate House bill (H.R. 2045), dubbed the “Trol Act,” has the same intention as the Senate bill.
Nutritionix was the victim of a patent assertion entity with a patent that ultimately was defeated after the Supreme Court curtailed patents on computer-implemented inventions in Alice Corp. Pty Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 2014 BL 170103, 110 U.S.P.Q.2d 1976 (2014).
That case and a Supreme Court change—Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2014 BL 151635, 110 U.S.P.Q.2d 1688 (2014)—that makes patent claims more likely to be found invalid as indefinite will put a dent in the quantity of vague or ambiguous patents that patent trolls can assert, Zadoff said.
However, he said, a startup firm with limited money in the bank can usually not afford to wait out the litigation even if confident it will eventually win.
Legislation like the Innovation Act is necessary, then, despite anything the Supreme Court can do, Boswell said.
To contact the reporter on this story: Tony Dutra in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Blake Brittain in Washington at email@example.com
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