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By Tony Dutra
Sen. Charles E. Schumer (D-NY) intended to introduce legislation May 6 that he contends would allow patents asserted in litigation filed by so-called patent trolls to be challenged at the Patent Trial and Appeal Board while litigation is stayed. He further said that the bill would be of value “specifically among technology start-up companies.”
The bill's text, though, makes changes to the “covered business method” transitional program created by the America Invents Act that would appear to apply to any patent on administration or management, without a restriction on either the plaintiff or defendant. The bill further does away with a sunset provision--the CBM transitional program is scheduled to end in eight years.
Another bill in the House of Representatives attempted to define patent trolls, but it addressed the problem in a different way. H.R. 845, the Saving High-Tech Innovators from Egregious Legal Disputes Act (40 PTD, 2/28/13), would reduce litigation by patent trolls by making them liable for alleged infringers' court costs and attorneys' fees if their patents are found invalid or not infringed.
The CBM challenge option was added late in the patent reform debate, sponsored by Schumer and now retired Sen. Jon L. Kyl (R-Ariz.). Schumer fought off an amendment to stop the provision on the day the AIA came up for vote, and in doing so, indicated that he would have wanted an even broader provision.
The current bill would certainly fulfill that desire.
AIA Section 18(d)(1) currently applies to any patent “that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”
For purposes of this section, the term 'covered business method patent' means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of an enterprise, product, or service, except that the term does not include patents for technological inventions.
AIA Section 18(a)(3) contains the sunset provision. Schumer's bill would delete it.
“This legislation will provide small technology start-ups with the opportunity to efficiently address these claims outside of the legal system, saving billions of dollars in litigation fees,” Schumer said in a May 2 statement on his website. “The Patent and Trademark Office is already reviewing twenty patent cases in a temporary patent review program, and I am confident that extending this program will be beneficial to New York's and the nation's economy.”
He claimed that patent trolls cost operating companies $29 billion in lawsuits in 2011, a figure drawn from “The Direct Costs from NPE Disputes,” by Michael J. Meurer and James Bessen of Boston University. That study has been criticized on multiple grounds, though.
Schumer's office did not respond to BNA's request for an explanation of why the bill was especially relevant to patent trolls and start-up companies. However, it is likely that his intent matches the approach of the authors of the Shield Act. When Reps. Peter A. DeFazio (D-Ore.) and Jason E. Chaffetz (R-Utah) introduced the original Shield Act in the 112th Congress, the bill was equally silent on defining patent trolls, but they argued that by limiting the scope of the bill to computer hardware and software patents, they would mostly capture technologies favored by trolls.
In their 2013 version, though, DeFazio and Chaffetz added text that would identify trolls by exclusion--identifying conditions under which the “loser pays” rule would not apply.
A May 1 article published in TechCrunch quoted Schumer as saying that he did not believe the Shield Act would succeed because it “would get quashed by the trial lawyer lobby.”
Text is available at http://pub.bna.com/ptcj/SchumerTroll.pdf.
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