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Exterminating Patent Pests

Sens. John Cornyn and Charles Grassley
Sen. John Cornyn (left). Photo by John Taylor

The next Congress will have a lot to do when its session begins in January. It looks as though one item on the agenda may be dealing with a troll infestation.

Earlier this year, I wrote about the ways in which so-called patent trolls have exploited the broad nature of the United States’ patent system. Patents serve a useful function in encouraging real technical innovation; however, by allowing companies or individuals to patent processes that boil down to ideas rather than inventions, the current system opens the door to all sorts of abuse.

The litigation I discussed back in April, Alice Corp. v. CLS Bank International, served as a convenient case in point. Alice dealt with a type of computerized escrow system, and hinged on whether the patents at issue pertained to a technological invention or to an abstract idea. As most observers expected, the court affirmed that the patent in Alice pertained to the latter, and was therefore invalid.

Unfortunately, the Supreme Court did not rule broadly enough to be of much help to patent lawyers and others trying to determine whether a given claim covers an abstract idea or not. Rob Merges, writing at SCOTUSblog, cited a variety of instances that the Alice decision would leave murky. For example, Google co-founder Larry Page holds a patent on page rank algorithm, a key to the search engine’s early success. Unlike the escrow idea in Alice, this is a patent that passes the common sense test. But if the court decided Page had been trying to patent the abstract idea of “weighting” different values, the patent might be rejected as incompatible with the framework the Supreme Court has since constructed to determine what is patentable in the first place. Because the justices could not agree on whether “business methods” as a class are patentable, the abstract idea criterion remains the sole basis to accept or reject a given claim of this type.

The system is murky enough for actors operating in good faith. When you add patent trolls to the mix, however, the need for reform becomes even more evident.

Since the courts have not, as yet, proposed a direct solution to the messy state of U.S. patent law, it is up to legislators to step in. It seems they may be primed to actually do so. Senate Minority Whip John Cornyn, R-Texas, has told journalists that lawmakers “absolutely” will pass a bill next year to address the patent troll problem. Cornyn and Sen. Charles Schumer, D-New York, worked on a bill last summer that did not advance, but which Cornyn said will serve as a starting point for the new legislation. The White House has also indicated that it will support a bill to crack down on the trolls.

Cornyn and Schumer’s proposal focuses on the infringement claim part of the process. The proposed legislation would require claims to be more specific, limit the scope of discovery and make it easier for defendants to join interested parties in the litigation. Perhaps most importantly, it would shift litigation costs if the underlying claim was questionable. This is critical because many trolls expect companies to pay them to settle rather than incur the expense of defending against even a baseless infringement claim. Sen. Orrin Hatch, R-Utah, outlined a proposal in November that covered similar ground.

All of these ideas are positive steps, but none of them will stop patent trolls at their point of origin. Doing so would require more serious reform of the way patents are issued in the first place. One idea that would hinder the trolls is a requirement that companies filing for patents prove that they actively participate in the industry at issue. With no ties to manufacturing, research, development or other related activities, trolls would find this requirement very difficult, while few legitimate enterprises would need to worry about it. The downside is that if this requirement is written too broadly, it could also harm individual inventors who lack the capital to bring their ideas to market, but who could legitimately expect to be compensated through royalties or by the sale of their intellectual property.

Trademark law requires plaintiffs to prove the intention of “use” - that is, a demonstrable intention to actually use the trademark. Rights can be lost if the holder abandons the mark. Since patent trolls tend to buy and hold stables of patents, unused except as fulcrums for litigation, a similar requirement for patents could prove challenging to them.

Hatch noted that low-quality patents are the food upon which patent trolls feed. Increasing funding to the patent office and improving access to information technologies would allow patent examiners to better performer their function. It remains to be seen whether Congress is prepared to make the big changes that are needed to give patent law a clear, reasonable set of rules to govern the 21st century, in which inventions tend to come in the form of intellectual, rather than physical, property.

But at least the two parties broadly agree that something needs to be done, and such agreement is scarce in Washington nowadays. Even if this round of legislation does not provide the major reforms that are needed to clarify what sorts of inventions should be patentable, it should go a long way toward cleaning out the trolls.

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