Patent Trolls Have A New Enemy

A blog about business and economics.
Oct. 24 2013 8:06 PM

Patent Trolls Have A New Enemy

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Bob Goodlatte, patent-troll killer

Photo by JIM WATSON/AFP/Getty Images

Matthew Yglesias is on vacation.

On Wednesday, Rep. Bob Goodlatte (R-VA) has introduced “the Innovation Act,” a bill designed to attack patent trolling. It’s a bipartisan effort compiled from previous bills from both sides of the aisle, and it’s attracted the praise of a number of public interest groups, including Public Knowledge and the Electronic Frontier Foundation—the latter calls it the “Best Troll-Killing Bill Yet.

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The Innovation Act would target the parts of the legal system most abused by patent trolls: the threshold for bringing a complaint, the liability and transparency of the party alleging infringement, and the cost for parties of defending against a suit.

First off, the party alleging infringement would have to specifically identify which parts of a patent have been violated. That might not sound like much, but right now, initial claims can begin as general statements accusing the defendant of violating “one or more” parts of a patent.

Second, the bill would create a “fee shifting” arrangement. In the U.S., courtroom costs are generally borne by each party separately, which discourages anyone from suing another person unless he or she is reasonably confident in his or her case—or that the defendant will pay a settlement to avoid the suit altogether. The Innovation Act would shift some fees onto the “non-prevailing party,” though there are exceptions if the court finds the case was “substantially justified,” or if it’s otherwise unjust. The provision is unclear, but at least it’s unclear in the right direction.

For comparison, the European Union is considering a system that would borrow the English model for allocating court costs. In England, the loser pays all of the costs—which is perfect, assuming the right person never loses. Still, that system goes far in ruining the patent-troll business model.

The Innovation Act would also make the actual legal process easier for defendants. Discovery is one of the biggest weapons in a patent troll’s arsenal—and they don’t need to win a case to use it. Discovery is the process requiring parties to disclose certain information to each other when it’s relevant to a case. For companies, this can easily become millions of documents, all of which a lawyer may need to review. The party alleged to have infringed a patent is usually the one that receives the bulk of discovery requests. The bill limits discovery while a judge determines what certain terms in a patent claim mean—which may itself require a process of discovery. Overall, it will delay a troll’s ability to wage a discovery offensive, and give the defense a greater opportunity to get the case dismissed.

The Innovation Act won’t stop trolls from demanding settlements up front, but it does make trials a much less threatening proposition. If successful, the broad effects of the bill would do a lot of damage to patent trolls’ bottom lines.  

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