The Slaying of the Patent Troll: A Fairytale

When I was a child, I read stories of terrifying trolls that lived under bridges and ate children trying to cross.  They were the creatures of nightmares, and patent trolls are no different. Patent troll is the name given to people or companies that do not manufacture products or supply services, but instead raise meritless patent infringement claims in order to collect licensing fees from accused infringers.  Small companies typically lack the financial capital to fight the claims and large companies will often settle for sizeable sums rather than go through lengthy and costly patent proceedings.

All parties agree that patent trolls are harmful to innovation and the patent system, but there is no consensus on the best course of action.  Courts have been struggling with how best to handle patent troll claims that enter their courtrooms, but without legislative reform, there is little that can be done.

Like a legendary knight sworn to protect innovation, Senator Leahy has waged war on patent trolls.  Patrick Leahy (D-Vt.), the Senate Judiciary Committee Chairman and co-sponsor of the Leahy-Smith America Invents Act, is attempting to push a bill through the senate that would change the playing field and crack down on patent troll claims.  Senator Leahy, however, faces an uphill battle as he attempts to have his bill passed both by Republicans who support the change and Democrats who argue that further sweeping overhauls to the patent litigation will only reduce frivolous litigation at the cost of preventing legitimate inventors from being able to protect their intellectual property. 

Senator Leahy

The bill, known as the Innovation Act, makes several changes to the current patent regime. Firstly, the bill introduces a fee-shifting scheme in which losing parties found to have brought meritless claims would be responsible for paying the winning party’s litigation costs. This would discourage meritless claimants from suing in the first place.  Furthermore, the bill includes joinder provisions to ensure that real parties in interest can no longer hide behind shell companies and can be held liable for those costs. Secondly, the bill calls for heightened pleading standards in patent litigation. Patent trolls are presently able to file vague suits with very limited pleadings, making it difficult for small companies to determine the scope and validity of the claims asserted without hiring specialized patent attorneys.  Thirdly, the bill calls for discovery reform, which imposes reasonable limits on initial discovery to help incentivize startups and other small companies to fight the trolls in court, rather than settle early.  In patent litigation, discovery is often the most burdensome and expensive part of the litigation, which lands heavily on the alleged infringer.  This reform would greatly reduce that burden. Fourthly, the bill heightens the standard for demand letters to include concrete information on the patent holder’s claim to give recipients the needed information and makes letters sent in bad faith actionable.

Despite his efforts, a new opponent of Senator Leahy’s bill has recently appeared.  Several big-players in the tech business, such as Apple, DuPont, Ford, GE, IBM, Microsoft, and Pfizer, have formed a coalition to oppose the bill.  Each of these companies once began as small start-ups like the ones falling victim to patent trolls today, so why wouldn’t they support this act?  The coalition claims that it is attempting to protect innovation and fears that the proposed bill would weaken the strength of patent protection, but some critics suggest another motivation for the opposition.  While these large companies have each lost money to patent trolls, they have also arguably all benefited from seeing their competitors squashed when unable to sustain litigation to defend against infringement claims.  Regardless of motives, this coalition will certainly make Senator Leahy’ fight more difficult.  For now, we can only wait and see how the bill progresses.

* Rebeca Echevarria is a third year law student at Wake Forest University School of Law. She has a Bachelor of Arts in Politics, International Relations, and Biomedical Ethics from Mount Holyoke College. Upon graduation in May 2014, Miss Echevarria intends to practice Intellectual Property and Biotechnology law.