Patent Trolls Under New Threat by Bipartisan Bill

patent trolls 2This week, patent trolls have another reason for cowering under a bridge. A sixth bill has been introduced to Congress that is bipartisan and could have real effect on a growing problem for American businesses. I know. We’re surprised – and delighted! – too.

The intricacies of patent law may seem like a niche subject, but patent trolls have the potential to affect all companies.   Unfortunately, that potential is realized by the trolls, too.   Patent troll litigation is now the majority of all patent litigation in the United States, and cost $29 billion in direct costs in 2011 alone.

The definition is debated, but patent trolls generally operate like this. They buy up extremely broad technology patents that pretend to cover things like WiFi, scanning documents, even the Internet itself. They hire not engineers but lawyers, who send out thousands of demand letters asking for a licensing fee. Patent trolls aren’t discerning about whom they target. Increasingly, they aim at non-tech companies like real estate agents, hotel chains, retail stores and restaurants. These companies don’t have intellectual property lawyers to defend themselves. They buy a WiFi package or something similarly common and end up with a letter asking for a very expensive licensing fee- sometimes $1,000 per employee, with very little choice but to pay up.

Patent trolls could, and already have, had a detrimental effect on our members, big or small and tech-savvy or not. They are a menace to our economy and American innovation.

Earlier this week, Representatives Darrel Issa (R-CA) and Judy Chu (D-CA) introduced the Stopping Offensive Use of Patents Act, or STOP Act (H.R. 2766). The bill expands a small program at the Patent and Trademark Office created in 2011 that was created to combat broad business model patents from the financial sector. This was a reaction to the Great Recession, and in its short life it has already made a huge impact. It could have the same impact in the world of patent trolls. Instead of going through the costly process of opposing the patent in court, companies could take a cheaper option and appeal to this board. The STOP Act would make this temporary program permanent, and expand it include patents for all “products.” This small change to an existing program would have a huge effect on patent trolling; companies would have a cheaper option to defend their companies, and the costs and risks of being a patent troll would rise exponentially.

The STOP Act is very similar to another bill introduced in the Senate a few months ago by Senator Chuck Schumer (D-NY), called the Patent Quality Improvement Act (S. 866). This new bill, however, is a bipartisan effort by a Democrat and a Republican,  himself a holder of multiple patents. We at DMA are extremely pleased with how seriously Congress is taking this issue, and urge Congress to go ahead with this bill that has united such disparate members of Congress against a common enemy.

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Editor’s note:  Thanks to our fabulous DMA legal intern Alison Swift for her contributions to this article.  

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