A new front in the war on patent ‘trolls’

Advocates are scrambling for new ways to crack down on “patent trolls,” the companies that profit by threatening meritless patent-infringement lawsuits, after hopes for a comprehensive reform bill expired in the Senate.

One idea gaining traction in both chambers is going after “demand letters,” which are the often-vague letters that patent trolls send in bulk, threatening to sue for infringement, in the hopes of getting recipients to pay costly licensing fees to avoid going to court.

Patent reform advocates say these letters especially hurt small companies and individuals who do not have the legal resources to gauge the validity of the letter’s infringement claim. They therefore feel more acute pressure to pay the licensing fees in order to escape millions in court costs.

“Demand letters are a huge problem and we need to fix it,” said Julie Samuels, executive director of tech advocacy group Engine.

The enthusiasm for demand-letter bills comes after Senate Judiciary Chairman Patrick Leahy (D-Vt.) said Wednesday that he would drop his sweeping patent reform bill from his committee’s agenda.

For weeks, Leahy delayed committee consideration of his bill as he and other key members of the committee worked to reach a compromise on some of the more contentious patent reform proposals.

But citing divisions between special interest groups that were too wide to bridge, Leahy shelved his bill Wednesday, likely ending any chance for comprehensive patent reform in the Senate and killing the momentum that had been created when the House passed Judiciary Chairman Bob Goodlatte’s (R-Va.) patent reform bill late last year.{mosads}

The more narrowly-focused demand-letter legislation stands a better chance than Leahy’s sweeping bill, according to one patent lobbyist.

Getting it through Congress is “a distinct possibility because that’s sort of the genesis of the [patent troll] problem,” the lobbyist said.

“Absolutely, this could end up being the new focus.”

While demand-letter legislation would appease those that worried Leahy’s bill was too broad and would have too many unintended consequences, it remains to be seen if reform advocates, especially the tech industry, would get behind a narrow measure, the lobbyist said.

In the Senate, Sen. Claire McCaskill (D-Mo.) has introduced a demand-letter bill, the Transparency in Assertion of Patents Act, which would allow the Federal Trade Commission (FTC) to define what constitutes a “deceptive demand letter” and bring charges against the companies that send them.

In the House, Rep. Lee Terry (R-Neb.) is circulating a draft of his demand-letter bill, which would require the letters include more specific information and would “enhance” the authority held by the FTC and state Attorneys General by allowing them to bring fines against the senders.

That bill was the subject of a Thursday hearing held by the House Commerce Subcommittee on Trade, chaired by Terry.

Alluding to Leahy’s decision to shelve the Senate patent reform bill, Terry said Thursday, “I think the decision yesterday to pull the patent bill off the Senate Judiciary list of things to do actually puts more pressure on us to get this done.”

While there is no official timeline for moving ahead with Terry’s bill, he said his “personal goal” is “to have something we could bring by the end of June.”

The testimony at Thursday’s hearing pointed to “about six issues on just basic nuancing of wording,” he said, that his staff will work on “over the next two to three weeks.”

He said he would work on the bill in his committee before attempting to coordinate movement with McCaskill.

“It would be my hope, since I think we’re more advanced than they are, that they would jump on board with us and we could pass one bill,” he said.

In the upper chamber, McCaskill is hopeful that her bill will be considered on its own.

Now that Leahy is backing off of pushing through a comprehensive bill, “we’ll try to move ours,” she said, adding that she has been working with vocal patent reform advocate Sen. Charles Schumer (D-N.Y.) and Senate Commerce Chairman Jay Rockefeller (D-W.Va.).

When asked whether he plans to bring the bill up in the Commerce Committee now that the Judiciary Committee has shelved its efforts, Rockefeller declined to commit. 

“We probably are going to, but I couldn’t tell you much more than that right now,” he said.

“We’ve got so many hearings and so much on our plate,” he continued, citing as an example a satellite television law that’s set to expire at the end of the year.

Some lawmakers say piecemeal patent reform measures — like the demand-letter bills from Terry and McCaskill — will meet the same fate as Leahy’s comprehensive package.

“I think it will be difficult,” said Sen. Charles Grassley (R-Iowa), who, as Senate Judiciary ranking member, worked with Leahy on his comprehensive package.

“I think it’s going to have to move [as] a package,” because a more narrow bill would get weighed down with amendments that address issues that Leahy couldn’t find compromises on, he said.

“It’s going to be subject to all of the other amendments anyway.”

According to a House Judiciary aide, Goodlatte views demand-letter legislation as “only part of the solution” to the issue of patent trolls.

He will continue to urge the Senate to work on a comprehensive reform, using his bill as a roadmap, the aide said.

Samuels warned that a demand-letter bill, even a good one, would not solve all of problems with patent abuse.

“It can’t be a substitute for a larger set of patent reforms,” she said.