House votes to thwart ‘patent trolls’

The House passed legislation on Thursday aimed at discouraging frivolous patent lawsuits, which supporters of the bill say are draining money and time from companies that might otherwise be used to create jobs.

Members passed the bipartisan Innovation Act, H.R. 3309, in an overwhelming 325-91 vote. But the bill split both parties somewhat — Republicans voted 195-27 for the bill, and Democrats supported it 130-64.

{mosads}The bill is also supported by the Obama administration, which means there’s a chance the Senate could consider it in the coming weeks and months.

Supporters of the bill said the act of filing non-meritorious patent lawsuits against companies in an effort to seek a quick settlement is acting as a drag on the U.S. economy. They said these acts — from so-called “patent trolls” — are affecting companies of all sizes, as well as nonprofit organizations.

“The tens of billions of dollars spent on settlements and litigation expenses associated with abusive patent suits represent truly wasted capital,” said Rep. Bob Goodlatte (R-Va.), the bill’s sponsor. “The patent system was never intended to be a playground for litigation extortion and frivolous claims.”

Democrats like Rep. Peter Welch (D-Vt.) agreed, and described the experience of one Vermont company that was sued by a plaintiff who claimed he had a patent on browsing the Internet with a mobile device.

“This was a stickup,” he said. “Patent trolling is a total and complete abuse of the patent system, and a total ripoff of hardworking people.”

But the bill also drew significant bipartisan opposition from members who said that setting up obstacles to patent suits would only hurt small inventors looking to defend their patents from large, well-funded companies. Rep. Dana Rohrabacher (R-Calif.) has been the most vocal opponent of the bill, and said the term “patent troll” was devised by large companies in an attempt to de-legitimize small patent holders.

“Every time you hear the word ‘troll,’ what you’re hearing is a manipulation of this debate by some very special interests, powerful interest, who want to steal from the independent inventor,” he said.

House Judiciary Committee ranking member Rep. John Conyers (D-Mich.) agreed that the bill would unfairly hurt small patent holders, and said the bill does nothing to deal with another problem involving the diversion of patent fees paid to the U.S. Patent and Trademark Office (USPTO). Conyers said millions of dollars in these fees have been taken for other purposes, when they should be used to fund USPTO activities.

The bill was also opposed by Rep. Mel Watt (D-N.C.), who has been nominated by President Obama to be the next Federal Housing Finance Agency director. Watt went against the administration he might soon be serving in, saying that while the threat from “patent trolls” is real, “this bill adopts an extreme, unbalanced approach to address those abuses.”

The term “patent troll” loosely describes entities that seek to enforce patent rights against companies — often the plaintiff does not produce a product, simply holding patents and seeking to win licensing fees.

Goodlatte’s bill would create layers of new requirements that plaintiffs would have to meet when filing a civil action that alleges patent infringement. Part of the goal is to weed out the frivolous cases by setting higher hurdles that only serious cases can meet.

For example, plaintiffs would have to include the details of each patent that has allegedly been violated, and information about the identify of the patent holders covered by the suit. It would limit discovery at the early phase of the case in order to protect defendants.

It would also seek to discourage suits by requiring courts to award reasonable fees and other expenses to parties that prevail in court, or the so-called “loser pays” provision. If the non-prevailing party cannot pay fees, the court would be allowed under the bill to make these fees recoverable against any interested parties that have joined the action.

Before final passage, the House voted 341-73 in favor of an amendment from Goodlatte making technical changes. By voice vote, members also supported language from Rep. Jared Polis (D-Colo.) that would require plaintiffs to provide more information at the early stages of a suit, a change that increases the hurdles patent plaintiffs would face.

But the House also supported a proposal from Rohrabacher that went in the other direction. Rohrabacher’s amendment struck language that would have limited patent applicants’ rights to judicial review of USPTO decisions to grant or deny a patent was also approved, and it passed in a 260-156 vote.

Opponents of Rohrabacher’s amendment argued that Congress should limit judicial review in order to prevent “patent trolls” from obtaining “junk patents” that can be used to harass companies.

Members also voice-vote approved language from Rep. Sheila Jackson Lee (D-Texas) requiring a study on the effects of portions of the bill on small and minority-owned businesses.

The House rejected four other amendments, from:

— Watt, giving judges more flexibility in deciding whether to award attorney fees to the winner in patent lawsuits. Failed 199-213.

— Thomas Massie (R-Ky.), eliminating Section 5 of the bill, which would require a court to stay patent infringement actions against retailers. Supporters of this section say it would ensure that legal actions focus on manufacturers, not retailers using technology that may or may not violate a patent. Failed 119-296.

— Sheila Jackson Lee (D-Texas.), limiting retailers’ protection from patent suits to companies with annual revenues below $25 million. Failed 144-266.

— Conyers/Watt, a substitute bill from opponents of the Innovation Act that drops the “loser pay” language and makes several other changes. Failed 157-258.