Proposed bill could make life harder for patent trolls

By Marilyn Tennissen | May 7, 2013

A bill proposed in the U.S. Senate could make it harder for so-called patent trolls to take infringement cases to court.

Sen. Charles Schumer (D-New York) introduced legislation Monday that will expand the America Invents Act of 2011. Schumer and Sen. Jon Kyl (R-Arizona) added a provision to the patent reform legislation that instituted a program that allowed companies in the financial services industry to challenge business-method patents at the U.S. Patent and Trademark Office.

The new bill would allow more businesses to request that the PTO review the patents before the lawsuit continues in court.

According to an article in Corporate Counsel, the proposed legislation is a response to the large number of infringement lawsuits filed by non-practicing companies that exist primarily to assert patent claims, often called “patent trolls.”

The Eastern District of Texas is a hotbed of patent infringement lawsuits, many filed by patent trolls. Some studies have shown that actions by non-practicing entities are costing businesses millions of dollars and have a negative impact on innovation. The problem is getting more attention these days from national lawmakers.

“Patent trolls are bullying New York’s technology companies, stymieing innovation, and dragging down growth,” Schumer said in a statement. “This legislation will provide small technology start-ups with the opportunity to efficiently address these claims outside of the legal system, saving billions of dollars in litigation fees.”

According to Schumer, in 2011 NPEs cost operating companies $29 billion. The average settlement, he said, costs a small or medium-sized company $1.33 million, while an in-court defense would cost the same company an average of $1.75 million per case.

The Schumer-Kyl provision will give experts at the PTO a chance to review a challenged business method patent in a post-grant review. If the PTO finds it more likely than not that that patent will be deemed invalid, it will take a second look and make a quick decision.

Schumer said his program will help resolve existing suits in a low-cost way but will also deter NPEs from filing such suits in the future.

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