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Patent Act Approved by Senate Judiciary

With both bipartisan support and some bipartisan opposition, the Patent Act passed favorably out of the Senate Judiciary Committee Thursday (the vote was 16-4), but with the concession the bill was close but needed more work before a floor vote.

The goal of the bill is to address the problem of the abuse of patent demand letters, in which entities succeed in extorting money from the targets of the letters to avoid costly litigation.

The Patent Act, which is supported by broadcasters, retailers, realtors and others, would create a national standard for what is a deceptive patent demand letter and give the FTC civil penalty authority to enforce that, as well as enforcement authority for attorneys general. The bill also protects customers of patented technologies by making manufacturers the litigators, say Intel over one of its chips rather than JCPenney for using it in a bar code reader.

It also shifts attorneys fees to non-prevailing parties under some circumstances, and makes it easier to recover fees.

While both sides agreed that mass mailings intended to collect money rather that protect legitimate patents was a problem in need of fixing, opponents of the bill say the bill is too broad a brush and would deter the small businesses and innovators from protecting their patents, even as it tries to protect small businesses from nuisance suit threats.

A number of amendments were defeated that would have carved out universities and small businesses from the heightened requirements, with bill proponents suggesting those carve outs would carve up the delicate compromises in the bill.

Ranking member Sen. Patrick Leahy (D-Vt.), one of the bill's architects, pointed out that the language had been changed already to include a provision that if fee shifting would create an undue economic hardship on a university it would make that presumptively unjust.

An amendment that was adopted would prevent the most highly coercive demand letters, ones she said were tantamount to blackmail and extortion.

So called patent trolls were called even worse during the hearing, everything from tapeworms on the body politic, to Aisan Carp (an invasive species) to scum-suckers. But bill opponents cautioned against such broad-brush characterizations.

There were clearly still major disagreements over whether they bill targeted trolls, or went beyond that to protect larger players at the expense of smaller ones.

Even some of the bill's supporters said they were doing so somewhat reluctantly, with the expectation that there were still more discussions to be had before a floor vote.

On the other side, Sen. Ted Cruz (R-Texas) said he was opposing the bill, but might be able to support it on the floor depending on how it was eventually amended.

“It is clear from the markup this morning that significant work remains on the PATENT Act before it can be widely supported by stakeholders and the broader Senate," said Brian Pomper,  executive director of the Innovation Alliance, whose members include Qualcomm and Dolby Labs. "We can strengthen our patent laws without undermining intellectual property rights and crippling a system that is so important to incentivizing innovation and job creation in our country.”

“This bipartisan legislation will help deter patent trolls and the abusive patent lawsuits that cause harm to our nation’s economy,' said the National Cable & Telecommunications Association. "We urge the full Senate and the House to pass this important legislation."

Consumer Electronics Association President Gary Shapiro also called on the Senate to move ASAP to pass the bill, calling it "fair, common-sense legislation closes the legal loopholes used by patent trolls—the individuals and companies that don’t invent or manufacture anything useful, but rather abuse our patent system and extort American innovators.

“Patent trolls bleed $1.5 billion a week from the U.S. economy," he said. "[T]hat’s almost $120 billion since the House passed a patent reform bill in December of 2013. The money that a business must spend on legal bills to fight off trolls is funding it can’t invest in developing new products or creating new jobs. But the PATENT Act will stop this legalized extortion of American innovators and free our small businesses from the burden of bogus lawsuits."

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.