Conservative lawyers question need for patent troll legislation

Congress should step back and determine whether patent trolls are causing serious problems in the U.S. patent system before moving forward with patent reform legislation in 2015, said other speakers at a Federalist Society for Law and Public Policy Studies patent reform discussion Tuesday.

Congress is likely to move forward with legislation next year targeting legal maneuvers often used by patent trolls, generally defined as patent holding companies that use questionable legal methods to extract licensing fees from other businesses.

But Tuesday's event illustrated a split among Republicans on patent reform, with conservative patent experts there wary of legislation that targets patent trolls.

A year ago, the Republican-controlled U.S. House of Representatives voted 325-91 to pass the Innovation Act, a patent reform bill supported by many large tech companies and some digital rights groups. Legislation stalled in the Senate, but with Republicans taking over the majority there as well next year, similar legislation will have momentum, said Noah Phillips, chief counsel for Senator John Cornyn, a Texas Republican and supporter of patent reform.

"There is a problem with patent litigation in the United States today, and it has become a drag" on the patent system, Phillips said.

Not so fast, said other speakers at the Federalist Society, a conservative legal advocacy group. While Federalist Society members and congressional Republicans are natural allies on many issues, many conservative lawyers see the Innovation Act as an erosion of intellectual property rights, speakers said.

Problems with the U.S. patent system and lawsuits by patent holding firms, or nonpracticing entities, appear to be exaggerated, said Adam Mossoff, a law professor focused on intellectual property at George Mason University in Virginia.

In recent years, less than 2 percent of patents ended up in litigation, holding steady with long-term historical trends, Mossoff said. There is no "explosion" of patent infringement lawsuits, and studies suggesting the cost of patent lawsuits run into the tens of billions of dollars a year are "entirely made up," he said.

Before Congress passes a new patent reform bill, new studies about the scope of the problem are needed, Mossoff and other speakers said. The current patent reform debate relies heavily on assumptions pushed by patent reform advocates.

Paul Michel, a former chief judge in patent-specialty court the U.S. Court of Appeals for the Federal Circuit, decried the current patent debate as "juvenile," noting that reform advocates use terms like "trolls" and "patent hold-up."

The push for patent reform comes from "massive PR and what I would characterize as propaganda," Michel said.

Phillips, the lone speaker in favor of patent reform at the event, called the Innovation Act a "modest" reform of patent law in response to growing problems caused by patent trolls. The bill would have required plaintiffs in patent infringement lawsuits to identify the patents and claims infringed in initial court filings, in an effort to reduce the number of lawsuits with vague patent claims. The bill would have also required losing plaintiffs who file questionable infringement cases to pay defendants' court fees in many cases.

The bill would also have allowed manufacturers and suppliers to intervene in patent litigation against their customers. In recent years, some patent trolls have targeted end users of technologies that allegedly infringe their patents in an effort to collect more patent license fees or court awards.

While the percentage of patents involved in lawsuits may have remained steady in recent years, the sheer number of patent infringement lawsuits has grown significantly, Phillips said. The number of patent lawsuits filed in the U.S. doubled between 2009 and 2013, he said. The number of patent lawsuits have grown because of a larger number of patents being awarded.

Many of the lawsuits are brought by non-practicing entities [NPEs], companies focused on collecting licensing fees and not on commercializing their patents, Phillips said. In 2013, more than 60 percent of infringement lawsuits were filed by NPEs, compared to less than 30 percent in 2009, he said.

In addition, NPEs are increasingly filing lawsuits against companies using patented technologies, including retail outlets, financial services firms and hotels. "A rapidly expanding number of industries are getting hit," he said. "More often than not, they're small firms."

In many cases, the targets of patent infringement lawsuits are small businesses with small legal teams or start-ups with new funding, Phillips said. "It's not about the money being made by infringing," he said. "It's about finding an easy mark and targeting them. That is trolling."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.