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Death of Leahy Patent Reform Bill Leaves ‘Patent Trolls’ Unchecked

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A proposed law intended to protect companies from legal assaults by so-called “patent trolls” stalled in the U.S. Senate in May 2014 after Sen. Patrick Leahy (D-Vt) removed it from consideration by the Senate Judiciary Committee. Leahy cited widespread disagreement among the bill’s supporters and opponents over how to curb patent trolls without weakening the legitimate intellectual property protections.

Dubbed the Innovation Act, the bill was backed by several tech industry giants, including Google, and enjoyed strong bipartisan support when it passed the House by a 325-91 vote in December 2013.

Patent trolls, or non-practicing entities (NPEs), are businesses that own a stockpile of patents and patrol the marketplace for products and services that may infringe upon one of their patents. The NPE then approaches the company (and increasingly, according to Washington Post columnist reporter Timothy Lee, those companies’ customers) and demands a licensing fee for the use of the allegedly patented technology. Those licensing fees represent the majority of the NPE industry’s revenue.

If a company declines to pay the licensing fee, the NPE typically threatens it with a patent infringement lawsuit. Critics maintain that the NPE industry’s legal intimidation tactics are intended to “shake down” smaller and newer companies without many financial or legal resources, particularly in the technology sector, and that the practice is a significant drag on the country’s economic growth. A study by Boston University estimated the costs of patent litigation from patent trolls at $29 billion in 2011 alone, according to a story in The Atlantic.

“We can all agree that patent trolls abuse the current patent system,” Leahy said on his website in announcing the bill’s withdrawal from consideration. “I hope we are able to return to this issue this year.”

The news was the second major development in two months to come out of Washington regarding patent law. An April 2014 ruling by the Supreme Court of the United States gave judges in patent infringement cases wide discretionary power to financially penalize plaintiffs who engage in meritless patent infringement lawsuits by requiring them to pay the defendant’s legal fees, a practice known as “fee shifting.” The ruling was widely seen as a rebuke to the NPE industry.

Notably, Wired reports that more stringent language on “fee shifting” in the Innovation Act may have contributed to the legislative resistance it found in the Senate. Under the Innovation Act, a plaintiff who lost a patent claim case would have been compelled, irrespective of the presiding judge’s opinion, to pay the defendants’ legal fees.