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May 22, 2014

One More Branch of Government Takes Action and Gets it Right, Another Opts for Failure


Lately tech policy watchers in DC have been split in their focus on the Senate Judiciary Committee, waiting for a patent reform bill to emerge (which was pulled and put on hold yesterday) and on the Supreme Court which took a step in the right direction in the recently decided cases of Octane Fitness, LLC v. ICON Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Management System, Inc.

Both of these cases addressed “fee shifting,” that is, empowering the courts to impose fees on patent litigation losers by providing judges with greater discretion to award fees, an important tool for discouraging frivolous patent litigation. But while the courts have been granted greater discretion they are still substantially constrained to shifting fees in “exceptional” cases, which is, according to the Supreme Court, “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” 

The result is that those contemplating bringing an exceptional case will likely reconsider, which could marginally decrease the number of so called “patent troll” cases. Some threats to bring litigation, as expressed in abusive demand letters, will now ring hallow in clearly exceptional cases. 

But the proposed legislation, which has been shelved, is also necessary to fully address bad actors’ behavior, such as those abusive demand letters. Some though, relying on overbroad and questionable patents still will not be discouraged because they may still be able to argue that “infringement” occurred, albeit on vague and sloppily awarded patents. 

But a less theoretical justification emerged while the Senate deliberated—trial lawyers unleashed. As reported in GigaOm, “Call it patent trolls gone wild. On April 23, trolls embarked on an unprecedented litigation spree in East Texas and elsewhere, suing everyone from Etsy to Estee Lauder. A review of the cases reveals an eye-popping 184 complaints, as trolls rushed to beat new rules that could limit their ability to game the country’s troubled patent system.”  That was timed exactly before it looked like the legislation was to be marked up and emerge from the Senate Judiciary Committee to be considered by the full Senate. Emboldened they reportedly went on to convince Majority Leader Reid to stop the legislation at all costs. 

The Supreme Court, the House of Representatives and the White House all agree that abusive patent litigation needs to be addressed now, but the Senate must act. The Senate must get back to the hard work of marking up a bill. Every day delayed means the Senate is hurting innovation and costing jobs.


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