The right kind of patent reform

We are now well past the point where anyone in Washington needs to be convinced there is a patent troll problem afflicting American businesses, large and small. No one appears to be arguing in opposition to reforming the patent litigation system any longer. This is a long-overdue and welcome acknowledgement that the patent system designed to foster innovation has recently served almost as often as a hindrance.

What remains then are the decisions about how best to reform the system to rein in patent trolls, to foster innovation, to protect small businesses, and to make sure consumers reap the benefits of technology. Already, the House of Representatives has passed patent reform legislation containing several good provisions to achieve some of these goals. Though it is hardly perfect, one unquestionable strength it has is broad bipartisan support. It passed the House by a 325 to 91 vote, with the rare support of the majority of both Republicans and Democrats and the endorsement of the White House.

{mosads}This week, the Senate Judiciary Committee will decide what their version of patent litigation reform legislation will look like. For the sake of mobile phone application developers, who may get more threats from patent trolls that anyone else, the legislation should be as strong as possible. It should include a so-called fee shifting provision, so that patent trolls face the real possibility of paying the attorney’s fees and expenses of the people they sue if judges find they’ve brought truly ridiculous legal cases.

In large part, trolls have been so successful because they have very little to lose when sending out demand letters with broad accusations of patent infringement. Trolls too often take advantage of the high litigation costs of patent cases to bully companies into settling. Knowing that if they prevailed they wouldn’t also be stuck with lawyers’ fees may encourage more of the accused companies to retaliate.

Too often the face of the case for patent reform has been large businesses and tech corporations. But small business owners have suffered as well. And to a small business, a patent lawsuit can mean delaying the launch of innovative technologies, costing millions of dollars in lost innovation, legal expense and can even lead to bankruptcy.

On behalf of consumers who may no longer get free wi-fi from coffee shops and hotels sued by patent trolls for offering it to their customers, the Senate should improve the “customer stay” rules in courts, so that technology manufacturers can join the suits brought against end users of their products. Patent trolls know they won’t get a dime from the two or three makers of wifi routers, so instead they send demands for bogus royalty payments to the tens of thousands of hotels and coffee shops who bought those routers for $69 each at Best Buy or WalMart.

The Senate should provide some relief to the thousands of mom and pop restaurants receiving extortive patent troll demands for offering simple commercial website technology like nutrition calculators to their customers. Senators can do this by reforming the rules of “discovery” in patent litigation. Defendants shouldn’t be forced to settle unfair cases solely because of the threat of being overwhelmed by unreasonable requests for extraneous materials from trolls.

The list of victims patent trolls extort unearned money from seems endless: retailers, auto manufacturers and dealers, casino owners, public transit and power agencies, newspaper publishers, small print shops, credit unions, non-profit groups, hardware and software manufacturers, movie studios, Realtors®, home builders and the list goes on and on. Ultimately though, it is consumers who will end up paying the tab for the nearly $30 billion a year patent trolls suck out of the productive economy, because all costs eventually get passed down the line.

It is time for the Senate Judiciary Committee to take action, and we – as small and large business owners, innovators and venture capitalists alike – need to urge the members of the committee forward. Instead of spending time, energy and money fighting patent troll abuse, we need to do everything within our power to rein in the trolls and put an end to the hold they have on the business community.

Supporting patent reform is easy. Simply visit patentfairness.org/takeaction and you will be directed to a site where you can call, email or tweet at your senator. Tell them how important it is to you that change of the patent system becomes a reality.

Levy is patent counsel for the Computer and Communication Industry Association.