Business on the prowl for ‘patent trolls’

The next big thing in legal reform may deal not with asbestos or medical malpractice but with the rising problem of patent litigation.

Momentum is growing among business interests and lawmakers to reform the country’s patent system, both at the U.S. Patent and Trademark Office (PTO) and in the growing number of patent-infringement lawsuits.

The Information Technology Industry Council (ITIC) and the Business Software Alliance (BSA) have been leading the charge on patent reform. Their members have faced a growing number of patent-infringement suits in recent years.

Many of the suits are filed by so-called “patent trolls,” firms that obtain patents similar to those used by large companies in commercially successful technology. The patent trolls then sue the large company for patent infringement. Instead of litigating the case, which can be costly and could compel the company to stock manufacturing the product, the large company opts to settle or to pay licensing fees to the patent troll even if it would likely prevail in court.

“There’s a lot of concern that questionable patents are being asserted against large companies. Do they want to engage in patent litigation that can cost millions of dollars, or do they want to settle?” said Mike Kirk, executive director of the American Intellectual Property Law Association (AIPLA), which represents patent attorneys and has pressed for an overhaul.

Kirk also said that much of the problem lies with the PTO and its lack of sufficient funding.

“PTO itself has been continually falling behind in its workload. Technology has been becoming increasingly more complex. The office hasn’t been able to hire the examiners it needs,” he said.

But while nearly all the stakeholders agree that the patent system is broken, industry groups representing patent holders look likely to split on how to address the problem. The Pharmaceutical Research and Manufacturers of America (PhRMA) has indicated that it would prefer fewer curbs on patent litigation, said lobbyists working on the issue, because its industry tends to litigate in defense of its own patents more often.

“The pharmaceutical industry, because of the nature of their industry, has different views, an honest difference of opinions,” said Emery Simon at the Business Software Alliance.

A spokesman for PhRMA declined to comment.

Both the House and Senate are planning to hold hearings on the issue. Reps. Lamar Smith (R-Texas), Howard Berman (D-Calif.) and Rick Boucher (D-Va.) have expressed an interest in drafting a new bill on the issue. BSA, ITIC, AIPLA, the Biotechnology Industry Organization, the Intellectual Property Owners Association and the American Bar Association have been weighing in with their preferences.

The idea of a overhauling the patent system has been around for several Congresses, most notably in bills introduced by Berman. But this year some lobbyists are hoping that the administration’s larger push for legal reform — which scored an early success with passage of the class-action bill — will give a needed boost to patent reform.

“It’s business versus trial lawyers with a nerdy twist,” one lobbyist quipped.

Other lobbyists said, however, that it would be hard to pitch patent reform as part of the legal-reform agenda.

“I don’t think that the quick reaction of ‘Let’s throw this into legal reform’ works; It’s more nuanced than that,” Kirk said. “When this starts to move forward in Congress, how many people will start coming out of the woodwork? We haven’t heard from small business, universities, independent investors. You can’t change a comma in the patent statute without drawing a crowd.”