Big Businesses Vie for Favored Provisions as Senators Finalize ‘Patent Troll’ Bill

Posted April 2, 2014 at 5:38pm

Four months after the House passed a far-reaching bill to prevent abusive patent infringement lawsuits, senators are close to striking a deal on their own legislation, according to aides in both parties.

The bipartisan, bicameral push to crack down on so-called patent trolls has the support of the White House, is a top priority for Silicon Valley and represents the rare policy area in which lawmakers believe they can overcome election-year gridlock and send a major bill to President Barack Obama’s desk.

Obama even singled out the arcane issue during his State of the Union address on Jan. 28, urging lawmakers to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.”

While there is clear momentum behind the effort, there are also potential obstacles as the Senate debate shifts from closed-door negotiations to a public focus on a manager’s amendment to a bill (S 1720) that could be introduced and voted on in the Judiciary Committee as early as next week.

The same powerful economic forces that have made legislation a priority also guarantee that reaching an ultimate deal will be tricky, as deep-pocketed tech firms, pharmaceutical companies, research universities and other stakeholders wage an expensive lobbying battle to ensure that the final details of the agreement are to their liking.

Google, Dell, Adobe, Verizon, BlackBerry and other major tech interests want the Senate to replicate key provisions in the House-passed bill, which would change the rules of the civil justice system in an effort to shut down the business model favored by trolls, or “patent assertion entities,” that acquire vaguely worded or broad patents and then sue other companies for infringing on them as a way to extract costly legal settlements or licensing fees.

The House bill, for instance, includes a provision that would require the loser in an infringement case to pay the winning side’s costs — a powerful disincentive to meritless litigation. Tech firms say the “loser pays” provision and other aggressive steps are needed because they spend too much time and money defending themselves against troll lawsuits in court, when they should be focusing on the innovation that spurs the economy.

Recent Senate negotiations have focused on several main sticking points, including the loser-pays language and House-backed requirements to raise pleading standards and change the discovery phase in patent lawsuits, according to lobbyists and aides familiar with the discussions. Many GOP senators favor tough litigation changes like those passed by the House. The top Republican on the Judiciary Committee, Charles E. Grassley of Iowa, said last week that he is “not willing to accept language that is so weak that it won’t really put a stop to patent trolling.”

Judiciary Chairman Patrick J. Leahy, D-Vt., favors what he calls a “balanced” approach and has agreed to incorporate a change in fee-shifting rules and other concessions as part of a compromise with Republicans. But aides say Leahy wants to stop short of a strict requirement that court losers pay the winning side’s costs and taking other steps that could deter good faith patent holders from filing legitimate claims to protect their inventions. Most Judiciary Democrats have expressed the same concern.

Plaintiffs vs. Defendants

If large tech firms see themselves as defendants being unfairly targeted by trolls, AstraZeneca, Eli Lilly, GlaxoSmithKline, Johnson & Johnson and other major pharmaceutical firms say they are more often the plaintiffs in patent disputes and should not be punished alongside trolls. As a result, they are staking out a more nuanced position than Silicon Valley, cautioning that the House’s approach tilts too far in the direction of tech industry defendants and may punish legitimate plaintiffs with unintended consequences.

Patent-heavy pharmaceutical firms argue, for instance, that a House provision to limit the discovery phase of patent infringement trials — intended to make them shorter — actually “would bring almost every newly filed patent case to a virtual standstill” while attorneys argue about the new rules and drag out proceedings, the Coalition for 21st Century Patent Reform said in a statement.

Still other outside players, including independent inventors and research universities, favor a more hands-off approach and want Congress to put the focus on the Patent and Trademark Office, rather than the courtroom. Because trolls take advantage of poor quality patents, they argue, lawmakers should ensure that the PTO has the funding it needs to do its job effectively.

The House, which passed its bill (HR 3309)on an overwhelming 325-91 vote on Dec. 5, declined to include language that would have allowed the PTO to keep user fees that have been diverted from the office in the past. Leahy and other senators want to reach a compromise with the House without a conference committee and are reluctant to include new funding language that was not part of the original bill and could complicate the path to an agreement between the chambers, according to aides.

The many competing interests are being reflected in the push and pull of the legislative process. The Judiciary Committee delayed a markup on a placeholder Senate bill last week and could do so again on Thursday, as lawmakers try to wrap up what one lobbyist called “really serious negotiations” that have occurred at the staff level for weeks. But a Democratic aide stressed that both sides are intent on reaching the finish line.

“This is an issue where people want to go to a bill-signing ceremony,” the aide said.