Wondering about that collective groan you might have heard this week in e-commerce-land? That’s the sound of so-called “patent troll” reform being shelved in the U.S. Senate.
The Judiciary Committee tabled the Patent Transparency and Improvement Act after members failed to reach a compromise on details of the proposed law. Patent trolls, more politely known as non-practicing entities, are companies that own patents to technologies and business methods developed by others—such as online shopping carts or the use of quick response codes in mobile commerce marketing. These trolls typically own these patents solely for the purpose of demanding licensing fees—and they often file lawsuits if e-retailers and others refuse to pay.
In general, the act sought to undermine the leverage of these non-practicing entities, otherwise known as trolls. One of the goals of backers of the pending patent legislation is to force plaintiffs in patent cases to issue clearer demand letters. Another idea is to make the losing party in patent-infringement suits pay the winner’s legal costs. The hope is that would deter patent holders from filing lawsuits. Just the threat of a lawsuit can lead a company to settle a claim, as defending a patent lawsuit can easily cost hundreds of thousands of dollars; often, e-retailers will pay $5-10,000 to make a patent claim go away rather than take on the expense of litigation.
Late last year, the U.S. House approved a patent-infringement reform bill, which then went to the Senate.
The e-commerce industry generally supports changes designed to deter patent demands and lawsuits. While many online retailers pay licensing fees to avoid legislation, some, notably Overstock.com Inc. (No. 31 in the Internet Retailer Top 500 Guide) and Newegg Inc. (No. 17) have aggressively contested patent lawsuits, and in several cases won.
Last year, patent trolls sued more than 2,600 technology-focused companies, including many involved in Internet retailing, according to RPX Corp. Even companies that win face steep legal costs to fight. The act would have “put a stake in the heart of abusive patent trolls and restored order to the nonsensical patent litigation system which today inhibits innovation,” says Overstock.com CEO Patrick M. Byrne.
Such groups as universities and the biotechnology and pharmaceutical industries have opposed the proposed bill, arguing in a letter to the Judiciary Committee this week that the act would treat “every patent holder as a patent troll; other provisions seriously weaken legitimate patent enforcement while lacking any discernible impact on curbing the abusive practices of patent trolls.”
Prospects of a reform bill moving through the Senate this year appear dim. “I have said all along that we needed broad bipartisan support to get a bill through the Senate,” says Sen. Patrick Leahy (D-VT), the chair of the Judiciary Committee. “Regrettably, competing companies on both sides of this issue refused to come to agreement on how to achieve that goal. If the stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the Committee.”
Favorite