Last year a bill to eliminate patent trolls, backed by the tech industry, passed the House with massive bipartisan support. Unfortunately, it died in the Senate.
This year, vast resources are being marshaled by opponents of the bill. The House Judiciary Committee will decide as soon as next week whether to resume the fight against patent trolls or abandon the effort altogether.
Tell Congress: Patent Trolls Must Be Stopped Now!
We write today to express our strong support for H.R. 9, the Innovation Act. This legislation addresses patent litigation abuse that threatens startups and emerging software companies that are the driving force of the app economy.
The Innovation Act passed by the Committee last year earned overwhelming bipartisan support in the House because it offered a balanced, measured approach, leveling the playing field for innovators and small companies. Senate inaction last year highlights the need for the 114th Congress to address this issue. With the blueprint for success already drafted, we urge the swift passage of this legislation.
In just over six years, the app economy has grown into an $87 billion industry. An effective patent system has been critically important to the rapid growth of this marketplace. App makers own patents, license patents, and build apps that run on patented technology. However, we have seen a rise in entities known as patent trolls that are exploiting weaknesses in the patent litigation system to bully and extort small companies.
Patent trolls target companies lacking the resources to challenge bad patents and bogus claims in court. The price of defending against a patent troll often exceeds $650,000.1 This is a cost far too great for most small companies to bear. Instead, many are coerced into paying license fees to avoid the risk and expense of litigation. Fear of patent troll litigation has prevented app makers from filing for patents, securing venture capitalist funding, and even advertising their products. In the fast-paced mobile marketplace, this puts the American app economy at a serious disadvantage.
The Innovation Act provides several important changes to existing law, but there are three in particular we would like to highlight:
- Closes loopholes trolls exploit without decreasing the value of the patent system.
Critically, the Innovation Act fixes the fee-shifting standard to better allow judges to award fees in patent lawsuits based on frivolous and meritless claims. This effectively deters bad actors from filing unsubstantiated lawsuits in the hope of forcing a settlement.
- Increases transparency in claims and ownership of patents.
A patent troll typically sends a demand letter with intentionally vague claims that are difficult for the recipient to understand. Companies must expend substantial resources to determine the real party in interest and to understand the patent infringement claims against them. The transparency requirements in the Innovation Act make this critical information more easily accessible to small companies without the costs that deter them from defending against spurious claims.
- Cuts right to the source of patent troll power by improving patent quality at the United States Patent and Trademark Office (USPTO).
Trolls exploit bad, overly-broad patents that should never have been granted. The patent quality study in the Innovation Act will build on the work of the America Invents Act to continue to improve the quality of patents.
Patent trolls are a serious threat to our industry. We thank you for your consideration of these measures to protect startups and small companies from abusive patent litigation that threatens innovation and growth.
1 Report of the Economic Survey 2011, American Intellectual Property Law Association, cited in http://www.cnet.com/news/how-much-is-that-patent-lawsuit-going-to-cost-you/