Patent reform push has new life in Senate

Senate leaders on Wednesday introduced new legislation that would crack down on “patent trolls,” reviving a push for reform that stalled in the upper chamber last year. 

The legislation is aimed at combating what industry groups say is growing abuse of the legal system, with the “trolls” buying up patents solely for the purpose of extracting financial settlements.

{mosads}With Republicans now in control of the House and Senate, advocates are hopeful the legislation can make it to President Obama, who has urged lawmakers to take action on the issue.

Sen. Charles Schumer (D-N.Y.), who was involved in negotiations over the new legislation, said the bill “shifts the legal burden back onto those who would abuse the patent system in order to make a quick buck.”

“I’m hopeful we can move quickly and in a bipartisan way to get this bill passed in committee and on the Senate floor this summer,” he said. A hearing on the bill is already in the works.

The other lawmakers involved in drafting the bill were Sen. John Cornyn (R-Texas), Judiciary Committee Chairman Chuck Grassley (R-

Iowa) and ranking member Patrick Leahy (D-Vt.). The bill also has the support of other panel members, including Sens. Orrin Hatch (R-Utah), Mike Lee (R-Utah) and Amy Klobuchar (D-Minn.).

“As I look at the assembled people on the platform today, this is as close as you get to legislative shock and awe,” Cornyn said about the bipartisan co-sponsors.

The negotiations over patent reform date back a year. While the new Senate legislation contains provisions that are similar to a bill working its way through the House, it also contains crucial changes, according to a person familiar with the bill.   

The proposal would establish standards to curb court proceedings that can be used to run up the cost of litigation. Senators this month crafted a new way to limit discovery — a part of the pre-trial procedure — while early motions are resolved, the source said.

The bill also includes a provision on “fee shifting,” a way of requiring the losing party in a lawsuit to pay the winner’s legal fees.

The House version of the bill would require that payback unless a patent lawsuit is found to be legitimate. But the Senate version would only grant the fee shifting if the winner can prove the lawsuit was not “objectively reasonable.”

The Senate bill would also change how courts could go after the parent company of shell organizations that sometimes file frivolous suits and are not able to pay up. 

The issue of fee shifting has long been a hang-up for some Democrats. Senate Minority Whip Dick Durbin (D-Ill.),  and Sens. Chris Coons (D-Del.) and Mazie Hirono (D-Hawaii) previously introduced a pared back patent reform bill without those provisions. 

When then-Majority Leader Harry Reid (D-Nev.) vowed to block a patent reform bill from hitting the floor last year, the opposition reportedly came from the biotechnology industry, universities and trial lawyers.

“Last year, it was stalled by a significant person running the United States Senate. I don’t think there will be that stall this time,” Grassley said. 

Wednesday’s proposal also contains a provision that would protect end users, such as retailers, who are sometimes sued by patent-holders for using a technology the patent-holders do not manufacture. The provision would allow those companies to put off a lawsuit if the manufacturer is also hit with a lawsuit, according to the source.

The bill also would prohibit vague letters alleging infringement from being used in lawsuits. The authors say that provision would give incentive to companies to increase their level of detail in “demand letters,” which can often be the first step in litigation.

The Senate legislation would also make clear that sending abusive letters is a deceptive trade practice that can trigger Federal Trade Commission action.

— This story was updated at 8:14 p.m.