(Source: Cleopolis)
Bill is seen as a win for businesses and consumers alike, if a bit weak on a couple topics

Today in the U.S. a strong case could be made that intellectual property is doing more harm than good to consumers and innovative companies.  That's not an argument against intellectual property, rather it's a testament to just to the poor state of the American intellectual property system.

I. Fixing a Broken System
Veteran legal experts widely acknowledge that the patent and copyright systems are broken.  Much of the human genome is "patented" by biotech firms preventing cancer research and other medical progress (and a recent Supreme Court ruling protects key elements of those patents).  Big electronics companies like Apple, Inc. (AAPL) are patenting things like "rectangular body with curved edges" and suing their rivals.

Meanwhile, all these big players are also under attack from the bottom by "patent troll" companies that produce nothing, buy up collections of intellectual property, and sue those who do produce via shell companies.  Some trolls are even suing small businesses for merely using Wi-Fi or developing apps with notifications.

It would seem an easy thing to agree upon among federal lawmakers to move aggressively to reform the broken system.  While some corporate interests oppose remedies to some of the aforementioned problems (e.g. gene patents or patents on simple design elements), most companies stand united against so-called patent assertion entities (PAE) or non-practicing entities (NPE) -- companies that produce nothing, but instead buy up patents to sue productive U.S. businesses.

NPEs/PAEs are allegedly the worst of the trolls. [Image Source: Word of the Nerd]

Given record contributions from traditional tech businesses and minimal contributions from PAEs/NPEs (aka "the trolls"), this would seem like something Congress would be eager to take up -- particularly as it's an example of the occasional case where consumer interests and corporate interests seem to align for a common good.

Cat patent
Patents are often abused under the current system. [Image Source: ICanHazCheeseburger]

But progress has been slow.  In June Congress asked the  U.S. Federal Trade Commission to use its ambiguously defined powers to examine the behavior of PAEs/NPEs, who stand accused of the most severe forms of patent trolling.  The FTC agreed to probe the problem, but made it clear to Congress that it wasn't in the business of suing the PAEs/NPEs, even if it found they were trolling.

II. New Bill Emerges

Thankfully that deadlock has changed.  Back from the government shutdown, members of the U.S. House of Representatives showed a rare moment of cooperation, convening to address the problem of patent trolling.

Dead Troll
A new bill looks to take a bite out of patent trolls' business scheme. [Image Source: Sodahead]

A new bill dubbed the "Innovation Act of 2013" has been proposed, sponsored by a bipartisan collective in the Republican-controlled house.  Sponsors include: * Primary sponsor

Lamar Smith
Rep. Lamar Smith has joined with past rivals to sponsor the bill. [Image Source: Lamar Smith]

For those who don't follow politics, let's just say the collection of sponsors is littered with odd bedfellows.  For example Reps. Chaffetz and Eshoo were among the coalition that successfully opposed a pair of questionable antipiracy bills -- U.S. House of Representative's "Stop Online Piracy Act" (SOPA) (H.R. 3261) and its Senate equivalent, the "PROTECT IP Act" (PIPA) (S.968).  On the flip side you have Rep. Smith whose office was responsible for writing SOPA.  In other words the sponsors are an odd hodgepodge of supporters of big government supporters and budget-trimming proponents; tradditionalists and reformists; "Tea Party" Congresspeople (e.g. Rep. Chaffetz and Farenthold) and relatively "liberal" Congressmen/women like Rep. Eshoo [source].
Congress Buillding wide
Congress is at last putting serious effort into tackling the issue of patent trolling.
[Image Source: U.S. Congress]

Given that odd assortment, it's clear just how broad support for the bill is across a host of political idealogies.  And that makes it all the more puzzling why it took so long to get here (oh well).

II. What Advocacies are Saying

The bill would amend USC (U.S. Code [of Law]) Title 35 -- the section of the U.S. legal code that governs patent law, and amend the "America Invents Act", which Obama signed into law in 2011.

The bill reverses some key provisions of the controversial 2011 America Invents Act, which some claim enables trolling. [Image Source: Unknown]
Skepticism of the new bill is high -- particularly given that the American Invents Act was billed as the "most comprehensive change to our Nation’s patent laws in 60 years", but evolved into a law that many patent reform advocates said made key problems worse.

But in its current form the new Innovation Act is draw strong positive feedback from social libertarians and civil rights advocacies on the "left" and "right" alike.  For example the Electronic Frontier Foundation (EFF) writes:

Today, we are one giant step closer to real patent reform in the United States. Rep. Bob Goodlatte (R-VA), along with a broad bipartisan coalition, has introduced the Innovation Act of 2013, comprehensive legislation that, if passed, would severely limit trolls' ability to continue their trolly behavior....

But at the time, we were still quite concerned. First and foremost, we worried that the law didn't address the growing patent troll issue...  Second, we worried that Congress, having passed patent legislation, would not be interested in taking up the issue again. Fortunately, Congress surprised us.

What changed? Well, the tech community learned how to better make its voice heard in D.C. (Remember SOPA?) This American Life focused two full hours (here and here) on patent trolls. And brave members of Congress, like Rep. Peter Defazio, got in front of the issue by introducing bills like the SHIELD Act.

But, really, the trolls have done all the hard work for us. They targeted app developers for using generally available technology. They sued small city governments for using bus tracking software. They went after businesses for using scan-to-email technology and the kind of WiFi routers you would buy off the shelf at Best Buy.

Thank you, trolls. You didn't only get our attention, you got the attention of Rep. Goodlatte, along with other congressional leaders, the FTC, and even the President. We're going to be working hard to make sure that not only is your 15 minutes of fame over, but so too is your entire business model.

That's a pretty strong statement of support, from a top advocacy who is funded by the likes of Google and has been steadfastly fighting patent trolling, particularly in its most severe forms (i.e. NPEs/PAEs).

III. How Does it Work?

The bill is indeed appears as good as the EFF says -- assuming it isn't neutered before it comes to a vote.  Among its key provisions are:
  • "Joinder" :
    • Forcing parent companies to declare their interest in lawsuits and exposing them to having to pay court fees, eliminating the benefits of shell companies, a key trolling tactic.

      shell companies
      The proposed law would restrict the use of unaccountable shell companies, a favorite tactic of trolls. [Image Source: Blogspot]
  • Transparency
    • Patent lawsuit filers must explain who will benefit from the legal win.  If it's a little office in the middle of nowhere occupied by 13 other shell companies, the case can be conveniently tossed out.
  • Loser Pays Up
    • Loser in a patent lawsuit would now have to pay court fees.  This would be a crippling blow to NPEs/PAEs who often hedge their efforts on the assumption that it's cheaper to settle than fight accusations in court.  At the same time it could also impact patent wars between large companies like Apple and Google Inc. (GOOG) by forcing them to think twice before suing.

      Court Fees
      Patent case losers may now be required to pay more of the winner's court fees. [Image Source: Bay Area Bankruptcy]
    • This provision is weaker, though, than in the SHIELD Act -- another reform bill -- as it does not include the bond requirement, a key payment in the case.
  • Explain yourself
    • Lawsuit filers must now precisely explain how they believe their patent is being validated and which claims in the patent they think are violated.  
    • This again could impact both NPEs/PAEs and litigation-happy corporate entities like Apple who would now have to more precisely explain how they believe the accused product(s) (e.g. a rectangular smartphone) infringe, making a jury less reliant on arbitrary interpretations of infringement claims.
  • Expanded review
    • Post-grant, patents will now be eligible to an expensive, but more sure-fire review track.
    • Companies like Google can pay examiners to look at prior art and determine whether rivals like Apple improperly obtained certain patents (and vice versa).

      Provisional patent
      Patents will now be eligible for faster reviews. [Image Source: InvestorsEye]
  • Protects business secrets
    • Prevents trolls and/or companies from using court filings to try to threaten to disclose their legal victims sensitive business data, a tactic that's sometimes used to try to force a legal opponent to settle.
  • Freezes suits against customers:
    • Weaker than the SHIELD Act, which would in most cases prevent suing customers for infringement by a third party.
    • Does make it so customers and third party can't be sued at the same time -- as NPEs/PAEs are fond of doing.
As you can see, the bill's strongest provisions deal with PAEs/NPEs -- the most blatant of trolls.  In that regard it may be viewed as a good first step.  Once that issue has been resolved, Congress can (theoretically) move on to tougher problems like figuring out ways to stop companies from filing over ambiguous/speculative patents, repatenting existing art, or forcing fair licensing rates for patents based on industry expert analysis.

Of course, Congress seems unlikely to tackle such complex problems, given that they lack traction with special interest dollars.  But at least there's hope this modest reform can pass through, given the current shows of support.

Sources: Innovation Act of 2013 [PDF], EFF [1], [2]

"And boy have we patented it!" -- Steve Jobs, Macworld 2007

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