Print 24 comment(s) - last by Jaybus.. on Oct 28 at 12:37 PM

  (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]

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Yawn. Can't even get a web site to work.
By overlandpark4me on 10/25/2013 12:49:38 PM , Rating: 3
They shouldn't do a thing until they can fix the health care debacle. The one they forced on me is triple the cost and double the deductible.

RE: Yawn. Can't even get a web site to work.
By KCjoker on 10/25/2013 6:23:20 PM , Rating: 2
Uh oh, you'll be called a racist for not praising Obama's signature legislation.

By ipay on 10/25/2013 9:34:31 PM , Rating: 2
I hear you like race cards, so I put a race card in your race card so you can race card while you race card.

By idiot77 on 10/27/2013 4:05:24 PM , Rating: 4
ROFL... wasn't even his legislation.

It game out of the Heritage Foundation in the 90's.

Then Congress did a wonderful hack job on that.

Obama was just the sucker that got forced into signing it because his party didn't have spine enough to actually sign real socialized healthcare.

Everyone bitches about it being horrible and complex, well... socialized is far cheaper and much simpler, but..... you know... we can't do that. Not enough corporations making 15% profit in the chain.

In the end, blame yourselves. We should be doing like every other country with any sense at all which is offer basic coverage to everyone to keep them from using emergency room resources (far cheaper to society to send them to an office).

BUT instead we're now going to pay for everyone to continue to go the ER with a bonus profit built in. WOOT!!!!

RE: Yawn. Can't even get a web site to work.
By room200 on 10/25/2013 6:34:08 PM , Rating: 1
Bull. You cannot substantiate what you're saying, and I dare you to do so.

RE: Yawn. Can't even get a web site to work.
By Manch on 10/26/2013 5:45:16 AM , Rating: 2
Are you saying bull because he there is no possible way he can obtain insurance since the website is broken? Or because you just dont believe his insurance has gone up?

RE: Yawn. Can't even get a web site to work.
By Piiman on 10/26/2013 10:43:33 AM , Rating: 2
If you really want it you can pick up the phone. And no I don't believe his Insurance has gone up. He is just spewing the party line.

By tng on 10/26/2013 7:46:50 PM , Rating: 2
And no I don't believe his Insurance has gone up. He is just spewing the party line.
You can say that, but I have been to several very large companies that as of about a year and a half ago, changed their healthcare coverage for all of their employees. Basically, premiums doubled, coverage was cut in half, and it was all allowed by new laws that "Obamacare" put in place.

The really sad thing about this is that I know at least a dozen people at these companies that went out and tried to find cheaper, better coverage elsewhere and they did find it. The only problem is that they were told that since they have coverage by their employer, they can't enroll in anything else. Since they are mandated to have the employer provided insurance they can't drop it without quitting...

I was told that this was also part of the new heathcare laws by several people. Kind of a catch-22 really.

RE: Yawn. Can't even get a web site to work.
By Reclaimer77 on 10/27/2013 10:45:45 AM , Rating: 2
And no I don't believe his Insurance has gone up. He is just spewing the party line.

Was this a joke post? Really?

The fact that millions of ignorant clueless people like you are voting in elections in this country is why we're in the mess we are today!

Why don't you do the barest minimum of research before YOU spew your stupid all over the Internet?

By gamerk2 on 10/28/2013 12:05:17 PM , Rating: 2
I dropped my insurance and signed up; more for less in my case. Its going to vary though; NY has over a dozen companies competing, Iowa has two. More competition = lower prices.

The ACA does nothing about the utter lack of competition in some states. Nor was it intended too. Hence why its an incomplete solution.

And too be fair, the Website WAS outsourced to a private business. Kinda makes the case for not outsourcing, now doesn't it?

By delphinus100 on 10/27/2013 1:41:45 AM , Rating: 2
They shouldn't do a thing until they can fix the health care debacle. The one they forced on me is triple the cost and double the deductible.

Perhaps. But of what use is a government that can handle only one issue at a time...?

Doesn't fix the main problem.
By dgingerich on 10/25/2013 8:04:14 AM , Rating: 2
It still doesn't fix the main problem: invalid patents. It needs to define patents so that companies can't just take one concept that is years to centuries old and adapt it to a new form factor to restrict their competition.

RE: Doesn't fix the main problem.
By Guspaz on 10/25/2013 11:11:34 AM , Rating: 3
The expanded reviews do impact that, though. Not as much as it should, but it's something.

I think that it's important to get this bill passed and in effect; they can always refine and update later, but this bill would provide a lot of good improvements to the current US patent regime.

RE: Doesn't fix the main problem.
By MozeeToby on 10/25/2013 1:32:43 PM , Rating: 3
This bill is a huge step in the right direction. No more hiding behind shell companies, no more claiming infringement without having to specify what or how, no more using the costs of litigation as a weapon. Yes, there's still too many bad patents, but this bill would make it at least possible to fight the trolls in court.

A big part of the problem right now is the trolls offer a $10,000 settlement on a case that will cost 10 or 100 times that to fight, even if you do win all while making only the vaguest allusions as to what you are infringing upon. So they never end up in court, and they never get their patents overturned. This bill makes that behavior impossible.

Misguided effort
By YearOfTheDingo on 10/25/2013 9:00:07 AM , Rating: 2
The proposed bill basically eviscerate patent protection for small and medium size firms, allowing big companies to steal their ideas with impunity. Let say you're start-up entering a market presently dominated by a single player. You have a truly innovative product that threatens this large firm's grip on the market. It gets spooked and promptly starts copying your methods. You respond with a lawsuit, but that takes time and money. Before you can win the case, your large competitor has already crushed you through a combination of aggressive pricing and promotional resources. Now you're in bankruptcy, what recourse do you have? There's no money for lawyers any more. And since there is no "aftermarket" for patents (due to this law), your IP portfolio isn't worth much. The only potential buyer is the large firm that has just vanquished you. So it picks up your IP on the cheap and continues to dominate the market.

RE: Misguided effort
By superstition on 10/25/2013 6:05:48 PM , Rating: 2
The proposed bill basically eviscerate patent protection for small and medium size firms

Social mobility in the USA is at an all-time low, the last time I checked. Wealth inequality is increasing.

Politicians have become brazen enough to even manage to get the Supreme Court to support the argument that taxpayers can be fined if they don't bankroll the bribes they get from their 1% puppeteers.

It's a good time to be king.

RE: Misguided effort
By Jaybus on 10/28/2013 12:37:46 PM , Rating: 2
No. I disagree. Your assumption is that the start-up's only outcome is being swallowed by the single player, and that the new law only affects the negotiation of a price.

I think it means the patent trolls will be forced to morph into a new business model. They will now have to step in sooner. Since it won't profit them to buy the bankrupt start-up as a shell to get the IP, they will have to partner with the start-up while it is still a going concern, and so become more like a VC. Prior to bankruptcy, the going concern has a far better case and only needs money for the lawyers. This forces the would be troll into a more legitimate model.

It also forces the small going concern to have a real innovation, not just a blackmail attack on companies with deep pockets. The bottom line is that paper will stand still for anything you want to write on it. What really makes a patent valid is that it has been tested in court.

IMO, this improves the situation for the small start-up, or at least for the small start-up that actually has a real innovation. You're right in that it was previously a matter of negotiating price. There was never any question as to the end-game of being swallowed up. The new law would create an opportunity for the start-up to actually succeed as a going concern and become competition for the single player.

The new law is more in the spirit of what the patent laws were supposed to be all along. A means for allowing a small company with true innovation to have exclusivity long enough to become a player. Patent laws should be a means to increase competition, not a framework for negotiating the price for remaining a monopoly.

Contact your Rep!
By Paladin21 on 10/25/2013 9:59:03 AM , Rating: 3
If you want things to change, you need to get out there and do your part too. E-mail the Representative from your District and ask them to get on board. Money talks, but these guys want to stay in office too. Let them know that they have cover from their constituents to run with the ball, and maybe they will.

RE: Contact your Rep!
By Spookster on 10/25/2013 1:33:58 PM , Rating: 2
Just emailed mine. My state for whatever reason attracts tech companies so hopefully that will make it an easy decision for our representatives to get on board.

Big company wins
By milktea on 10/25/2013 1:55:27 PM , Rating: 2
the current bill seems to favor big companies, to shield them from small trolls
small companies still aren't protected

RE: Big company wins
By inperfectdarkness on 10/26/2013 3:55:31 AM , Rating: 2
No surprise there. Small companies aren't making large campaign contributions.

By rbuszka on 10/25/2013 10:37:22 AM , Rating: 3
If this legislation might threaten any of Apple's ongoing patent litigation, you can presume this bill to be DOA on the President's desk, since Apple very clearly has the president's ear as we've seen in the past with the Samsung lawsuits.

If this legislation doesn't threaten to undermine any of Apple's current legal tactics regarding its patents, then its benefit in other cases is probably also very limited.

Please note, the trend in politics is still toward more corruption, not less. We need to keep a very close eye on this bill because it could easily turn into a bait and switch maneuver, though it's not like we can do much about it if it becomes corrupted.

f*cking finally
By zerocks on 10/25/2013 11:24:34 PM , Rating: 2
it has been too long a wait for some common sense to come up in that system and thank f*ck it's finally coming about.

"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton

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