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A Message from WestlawNext

Patent Vortex 2014 – Trolls, Innovation, and Return on Investment

Posted Mar 13, 2014 4:54 PM CDT
By Robert Greene Sterne

You can’t avoid it – “patent trolls” are everywhere in the popular press. This is the new narrative presented: Patent trolls are the new scourge of the U.S. legal system. They extract greenmail from legitimate businesses through nuisance settlements of baseless assertions of highly questionable patents. They clog the courts and make rich their promoters and lawyers. They are the new tax on innovation and they must be stopped.

Who is a patent troll?

Yet, who or what is a patent troll? Is it like pornography – “you know it when you see it?” Is it a buyer of a patent in a bankruptcy? Is it an entity that licenses the patent, but does not make the protected invention? Is it a patent owner of a fundamental breakthrough now being used by an entire industry? Is it an entity owned by a large patent holder that now owns patents spun off for technology no longer practiced in order to recoup a substantial investment in these wasting property rights?

Ask three people in the new patent vortex and most likely you will get three different answers. One thing most people will agree on is that there are some bad patent asserters that must be curbed. But which ones? This answer usually devolves to whose legal and financial interests are being hit.

Many patent stakeholders are in a collective state of shock over new proposed “anti-troll” legislation. They claim it will kill the incentive to innovate, as well as hurt job creation, capital formation, and industrial competitiveness in the U.S. These concerned opponents come from all parts of the patent community – individual inventors, R&D labs, universities, technology investors, large multinationals competing on the world stage, academics, and participants in a myriad of technology sectors. Cynics in the patent holder camp say it all comes down to money – the proponents of “anti-troll” legislation want to change the law rather than pay for the innovations they have taken from others and used to reap profits.

Can legislative measures stop patent trolls?

As mentioned above, to counter the “expanding legal menace” of the current patent troll narrative, legislation was rushed through the U.S. House of Representatives last Fall in a seldom seen display of bipartisanship by a super majority from both sides of the aisle. Provisions passed include:

• the losing party must pay attorney’s fees and costs in suits involving patents,

• subjecting computer-related patents to post-grant patentability challenges at the U.S. Patent and Trademark Office (“USPTO”) by any party threatened under declaratory judgment jurisdiction,

• creating special pleading requirements in the courts and new disclosure of interest showings of patent rights in USPTO records, and

• notice letters from patent asserters and requirements concerning protection at various levels in product distribution chains.

All of these fundamental changes follow the America Invents Act (“AIA”), passed in 2011, which wrought the biggest changes in patent law in 60 years.

Now the U.S. Senate is on the hot seat to deal with these and other proposed changes to patent law. Attorneys General of many states have jumped into the legislative fray with proposed state legislation directed at patent trolls, particularly involving assertion letters. These state initiatives are described as necessary consumer protection.

What is the impact of the new legislation?

If passed, some of the proposed changes will have clear and profound impact on other areas of the law. This new legislation could result in major and perhaps, terrible unintended consequences if not fully vetted and evaluated using the views of all interests in the patent world. For example, it may make it impossible for any patent holder to effectively enforce his patents.

A rush to legislation could take the U.S. patent system – which has fostered incredible technological innovation in the U.S. economy since the early ’80s – backwards relative to other industrialized economies. Already the U.S. patent system, once the worldwide leader, is being characterized as falling behind other patent systems in effectiveness.

How to get up to speed quickly on “anti-troll” patent legislation?

The views of many stakeholders can be found in “Patent Legislation Before The U.S. Congress: Differing Perspectives,” a three part video webinar series on the West LegalEdcenter. The series features panel discussions of the pending legislation as well as the possible implications and impact if the legislation is passed in its present form. The series can be found here:

Part 1 - http://westlegaledcenter.com/program_guide/course_detail.jsf?courseId=100015519

Part 2 - http://westlegaledcenter.com/program_guide/course_detail.jsf?courseId=100015792

Part 3 - http://westlegaledcenter.com/program_guide/course_detail.jsf?courseId=100015793

As Congress, the White House, and the states grapple with this hot topic, the debate will intensify. To stay on top of emerging developments and the new patent landscape created by the AIA, Patent Office Litigation through WestlawNext provides leading-edge treatment of all of the new laws, regulations, and Office rules of practice and procedure; all of which is necessary for anyone operating in the patent world in the global economy.

Robert Greene Sterne is the Editor-in-Chief of Patent Office Litigation, the first treatise on the new patent world created by the America Invents Act. This book examines how the proceedings interact with other aspects of patent procurement and enforcement, and delivers practical analysis and advice. He is a founder of Sterne, Kessler, Goldstein & Fox P.L.L.C., a leading intellectual property law firm. He is extensively involved in contested proceedings at the USPTO. He regularly moderates webinars for West LegalEdCenter and frequently writes and speaks on the patent landscape.

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