Tech companies have been pleading with Congress for years to crack down on abusive lawsuits by patent "trolls," or firms that use obscure patents to extract exorbitant licensing fees. The companies may finally get some real relief, thanks to an unintentional assist from the trolls themselves. These lawsuit-happy patent holders have made reform a Main Street business priority by threatening to sue scores of retailers and small businesses for selling or using off-the-shelf products that allegedly infringed their patents. Their efforts so outraged lawmakers from both parties that patent trolls have become a problem that can no longer be ignored.
So far this year, President Obama and at least seven groups of lawmakers have proposed measures to rein in patent trolls. The latest came Wednesday, when House Judiciary Committee Chairman Robert W. Goodlatte (R-Va.) and 10 lawmakers from both parties introduced a bill that would make it easier for companies to fend off patent trolls. Among other things, the measure would allow courts to order patent holders to pay the legal fees of companies they wrongly sue for infringement, and it would put lawsuits against the users of an allegedly infringing product on hold while the manufacturer of that product challenged the patent owner's claim.
Patents grant a monopoly over the use of an invention for a limited period, giving inventors a chance to recover their investments before competitors can duplicate their work for free. That protection is vital to industries with large research-and-development costs, such as the pharmaceutical industry. "Non-practicing entities" are companies or institutions (such as research universities) that aggregate patents in order to collect licensing fees, rather than to build and sell products based on those inventions. What sets trolls apart from other non-practicing entities is their habit of asserting ridiculously broad patents over well-established techniques, such as transmitting audio and video online, or stretching old patents to cover new technologies that weren't contemplated by the original inventor. They also tend to demand licensing fees that are higher than the patented technologies are worth but lower than the cost of defending against an infringement lawsuit.
A key provision of Goodlatte's bill would allow the manufacturer or supplier of an allegedly infringing product or component to intervene in suits brought against its customers — typically the end user of the product — shielding the latter while the court decides whether any infringement occurred. Some patent holders argue that the shield would be too broad, potentially blocking suits against those who profit from the use of infringing products. In fact, the bill would only delay such actions, and that's unfortunate. Ideally, Congress would ensure that those who use off-the-shelf products for their intended purpose simply cannot be held liable for any infringing technology inside them. The liability should rest solely on the manufacturer of the technology, not its customers.
The bill would also deter trolls from shaking down companies with lawsuits based on flimsy claims by requiring the losing party in an infringement case to pay the other side's legal fees, except when the court finds the loser's actions are "substantially justified." Some critics complain that the measure would make it too hard for small inventors to stop giant tech companies from stealing their breakthroughs. But small inventors are frequently the trolls' targets too — a good example being the lawsuits brought by Lodsys against smartphone application developers. And the changes advocated by Goodlatte and his cosponsors wouldn't stop valid claims of infringement based on good patents.
The root of the troll problem is that the Patent and Trademark Office has granted far too many patents that aren't good — they're too broad, too vague or not actually new inventions. The America Invents Act that Obama signed into law two years ago was designed to remedy that by giving the patent office more resources and making it easier to challenge bad patents administratively. But even if those changes improve patent quality in the future, they don't solve the problem posed by trolls armed with dubious patents they've already obtained. That's why Congress needs to take more action.