Sen. John Cornyn, R-Texas, met with a group of Austin’s high-tech officials Thursday to collect feedback on a new bill designed to reduce the number of frivolous patents lawsuits brought by “patent trolls.”
The Patent Abuse Reduction Act, which Cornyn filed last week, would heighten requirements and, potentially, costs for plaintiffs in patent lawsuits with little or no merit.
Many technology companies have argued that so-called patent trolls—often shell companies with no products and created only to press litigation over patents—are stifling innovation and hurting the economy.
The bill would require that plaintiffs “put some skin in the game,” Cornyn said. “Right now, they have a free shot.”
In remarks following the panel discussion at HomeAway Inc.’s downtown headquarters, Cornyn said the new bill was narrowly targeted and not intended as a panacea for patent reform.
Federal lawmakers last year passed a broader patent-reform bill last year, Cornyn noted, and other patent-abuse legislation has been filed in the current Congress.
Those bills will help patch gaps that arise as previous legislation is implemented, he said, but already a lot of creative people are circumventing many of the reforms.
“Lawyers can be very innovative, too,” Cornyn quipped after the panel discussion.
The senator said he came to Austin to hear stories about patent issues and learn more about how Congress can continue to modernize the longstanding patent framework to accommodate the speed of innovation in technology. Speakers on the panel generally praised the new bill and shared stories of what they felt were frivolous lawsuits brought against their companies.
However, Freescale Semiconductor general counsel Jonathan Greenberg cautioned that any legislation needs to accommodate legitimate patent claims. The semiconductor company defends many of its patents through litigation, and the new bill would likely increase the costs of that litigation.
Cornyn acknowledged that as a concern, noting that he hoped the legislation could serve as a bright line from which policymakers could continue to work in hopes of ironing out better protections against patent abuse.
Currently, plaintiffs can threaten or file lawsuits against companies with a minimum of cost and transparency, forcing defendants to decide whether they want to go into the often-costly discovery phase of litigation or settle.
Such cases are often brought by entities “that make nothing and sell nothing,” said David Pratt, president of M-CAM Inc., a patent advisory firm based in Charlottesville, Va. “The patents in many cases are extraordinarily vague.”
Because discovery costs can easily run into the millions of dollars, mostly on the defendant’s tab, Pratt said, “patent trolls” typically file vague claims and offer settlements to drop the suit before discovery.
At the panel discussion, Rackspace Inc. general counsel Alan Schoenbaum described one lawsuit that claimed the San Antonio company had infringed on a patent that reorients the desktop on a computer screen when the device is rotated— essentially, the same technology on millions of mobile phones and tablet computers around the world.
“We knew the patent was no good,” Schoenbaum said, and Rackspace rejected a settlement offer of $75,000.
However, many smaller companies choose to settle and conserve their resources, the panelists said, even if they don’t think the claim would stand up in court. Requiring greater transparency about the plaintiff and its claim could help reduce that practice.
In addition, Cornyn’s bill would establish a “loser pays” framework, which would require a losing party to cover the litigation costs for the other parties.
That provision could face a tougher challenge in Washington, said Pratt, at M-CAM. Other similar fee-shifting proposals have raised objections from the broader legal community, which has generally resisted such proposals.
“From a practical political matter it’s a bigger mountain to climb there,” he said. “But having transparency in the claim and stating the precise nature of it, that’s a positive.”