Politicos mull action against patent system abusers

Lawmakers continue to consider new rules aimed at discouraging "patent trolls."

WASHINGTON--U.S. politicians appeared sympathetic on Thursday to tech companies' cries for help combating what are commonly called "patent trolls"--companies that supposedly hold patents for no reason other than coaxing inflated settlements out of wealthy corporations.

"The patent system should reward creativity, not legal gamesmanship," Rep. Lamar Smith, the Texas Republican who chairs a House of Representatives intellectual-property panel, said at a hearing here entitled "Patent Trolls: Fact or Fiction?"

California Democrat Howard Berman said he was concerned about the patent holder who "spends not a cent on development...(and) patents every monkey he kisses. All he does is spend his time sitting around waiting, (hoping) that he can make enough of a case that it might infringe on his monkey that somebody will pay him to go away."

Each of the politicians has already put forth his own proposal aimed at improving what some decry as a broken patent system, though those suggestions remain works-in-progress while competing interests try to work out the best language. Both Berman and Smith said Thursday that they'd like to see new laws enacted this year. But that may prove tough because of an abbreviated election-year calendar.

Committee members seemed to agree that the U.S. Supreme Court's decision this spring in eBay v. MercExchange settled one of the thornier issues they were struggling to legislate--namely, when injunctions are appropriate in patent suits. The high court's ruling established that patent holders aren't "automatically" entitled to injunctions barring convicted infringers from using their inventions and instructed courts to consider several factors contained in centuries-old patent law, such as whether the patent owner would experience irreparable harm if an injunction weren't granted or whether other remedies, such as monetary compensation, would be enough.

The politicians also clearly took note of concerns expressed in a concurring opinion by Justice Anthony Kennedy, who wrote, "An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees" that can be "exorbitant."

"Is that an activity that is essential to innovation in America, that should be rewarded and that the process should accept and legitimate?" Berman asked.

He and his colleagues said other areas of concern remain, such as the way that damages are awarded to patent holders who win infringement suits and the quality of patents issued. Both bills, for instance, would establish a "post-grant opposition system" in which the public would have a certain number of months to dispute the validity of patents after they are issued without having to go to court.

'Loser-pays' approach suggested
Paul Misener, Amazon.com's vice president of global public policy, urged the politicians to concentrate primarily on rewriting the law surrounding the damage awards process. One suggestion made by Amazon and other technology companies, whose products often rely on as many as hundreds of thousands of distinct patented components, involves requiring juries to award money to patent holders based solely on the infringed patent's contribution to the overall product, not on lost sales for the entire affected product.

They argue that by effectively reducing the potential gains, people and companies may not have such a great incentive to obtain their livelihood by sitting on patents until they can find a company to sue for infringement.

Misener also called on politicians to outlaw the practice of awarding compensation for estimated lost profits to patent holders who don't offer a product that competes directly with the company they're accusing of infringement. Those who "do not compete in (the) marketplace are not entitled to lost profits but instead to a reasonable royalty," he said.

But Dean Kamen , a New Hampshire-based independent inventor perhaps best known for inventing the Segway Human Transporter, cautioned politicians not to erode, in their quest to root out "bad actors," the rights of legitimate innovators who thrive on licensing their patents to larger companies.

"If a big company repeatedly disregards people's rights, they are as bad as the trolls at the other end," Kamen said. He suggested that a way to quell abuses by both sides could be to institute "some form of loser-pays" approach to "penalize people who are abusing the system."

After hearing Misener's suggested reforms, Smith and Berman couldn't resist taking jabs at an ongoing controversy over Amazon.com's one-click patent, which covers a process for making online purchases in a single step and is currently under review by the U.S. Patent and Trademark Office . The e-commerce giant earned notoriety when it asserted the patent against rival Barnesandnoble.com several years ago.

"Could not Amazon.com be accused of being a troll for patenting the one-click?" Smith asked, a wry smile on his face.

Misener defended the patent as "a radical departure from the shopping cart model" when it was granted in 1998. "We only exercised the patent against someone who at the time...had publicly announced intention to crush our business," he said. "This wasn't some scheme to hit up small users."

 

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