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Patent litigation proponents pursue other efforts as Senate bill stalls

Daily Journal
05/22/2014

As the U.S. Senate Judiciary Committee exits from the discussion of how to curb frivolous patent litigation, for now, proponents are turning to other efforts to achieve their goals.

Andrew S. Baluch, a Washington, D.C.-based special counsel at Foley & Lardner LLP said several other government entities, including the U.S. Federal Trade Commission and the U.S. Supreme Court, are taking measures that could make it more difficult for holding companies.

"Even if patent reform legislation is on hold in the [Senate] Judiciary Committee, the reforms are moving full speed ahead in all other areas of the government," Baluch said. The Democrat-led committee stalled on a bill after the Republican-led U.S. House of Representatives overwhelmingly passed its version of patent litigation reform in December. Committee chairman, Sen. Patrick Leahy, D-Vt., pulled a bill from consideration Wednesday aimed at penalizing the abusive actions of some holding companies whose primary business model consists of asserting patents and extracting settlements.

But Leahy indicated there were concerns the legislative drafts were overreaching and would unduly impact innovative entities.

"Unfortunately, there has been no agreement on how to combat the scourge of patent trolls on our economy without burdening the companies and universities who rely on the patent system every day to protect their inventions," Leahy said in a statement.

But a bill introduced by Sen. Claire McCaskill, D-Mo., would authorize the Federal Trade Commission to develop and enforce rules prohibiting the distribution of bad faith demand letters. Such demand letters are frequently sent by holding companies to leverage the threat of litigation and obtain royalties.

Earlier this month, the Federal Trade Commission submitted a second request for public comments on the agency's proposed investigation into the structure and activities of so-called patent assertion entities, known by their detractors as trolls. Patent experts also point out how two Supreme Court decisions issued last month grant more authority to district court judges to award attorney fees to winning litigants in patent infringement cases.

Lawmakers had actively debated whether to include statutory fee-shifting provisions as part of a comprehensive patent litigation reform bill to discourage frivolous lawsuits.

San Francisco-based Keker & Van Nest LLP partner Ashok Ramani said he would like to see district court judges given more time to work with the America Invents Act and the Supreme Court decisions before Congress considers more legislation.

"I think it's unusual to have pretty significant changes after the first statutory patent change in some sixty years," Ramani said, in reference to the America Invents Act that was passed in 2011 to modernize patent prosecution and reexamination procedures. Mountain View-based Fenwick & West LLP partner Stuart P. Meyer said that different industries have disparate viewpoints on trying to limit patent litigation, making it difficult to craft a compromise bill.

The Biotechnology Industry Organization, a Washington, D.C.-based trade group, released a statement Wednesday in support of Leahy's decision "to remove the controversial patent bill from the Senate Judiciary Committee's agenda until greater stakeholder consensus can be achieved."

The Washington, D.C.-based Software & Information Industry Association threw its support behind lawmakers' efforts.

"At a time when Americans believe our political parties are badly divided, patent reform is one issue that has clear, bipartisan support in Washington," the trade group said in a statement.