Patent Trolls Lose Legal Advantages Under New U.S. House Legislation

NEWS ANALYSIS: A new law passed by the U.S. House of Representatives will try to rein in so-called patent trolls by requiring them to show they have valid claims and raising the cost of losing a case.

Reining in frivolous and legally unsubstantiated patent infringement lawsuits by making it costly to lose an unfounded case is the goal of a new law passed Dec. 5 by the U.S. House of Representatives.

The legislation, which moves on to the Senate for a vote, targets so-called "patent trolls" who often file vague, catch-all infringement cases against broad classes of small businesses that can ill-afford prolonged and costly litigation in federal court.

Being a patent troll is essentially a way to print money. You look for overly broad patents for business processes or perhaps software, and then you buy the patent. Once you have the patent, you decide to impose license fees on everyone who might conceivably be infringing on your patent.

These claims are made constantly regardless of the fact that they don't meet the U.S. Patent Office's requirements for obviousness, prior art or other existing patents.

The process works like this: You choose a class of business preferably with limited resources, such as mom and pop restaurants, and then send every one you can find something called a Demand Letter, telling them that they have to pay for a license or face a patent infringement lawsuit.

If they pay, you make money. If they don't pay, you also make money because you can sue for damages. It doesn't mattered very much that your patent is only vaguely applicable, likely invalid or simply bogus—you still sue.

The reason this makes money is because most businesses would rather pay a nominal amount than get involved in a lawsuit as a defendant. And even if they do refuse to pay, because courts are remarkably vague on patent law, there's a good chance you'll win and make money. But what's better is that as things are now, even if you don't win, it doesn't cost anything to try. The defendant will still likely have to pay the resulting costs and legal fees.

This last part is what the Innovation Act (HR 3309) would change. This law, sponsored by Rep. Bob Goodlatte, R-Va., and passed by a bipartisan vote in the House of Representatives, would require patent infringement plaintiffs to show that their claims are justified to avoid paying all of the litigation costs if they lose a case.

Chances are you thought that losing plaintiffs already had to pay for bringing a frivolous lawsuit, but that's not the case in patent law. Plaintiffs do not pay any costs, even if they lose an infringement case. If the law goes into effect, however, they would.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...