Patent Reform Battle Heats Up With Legislative, Supreme Court Action

On the heels of House passage of a closely watched patent reform bill, the Supreme Court has accepted a case that could open a new front in the war on “patent trolls.”

Industry groups that don’t feel much holiday cheer toward patent assertion entities, or “patent trolls,” got a pair of early stocking stuffers last week.

On Thursday, the House passed a highly anticipated patent reform bill  (opens in a new tab) by a wide margin. And on Friday, the Supreme Court announced it would take up a related case. More details:

About the legislation: The Innovation Act, a House patent reform bill sponsored by Rep. Bob Goodlatte (R-VA), started out as just one of many proposals aiming to curb what many claim is abusive patent litigation. But it was Goodlatte’s bill that ultimately made it to the House floor, where lawmakers voted 325-91 to pass it. “We have seen an exponential increase in the use of weak or poorly granted patents by so-called patent trolls to file numerous patent infringement lawsuits against American businesses with the hopes of securing a quick payday,” Goodlatte said in a statement. While tech-focused groups played a key role in bringing the issue to the forefront—and most supported the legislation—it has drawn attention from associations across a broad spectrum of industries far beyond the tech space and created some unusual alliances. Groups as diverse as the National Restaurant Association, the American Gaming Association, and the Alliance of Automobile Manufacturers support the measure  (opens in a new tab) [PDF].

The potential impact: The House bill has the potential to change the landscape for small companies that have often found themselves sued by patent assertion entities for using another company’s technology. Lodsys, for example, has filed numerous suits  (opens in a new tab) against app developers over in-app purchase technology—despite the fact that Apple already licensed the technology  (opens in a new tab) with the express purpose of making it available to developers. However, some associations linked to patent-heavy industries, such as biotechnology and licensing, have raised concerns that the bill is overly broad  (opens in a new tab) and could hurt innovation  (opens in a new tab). Several university groups that applaud the measure’s general goal oppose it  (opens in a new tab)for similar reasons.

Next step: The legislative action now moves to the Senate, where a hearing on a similar bill will be held on December 17. Bloomberg Businessweek notes  (opens in a new tab) that senators could face pressure to soften or remove one of the key aspects of the legislation. Some trade groups are unhappy with the bill’s requirement that losers of a patent suit pay the winner’s legal fees—a provision intended to make frivolous patent litigation undesirable. Among them was the National Venture Capital Association, which lobbied Goodlatte to remove the clause. “Although a prevailing-party approach for attorney’s fees may be acceptable for litigants that are similarly situated economically, this approach puts unfair burden on early-stage companies which are typically capital constrained,” the NVCA’s Bob Franklin wrote to Goodlatte.

SCOTUS steps in: The day after the bill’s passage, the U.S. Supreme Court announced  (opens in a new tab) it will take up a software patent case, Alice Corporation Pty. Ltd. v. CLS Bank International, in the coming year. The justices will decide  (opens in a new tab) whether conceptual software “inventions”—computer-implemented business methods (in this case, “the management of risk relating to specified, yet unknown, future events,” the patent owned by Alice Corp.)—can be patented or should be treated as unpatentable abstract ideas, like math formulas.There have been many cases of this type in recent years, but the lower court’s splintered ruling in Alice v. CLS—in which the Federal Circuit issued six different opinions—led the high court to accept the case, presumably to clarify the law on the issue.

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