The Senate Is Finally Getting Serious About Slaying Patent Trolls

Patent reform is back in the Senate, and it's going to be tougher for Harry Reid to get in the way this time.

Seven members of the Senate Judiciary Committee—including Majority Whip John Cornyn and Chuck Schumer, the No. 3 Democrat—unveiled legislation Wednesday that would overhaul several aspects of the patent-litigation landscape and clamp down on predatory patent-troll behavior.

The contents of the measure are the product of months of deliberations that began in January between Cornyn and Schumer, according to congressional aides close to the process. Discussions have dragged on for months as negotiators tweaked the bill to earn approval from Judiciary Chairman Chuck Grassley, ranking member Patrick Leahy, and others. It is part of an ongoing effort to build consensus around an agreement in which nearly every provision is subject to hostile dispute from interested groups—ranging from tech giants to start-up incubators to retail stores and biomedical firms.

The Patent Act effectively jump-starts a dormant debate in the upper chamber on how to best legislate against so-called patent trolling—the practice of filing frivolous patent-infringement lawsuits against inventors and businesses in the hope of reaping hefty settlements—nearly a year after negotiations within the committee crumbled.

Reform advocates say trolls sap tens of billions from the economy annually—a nefarious activity that has grown with the explosion of software patents in recent years. Opponents question the veracity of those calculations while warning that overcorrecting the nation's intellectual property rules could do more harm than good.

 Harry Reid, then the Senate majority leader, was widely blamed last year for killing the compromise brokered by Schumer and Cornyn just hours before it was expected to emerge publicly. Even Leahy told a Vermont newspaper last year he was "furious" that Reid had killed the bill.

Reid was accused by Republicans and some reform advocates of caving during a tight election year to the demands of trial lawyers—long a Democratic constituency—who have opposed broad reform to patent litigation. The GOP takeover of the Senate following last year's midterm elections was viewed as a boon to the prospects for patent reform in the new Congress, now that Reid is relegated to the minority leader job.

"Last year it was stalled by a significant person running the U.S. Senate," Grassley said during a press conference introducing the bill.

In addition to Reid's loss of influence, reform advocates are buoyed by the wide-ranging political spectrum of the bill's cosponsors. In particular, some highlighted Democratic Sen. Amy Klobuchar's cosponsorship as a sign the measure is likely to have the votes necessary to muscle its way through the Judiciary Committee. Grassley said he plans to hold a hearing on the bill next Thursday and then mark it up two weeks later, before the Memorial Day recess.

The legislation was quickly praised by several pro-reform groups, including the recently formed United for Patent Reform, whose members include Google, Facebook, telecom giants, and the hotel, restaurant, and retail lobbying groups, which lauded Schumer and Cornyn for "their hard work driving the process that led to today's bill."

But influential stakeholders, including pharmaceutical companies, universities, and trial lawyers, remain skeptical that such broad changes are necessary, especially just years after Congress passed the America Invents Act, which also dealt with the patent system. Reform opponents are also quick to point to a number of decisions made by the Supreme Court last year that tweaked patent litigation, arguing that it is too soon to gauge the impact of those rulings.

And the bill is likely to encounter sharp resistance from Minority Whip Dick Durbin and Democratic Sen. Christopher Coons, both members of the Judiciary panel who have offered their own more narrowly tailored patent bill. In a statement shortly after the bill's release, Coons blasted several aspects of the Patent Act, claiming it would "reduce the value of American inventions and the valid enforcement of patent rights" while not doing enough to address vague demand letters.

"If it looks like the House bill, I'll definitely oppose it," Durbin told National Journal on Tuesday, referring to the Innovation Act, a popular bill reintroduced by House Judiciary Chairman Bob Goodlatte earlier this year that had overwhelmingly passed the lower chamber 15 months ago.

Several of the Patent Act's provisions do adhere closely to the Innovation Act, though Grassley was quick to argue that key differences exist and are worth consideration by his skeptical colleagues.

"It looks a lot different than the Innovation Act in the House," Grassley said when asked about Durbin's lack of support. "[Goodlatte] had the ability to get a much different bill out of his committee than I was out of my committee," he added, ticking off differences on fee-shifting, pleading, and discovery provisions.

The differences on fee-shifting—making the loser pay the winner's legal fees in an infringement case—are especially notable, given how contentious the provision is among stakeholders. The Senate bill would allow fee-shifting only in cases when the loser is deemed not "objectively reasonable." The House bill offers a similar sounding "reasonably justified" standard, though IP lawyers contend the House measure is stronger.

In addition, the Senate measure does not make fee-shifting "presumptive" like the House bill, which would require fee payments for the winner unless a patent is shown to be legitimate. Like the House bill, the Senate bill also would place restrictions on sending vague demand letters, protect end-users—for instance, coffee shops hit with an infringement claim for using a patented product such as an espresso machine—and allow for a delay to the start of the discovery process until a court settles certain facts of an infringement case, such as the venue.

The bill would also give the Federal Trade Commission more leeway in policing against companies that are sending bad-faith demand letters.

Significant hurdles remain as the bill moves forward, but the bill's lawmakers didn't back down from being bullish about its prospects.

"This is the year we will finally pass patent reform. I'm confident of that," Schumer said. "I look forward, if we're all still friendly and talking to each other, six months from now all being at the White House as the president signs our patent bill into law."

"Or sooner," Cornyn cut in, eliciting a round of approving laughs among the lawmakers.