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Software Patent Proposals Divide Tech Industry

Bill Clark/CQ Roll Call File Photo
Schumer said that listening to stories from patent troll victims made it clear to him that Congress needed to take action.

As a less-costly alternative, the 2011 America Invents Act (PL 112-29) included a new program that allows the U.S. Patent and Trademark Office to re-examine certain software patents to determine if they are valid. The program is only a year old and few cases have made it through the system. But Charles Duan, director of the Patent Reform Project at the open Internet advocacy group Public Knowledge, said challenging a patent at the patent office costs only $20,000 — a fraction of the cost of litigation.

Duan said similar programs at the PTO have invalidated as much as 90 percent of the patents they examine, a rate similar to patent lawsuits that are litigated to completion.

“To the extent they are invalidated, the patents probably shouldn’t be granted in the first place,” he said.

The current program applies only to covered business method patents, which are essentially software patents used by the financial services industry. In response to the rising use of software patents by both patent trolls and large companies to stifle innovation, a number of lawmakers have suggested the CBM program be expanded to cover most business software patents. Schumer is among them, offering a bill (S 866) that would expand the program to all business software and remove the eight-year sunset provision on the program.

“We must expand and make permanent the Schumer-Kyl covered business method program in order to deter patent trolls from using poor quality patents as a weapon against innovation,” Schumer said.

In addition to Schumer’s bill is House legislation (HR 2766) from Reps. Darrell Issa, R-Calif., and Judy Chu, D-Calif., who frame their effort as a response to the growing problem of patent trolls.

“As a patent holder, I know how harmful and expensive these aggressive litigation tactics are for American entrepreneurs,” Issa said. “Instead of spending money on new hires or technology, innovators are faced with millions of dollars in legal fees to resolve these baseless lawsuits.”

Chu called patent trolls “a drain on our national productivity and economic output,” adding, “The STOP Act will deter abuse and arm smaller entities with the support they need to fight back.”

Portions of the tech industry, particularly Web-focused firms such as Google and Apple and mobile app developers, effusively praise the bills from Schumer, Issa and Chu.

“By enabling defendants to seek review of a patent’s validity, the bill creates a quick, cost-effective alternative to litigation,” said Gary Shapiro, president and CEO of the Consumer Electronics Association. “Without having to face the immediate potential of millions of dollars in legal fees, companies targeted by trolls will face less pressure to pay money to resolve baseless lawsuits.”

But a coalition of large corporations, including Microsoft, and other patent holders is pushing back, arguing that expanding the CBM program would diminish the intellectual property rights of patent holders and only give patent trolls multiple venues to challenge the validity of patents.

Opponents also argue that the move could send the message that the United States is treating software patents differently than other patents and prompt other countries to similarly exempt other patents from future treaties.

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