New Congress Needs to Save Startups from Patent Trolls | Commentary
Now that the midterms are over and Republicans have seized control of the Senate, there is hopeful talk of bipartisan cooperation in the few areas where agreement is possible in the next Congress. Patent reform, which has always had broad bipartisan support, is at the top of the list of legislation that can and should get done. Startups, in particular, are desperate for relief from patent troll abuse, and need the Senate to revive and pass the patent reform bill that was abruptly scuttled by Democratic leadership in May.
Patent trolls increasingly target startups and small businesses, and have significant adverse effects on their operations and viability. Startups are key drivers of innovation, developing breakthrough technologies that enhance our daily lives. Consequently, troll threats against them, often employing vague and unclear patents of dubious quality, disproportionately impede innovation and hinder American economic growth and prosperity. They stifle investment in innovation wherever there is an infringement threat, no matter how frivolous or baseless, and cost the U.S. economy $29 billion per year.
This chokehold on innovation requires a multifaceted solution — one in which the courts and the U.S. Patent and Trademark Office must also play a central role. The Supreme Court has issued several important patent decisions this year. Several of them clarify and bolster existing requirements for patent eligibility. If rigorously applied and enforced by the courts as well as the PTO, these decisions should improve patent quality — but only prospectively. The cost of challenging an existing patent is prohibitive for startups, and most existing patents can’t even be challenged at the PTO. So these decisions will have no effect on the thousands of already issued low quality patents that trolls have amassed in their arsenals.
Patent trolls thrive because of a grossly uneven litigation playing field that incentivizes and rewards frivolous and indiscriminate infringement claims. Trolls currently take advantage of the high cost of legislation to extort settlements from startups, draining critical energy and resources away from their businesses. Only legislation can remedy this problem. The House passed such legislation last December by a lopsided 325-91 margin. Furthermore, the Obama administration recently reiterated its call for comprehensive legislation to curb abuse, and supported for the House’s Innovation Act. So did most technology companies, retailers, and many venture capitalists. The Senate must now take up a robust reform bill that contains all of the core elements of the House bill in order to make it harder to exploit the litigation system to extort nuisance settlements.
Opponents of robust reform legislation have argued that the proposed changes in the law would also make it harder to enforce patents and assert valid claims. Startups, many of which rely on patents to secure funding, share the view that legislation should be tailored to baseless and bad faith claims. Nothing in either the House or Senate bills would hinder a patent holder from monetizing, asserting or enforcing valid patents, or patents whose assertion is substantially justified or objectively reasonable. Legislators in both chambers took pains to strike the right balance and ensure that the bill in no way prejudices valid patent claims or claims made in good faith. The fact remains that the litigation playing field is disproportionately skewed in favor of plaintiffs and lends itself to abuse. Targeted legislation is the only way to remedy that.
Legislation would level the playing field for all innovators, and give startups a fair shot at defending themselves against frivolous suits that extort inventors. If there is any hope for overcoming partisan gridlock, the new Senate leadership must take up and pass meaningful legislation to deter troll abuse and remove existing barriers to innovation.
Peter Pappas was formerly chief of staff at the United States Patent and Trademark Office.