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Innovation Act Hindered in House

on Thursday, 27 August 2015 in Technology & Intellectual Property Update: Arianna C. Goldstein, Editor

Innovation is a key driver for growth across all segments of the economy, from start-up business to large multi-billion dollar companies. Striking the proper balance between fostering and protecting innovation versus stifling it with too much, or too little regulation, is a difficult task. In recent years, there has been a focus on so-called “patent trolls,” and the negative effect they have on innovation. A patent troll, as the term in used in the industry, is an entity or person that owns a patent (or portfolio of patents) and typically does not utilize the patents to produce goods, and instead focuses on finding alleged infringers to exact a license fee from or sue for damages. While it is within the rights of a patent troll to exact such a license fee or bring suit against an alleged infringer, many patent trolls attempt to over extend these rights by using a weak patent to attack individuals or businesses when they do not have a good faith belief of infringement. There has been a large discussion surrounding the patent troll problem, and Congress has thrown their hat into the mix with proposed legislation to attempt to tackle the issue.

In February 2015, Bob Goodlatte (R-VA) introduced the Innovation Act (H.R. 9) in the House of Representatives, which proposes several changes and additional requirements for plaintiff-patent owners when they bring a patent infringement suit against an alleged infringer. The Act was approved for debate on the floor of the House by the Judiciary Committee in June. The House was scheduled to vote on the Act in late July, but due to growing opposition, the vote has been postponed until after Labor Day.

The major changes that the Innovation Act would have, if passed, deal with procedural requirements for bringing infringement lawsuits. In part the Innovation Act provides a heightened pleading standard, where a plaintiff must specifically point to claims in the patent that are infringed, disclosure of information about the plaintiff to the United States Patent Office once a complaint is filed, and awarding of attorney’s fees to the prevailing party, except in circumstances where the suit is justified and other limited circumstances. While these mechanisms would likely achieve the objective of fewer patent troll lawsuits, due to the additional procedural requirements and fee shifting, opponents of the Innovation Act believe it goes too far and creates too many impediments to bring legitimate patent infringement suits.

Opponents of the Act believe that it will harm small business and individual inventors by making it so difficult and costly to bring patent infringement suits that such owners will not be able to afford to assert their rights and protect their innovations. As a result of this, opponents say that big business will be favored because they may infringe a smaller entity’s patent with less risk of an infringement suit. The effect of smaller entities being unable to enforce their rights is that these entities may cease innovation all together. Without the ability to protect their rights, the incentive to innovate evaporates. While the Innovation Act is aimed at the noble goal of reducing suits by patent trolls, it may go too far and make legitimate patent suits too difficult to bring, especially by smaller entities with fewer resources.

It is important to note that Chuck Grassley (R-Iowa) has been simultaneously working to push a comparable bill, the PATENT Act (S. 1137), through the Senate. The PATENT Act is aimed at the same goals, but uses slightly different mechanisms for change as the Innovation Act. The PATENT Act was approved by the Senate Judiciary Committee in June after a manager’s amendment. While the PATENT Act appears to have more support than the Innovation Act, it has received similar criticisms on its fundamental principles. One thing is clear: the issue of costly, and sometimes frivolous patent lawsuits, is currently a significant concern, and the solution to solve this problem must be a delicate balance in order to foster as much innovation as possible.

AriAnna C. Goldstein

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