The US House of Representatives and corporations in Silicon Valley are taking action against excessive patent litigation, also known as “patent trolling.” The House subcommittee on Commerce, Manufacturing, and Trade drafted the Targeting Rogue and Opaque Letters (TROL) Act of 2014. Last Friday the subcommittee approved the bill to be submitted for consideration to the entire Energy and Commerce Committee.
The current draft’s primary goal looks at the misleading language and practices of companies that attempt to intimidate competitors into paying licensing fees. This includes deceptive “bad faith communications” such as claiming the company has filed a civil action or is taking other legal measures when it has not in fact done so.
So-called patent trolls, the main target of this bill, are companies that purchase expired patents in various fields with the sole purpose of collecting licensing fees.
Organizations in the tech industry have repeatedly called for tougher litigation on these companies, arguing that they contribute nothing of their own to the industry and serve only to stifle innovation. Business Spectator reports the practice is moving to pharmaceutical and even retail industries, resulting in a disturbing trend that many believe disrupts the competitive business environment.
Large tech companies are taking matters into their own hands with protective business alliances. Dropbox, Google, NewEgg, Canon, SAP, and Asana have teamed up to create the License on Transfer Network (LOT or “Lotnet”). LOT Network claims that frivolous patent lawsuits are responsible for over $100 billion in legal costs and licensing fees since 2005. When a member company sells its patents to a Patent Assertion Entity (PAE), other member companies retain license privileges, minimizing the PAE’s ability to target other companies that may be using patented technology.
LOT Network suggests an environment where the tech industry stands arm-in-arm in an “us against them” war against patent trolls, but history has shown these same companies do not hesitate to use this behavior against one another. It was not so long ago that Oracle, after acquiring Sun Microsystems and with it the rights to Java APIs, engaged Google in a controversial legal battle over Android’s use of Java.
Both the House draft bill and the formation of LOT Network address the need for reform, but neither measure is without its concerns. According to the Business Spectator report, the Federal Trade Commission can target companies engaged in patent troll behavior if they can “prove bad faith,” a vague requirement that some fear will make it more difficult for the FTC to act. The bill itself, however, has language requiring the target company to provide evidence of its own good faith under the subsection titled “Affirmative Defense”:
“Evidence that the sender in the usual course of business sends written communications that do not violate the provisions of this Act shall be sufficient to demonstrate good faith.”
If the TROL Act becomes federal law, it will also supercede individual state laws against frivolous patent litigation (at present, ten states have passed anti-patent troll laws).
Some of these states have tougher legislation than what is written in the House draft bill. Vermont, for instance, is the “first state to enact a consumer protection law against bad faith patent infringement” according to Patent Progress.
Other states are struggling to pass the bills they’ve introduced, with efforts stalled in Kansas, Mississippi, and Nebraska. While the TROL Act would help the many states trying to get this legislature off the ground, it would weaken the progress made in states like Vermont.
US lawmakers have attempted to introduce federal bills of this kind before with varying results. A bipartisan movement asking Congress to take more substantive measures earlier in the year went nowhere, although the White House has pressured both the House and Senate for stricter legislation. Senator Claire McCaskill, meanwhile, is pushing a bill similar to the TROL Act in the Senate.
Government is not the only place where efforts are questioned. Smaller companies in the tech industry worry that an organization such as LOT Network only stands to benefit tech giants with ample resources at their disposal, although at present the Lotnet website claims to be offering membership to other companies.
At present, it appears business alliances like LOT Network can move more quickly and act more effectively than the prolonged process associated with legislation.
On the other hand, lawmakers have the authority to protect businesses who are not a part of any protective association, especially small business owners and tech startups. Patent trolling is a rising problem that will require a combination of creative business practices and strong legislative action to stem the tide of this abusive and frivolous behavior.