R Street welcomes legislation to curb abusive patent lawsuits
Introduced by Reps. Darrell Issa, R-Calif., and Judy Chu, D-Calif., the Stopping the Offensive Use of Patents Act, or STOP Act, expands provisions of 2011’s America Invents Act that allow defendants in some patent litigation cases the opportunity to challenge the validity of the patents in question. The bill is a response to the growth in lawsuits brought by patent trolls, which represented 62 percent of all patent litigation in 2012 and produced $29 billion in direct costs in 2011.
Patent trolls – known in the legal parlance as “non-practicing entities” – are patent owners who do not produce any goods or services. Commonly, these firms purchase low-quality, overly broad patents with the intent of bringing suit whenever a company brings to market any product that might be considered infringing. Because of the high cost of litigation, companies typically settle rather than defend these claims, although more than 90 percent of cases that go to trial are found in favor of the defendant.
“The threat of costly lawsuits that commonly run into the millions of dollars gives patent troll enormous leverage to extort money from productive enterprises, particularly small and medium-sized businesses,” said R Street Policy Analyst Zach Graves. “Rather than keeping with the Constitution’s recommendation that Congress create patents to promote useful arts and sciences, this perversion of the patent system actually derails progress and keeps companies from bringing innovative new technologies to market.”
Section 18 of the America Invents Act created a temporary program, set to expire in 2020, that allows defendants in suits that claim infringement of business method patents covering financial products or services to petition the USPTO’s Patent Trial and Appeal Board to review the legitimacy of the patent. The STOP Act would make Section 18 permanent, while expanding the scope of covered patents to include business methods related to data processing and other business operations.
The legislation has been referred to the House Judiciary Committee, on which both Issa and Chu serve. It is a companion to the Patent Quality Improvement Act, introduced earlier this year by Sen. Chuck Schumer, D-N.Y.