Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Patent holders oppose Leahy-Lee bill ‘as it stands’, (Apr 3, 2014)

By Lynn Stanton,TR Daily

The day before the Senate Judiciary Committee was scheduled to consider a patent litigation reform bill during a markup session, more than two dozen companies and organizations representing patent holders told the committee leadership that they could not support the bill in its current form.

“As it stands, many of the provisions assume that every patent holder is a troll,” 3M Corp. and others told committee Chairman Patrick Leahy (D., Vt.), who sponsored the Patent Transparency and Improvements Act (S. 1720), and ranking member Chuck Grassley (R., Utah). “Drafting legislation in this way seriously weakens the ability of every patent holder to enforce a patent. This approach clearly favors a business model that does not rely on patents and tilts the balance in favor of patent infringers, thereby discouraging investment in innovation.”

Specifically, 3M and the others said that “[i]f the provisions on discovery, customer stay, fee shifting and any associated measures, pleadings, and enforcement by the Federal Trade Commission do not achieve the appropriate balance, we will oppose the legislation.”

Committee members Mike Lee (R., Utah), Amy Klobuchar (D., Minn.), and Sheldon Whitehouse (D., R.I.) co-sponsored S 1720, which would require those who sue for patent infringement to disclose their beneficial owners, allow manufacturers to obtain stays on behalf of their downstream customers targeted for patent infringement based on their use of the manufacturers’ products, and clarify that the Federal Trade Commission can take action against fraudulent and materially misleading patent demand letters as violations of prohibitions on unfair and deceptive trade practices.

Among those joining 3M in the letter were several associations representing colleges and universities, which often patent and license inventions that they do not manufacture themselves, a behavior often attributed to “trolls”; companies and associations from the healthcare, agricultural, and manufacturing sectors; the American Intellectual Property Law Association; the Council on Governmental Relations; the Innovation Alliance; and Procter & Gamble Co.

Meanwhile, participants in an “inventors’ fly-in” to Washington led by Edison Nation, held a Capitol Hill briefing yesterday in which they warned “Congress of the potential negative impacts of the pending legislation on American innovation, economic growth and job creation.”

They said in a press release that fee-shifting would “actively discourage small entities from pursuing litigation to enforce their constitutionally bestowed rights by making the financial risk prohibitive, even when bringing suit in good faith” and that the customer stay provision would “allow infringers to manipulate their supply chain structure to impede or prevent meritorious cases and increase the cost of litigation for the patent holder.”

Heightened pleading standards would “deter legitimate inventors from asserting valid patents in meritorious cases by requiring that plaintiffs provide at the inception of a lawsuit overly detailed claim charts as well as technical information that is accessible only to the accused infringer,” they said, while the threat that accused infringers could force investors to be joined to the case to ensure recovery of legal costs would “discourage seed money and early stage investment.”

In a statement issued today, Leahy said that the committee has been listening to the “concerns from businesses on Main Street and the tech community.” Leahy said that the committee would meet again next week to “nail down” outstanding issues with the legislation.

News: ConsumerProtection FederalTradeCommissionNews