Patent "Troll" Reform: Take Two

On Tuesday, House Judiciary Chairman Bob Goodlatter (R-Va.) made official what was widely assumed: patent "troll" reform legislation is back on the menu.

With the midterm election in the rearview mirror, and the Senate back in Republican hands, legislators will renew their efforts to enact patent reform in early 2015.

"Fortunately voters earlier this month made it clear they’re more interested in results than the latest filibuster," Goodlatte told the U.S. Chamber of Commerce’s 2014 IP Summit.

Last year, lawmakers' attempts to rein in the excesses of "trolls" came up short in the Senate. The Innovation Act, Goodlatte's own far-reaching bill, passed the House of Representatives by a 325-91 margin but stalled in the upper chamber, where various senators proposed alternatives.

Following months of inaction, Sens. John Cornyn (R-Tex.) and Charles Schumer (D-N.Y.) came up with a compromise that largely balanced the interests of patentees against the need to thwart NPE's. Their draft targeted the worst "troll" abuses by tightening pleading requirements, lightening the burden of proof for recovery attorney fees, limiting the scope of discovery in litigation, and restraining the use of "patent demand letters" through which NPEs harass mom-and-pop businesses.

But this compromise unraveled in the spring, when Senate Majority Leader Harry Reid (D-Nev.) prevailed upon Senate Judiciary Chairman Patrick Leahy to withdraw it. Yet now that Republicans have taken control of the upper chamber, industry insiders, pundits, and elected officials expect the legislative effort to be revived as early as the beginning of the next term.

Even the Patent Office signaled its belief that Congress would take up these issues again next year when it dropped its plans last month to promulgate rules for increasing patent ownership transparency—a key concern of small businesses facing infringement charges from shell companies. "We heard from a number of stakeholders," Deputy Director Michelle Lee, nominated to head the agency, explained, "that they’re looking ahead at the legislation, and actually perhaps it might make more sense to address [the issue] via legislation rather than administrative action, and we're supportive of what our stakeholders want to do and what makes sense."

What's less clear is the form the legislation will take. Most observers expect the starting point to be Goodlatte's bill, especially with enlarged Republican majorities in the House and support from House Minority Leader Nancy Pelosi (D-Calif.) and the president. But for reasons I documented across a series of posts here last year and earlier this year, the Innovation Act suffers from certain problems.

Far better to start where lawmakers left off: the Cornyn-Schumer compromise which, while imperfect, offers major improvements over the Innovation Act. Further massaging of its provisions, along with language regarding improper venue, could ensure passage.

Other ideas endorsed by all stakeholders include ending fee diversion, hiring of more skilled patent examiners and supervisors at the Patent Office, and curbing frivolous patent demand letters.

Much uncertainty remains. Watch this space in the coming months for further updates.