Clock Runs Out on US Patent Reform Effort

Sen. Patrick Leahy of Vermont, Chairman of the U.S. Senate Judiciary Committee, announced yesterday that he effectively was abandoning efforts to pass a patent reform bill, aimed at curbing abusive litigation brought by patent assertion entities (PAEs, or more colorfully known as "trolls"), this year. Although a reform bill sailed through the U.S. House of Representatives in December, more lengthy deliberations in the Senate bogged down as disparate industry groups could not agree on key provisions. With the legislature facing elections in November, Leahy conceded that efforts to pass the bill would have to wait until next year.

The key elements of the Senate reform bill were extremely high pleading standards for patent infringement allegations, imposition of a fee-shifting provision for meritless cases, and the identification of the real parties in interest in an infringement action. 

Although many companies in the computer technology space, which is the principal target of patent trolls, supported the reforms, the bill faced resistance from other companies once they began to appreciate the practical impact of the proposals. For example, some patent owners complained that the new pleading rules would added enormous cost and delay in filing suits, and could prevent smaller patentees from bringing even meritorious suits. In the end, industry groups on both sides of the issue could not reach a satisfactory compromise.  Politico has a concise review of the breakdown HERE. 

Republicans supporting reform immediately complained that the Democratic leadership in the Senate had succumbed to pressure from the "trial lawyer" lobby. However, it was clear over the last several weeks that a variety of groups, including some major manufacturers and research universities, opposed the broadest reform proposals.

The legislative collapse may provide an opening for the courts to demonstrate that they can deal with the troll problem by embracing aggressive case management practices. Many of the reforms in the House and Senate bills tracked mechanisms that currently are within the power of the courts, but are little used. Two district judges in the U.S. District Court for the District of Delaware recently announced revised standing orders to streamline pretrial practice in their courtrooms. Order. In addition, the U.S. Supreme Court’s decision in Octane Fitness and Highmark seem to give district judges greater latitude in awarding fees in cases of abusive litigation. See commentary HERE. If the courts can demonstrate a renewed commitment to addressing the most egregious aspects of the patent troll problem, reforms efforts may have a difficult time building momentum after the 2014 elections.