Features of the Anti-Patent Troll “Innovation Act”

The proposed “Innovation Act” will purportedly make it more difficult, or at least less attractive, for so-called “patent trolls” to target companies for patent infringement. The primary features of the bill include: – A shift to “fact pleading” in patent infringement cases — currently, plaintiffs only need to claim infringement and what the infringing product is. Under fact pleading, plaintiffs would need to identify what parts of the infringing product actually infringe on the patent, and how. – Discovery in the initial phases of suit are limited solely to materials related to the infringing product itself — no extensive (and expensive) discovery requests into tangentially-related issues. – A losing plaintiff must pay the defendant’s costs and legal fees, unless it can be shown that the suit “was substantially justified or that special circumstances make an award just”. – Defendants can reach through “shell companies” (which nominally own the patents but have no assets, and are used to shield the patent troll) to make those entities with a “financial interest” in the patents (the patent troll itself) pay the shifted fees. The intent is to discourage patent trolls from threatening costly litigation — first, they can’t run up the costs of litigation through extensive discovery until they can establish a viable claim, and even then if the claim ends up being shown to be frivolous, they will have to pay the defendant’s costs and legal fees. However, critics of the bill point out two deficiencies of the Act: 1) it doesn’t curb the practice that actually makes patent trolls money — the numerous frivolous settlement demand letters they send out to small businesses without the knowledge or resources to fight back who end up paying the settlement; 2) the Act may end up discouraging small business practicing entities from attempting to assert their patent rights, since if their claim is judged to not be “substantially justified” they will have to pay the defendant’s costs as well. The bill is still in committee, so the apparent deficiencies may yet be addressed by the bill’s sponsors.

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