Why US patent reform is stalled

    Harry Reid (left) v. Patrick Leahy (right)

    When in December 2013 the House of Representatives voted for the bill S. 1720 “A Bill to promote transparency in patent ownership and make other improvements to the patent system, and for other with 325 votes to 91 purposes, ”driven by Patrick Leahy, a Democratic senator from Vermont and chairman of the US Senate Legal Committee, there has been a surge of optimism in technology circles. The meaning of the amendments is summarized here.; their entry into force would significantly alter the litigation of patent disputes. The bill was actively supported by Google and Cisco Systems and a coalition of community groups led by the Electronic Frontier Foundation, including Public Knowledge, Open Technology Institute, Engine Advocacy, as well as the Consumer Electronics Association (CEA) and Computer & Communications Industry Association (CCIA).

    However, in May 2014, Patrick Leah unexpectedly took off for manythe bill from the agenda of the legal committee, which means that its discussion is likely to continue only next year. At the same time, sources who knew the US lawmaking cuisine pointed to Harry Reid, a Democratic senator from Nevada and the leader of the Senate majority, as the one who actually pressed the red button.

    The amendments would significantly complicate the life of patent trolls, however, different sides took up the bill, including those that did not seem to be directly related to trolling. Innovation Alliance Patent Coalitionstated that the bill will allow each patent holder to be considered as a troll. Among the participants of the Innovation Alliance there are large patent owners, for example, Qualcomm and Dolby, who sometimes pursue an aggressive patent policy, but which are difficult to rank as trolls. American universities, which widely patent their inventions, but have no physical ability to put them into practice, reacted extremely negatively to the document. The position of universities was expressed, for example, by Edison Nation , which mediates in the process of monetization of university developments.

    However, the main pressure, apparently, was nevertheless not provided by them. Julie Samuels, director of startup lobbying Engine Group , saidthat "the pharmaceutical industry and legal advocates did this." The fierce struggle of manufacturers of “patents” (patented drugs) against manufacturers of “generics” (substitute drugs) is well known. The market for medicines is huge, and in the United States 3.4 million jobs are somehow connected with the pharmaceutical industry . The bill will technically complicate the prosecution of manufacturers of “generics”, and pharmaceutical giants are not particularly affected by patent trolls, in any case, there is someone to protect them. In 2011, there were more than 1.2 million licensed lawyers in America , not all of them appear in the courts, and especially not all specialize in patent cases, but the total number is impressive. And in recent years, clearly outlineda shift in the specialization of lawyers towards intellectual property. For lawyers practicing in the courts, reducing the number of lawsuits means a drop in revenue. It is logical to assume that patent trolls were not idle, but their resources are clearly incomparable with the resources of major pharmaceuticals and large law firms. Therefore, the opinion of Julie Samuels does not look strange.

    Against the background of these events, it is appropriate to recall the origin of the term “patent troll”. Currently, it is applied to a person acquiring patents without the intention of further improving patented inventions, manufacturing products or providing services based on them and making profit from their sale and / or licensing to other persons.

    The first use of this term dates back to 1993, and its meaning was slightly different from the modern one and the term refers to companies initiating aggressive patent claims (“When Intel Doesn't Sue”, Forbes, March 29, 1993). The first widely acclaimed comic visualization of the patent troll appeared in 1994 in the popularization educational film The Patent Video , which was distributed to corporations, universities, and government agencies.

    Subsequently, the epithet became popular thanks to Peter Detkin, the former Deputy Chief Counsel for Intel, who used it for TechSearch LLC, its director Anthony O.Brown and its lawyer Raymond Niro in connection with prosecuted by TechSearch. At first, Detkin used the term “patent extortionist” to refer to companies suing Intel for patent infringement, but after accusing Intel itself of defamation, it applied the term “ patent troll ”. The accepted definition began to be usedin the patent field to denote any plaintiff who does not like the speaker. Strictly speaking, the modern definition of who is the patent troll does not shine with accuracy, and Intel itself and a host of other companies and organizations, including educational and research institutions, fall under it.

    It is worth considering that the issue of patent trolling is not so straightforward. The surge in smartphone-based patent wars in 2012 sparked a lot of commentary on the “coma” and “untimely demise” of the US patent system. High-profile cases, such as the confrontation between Apple and Samsung, undoubtedly draw public attention to the subject of patent wars, but they are not the main problem. This has happened before, it’s enough to recall the “first telephone war” of the era of Alexander Bell. In those years, the American Bell Telephone Company alone and its successor AT&T withstood 587 patent litigations. So the generals of “smartphone wars” have a lot to learn from their predecessors. Ultimately, the billionth fine, sued by one giant from another, will be “spread thin” by a billion users, and no one has died yet. And here are a few hundred thousand dollars that a startup on take-off will have to give to the troll anyway or to lawyers in the event of a patent dispute, can severely undermine it, or even lead to collapse. The cost of litigation related to trolling in 2010 amounted to61 billion dollars and the activity of trolls is increasing. All ten of the most active plaintiffs in patent litigation in 2013 are patent trolls. Of the three leaders — ArrivalStar, Wynncom, and Thermolife — each filed more than a hundred lawsuits . This causes concern to the technological sector of the economy and gets a resonance in society - it becomes clear to many that something needs to be done.

    Opponents of this view point outthat since the first patent law of 1790, US law provides for the sale of patent rights, which both the US Patent Office and the courts are called upon to promote. Selling patent rights has always been an important factor in the American economy, as America’s main “inventive power” has always been independent inventors (now called Non-Practicing Entities, NPEs), who have no financial means to turn their patents into new products. Documents from the 19th century indicate that two-thirds of the 160 greatest inventors of the era of the technological revolution, including Thomas Edison, were NPEs. And the report of the American Bell Telephone Company for 1894 indicates that it acquired 73 patents from third-party inventors against only 12 inventions made internally.

    The US patent system has already undergone significant changes in 2011 with the adoption of a package of amendments to patent laws, known as the America Invents Act , one of the drivers of which was also Patrick Leahy. Then, the changes mainly affected the principle of determining the primacy in an invention, and it became possible for a legal entity to file a patent application.

    In his appealin connection with the recall of the new bill, Patrick Leahy said that the initiative failed because the parties concerned could not agree on how to deal with trolling, which is the scourge of the American economy, without violating the legitimate interests of large employers and universities, and expressed the hope that the parties concerned will be able to overcome the differences and it will be possible to return to the discussion of the bill soon.

    Let us hope that lobbyists will still find a compromise and that American lawmakers will be able to adopt this package of amendments to patent laws within a reasonable time. Good luck to Patrick!

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