Paul C. VanSlyke, Senior Counsel at Hoover Slovacek LLP
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New legislation seeks to stop patent trolls

New legislation has been introduced in Congress seeking to reform intellectual property rights. The Restoring American Leadership in Innovation Act of 2018 seeks to restore protections to patent holders by curbing abusive practices used by tech giants and large research and development firms.

These companies evaluate the risk of infringement litigation through a cost benefit analysis lens, weighing the pros of unauthorized use of the patent against the cost of obtaining a license. To the loss of patent holders, big players have decided it is most cost effective to steal the use of technology instead of licensing it. 

How legislation passed in 2011 shaped business practices

Back in 2011, the America Invents Act was passed, which created a review process to challenge the validity of existing patents. The review is heard by an administrative panel of the U.S. Patent and Trademark Office, and is known as inter partes review or IPR.

The IPR process has placed patent holders in a difficult situation. The review process is much quicker and less costly than bringing a lawsuit. The IPR board, as an administrative agency court, does not follow the Federal Rules of Evidence, and thus, the standards are lower. Prior to 2011, if a company was accused of patent infringement, a court would issue an injunction forbidding the company from using the technology while litigation was pending. That is no longer the case, and therefore many tech giants have twisted the IPR process to their advantage using a tactic known as “efficient infringement.”

What is efficient infringement?

The practice involves a company using a patented technology without it being licensed by the holder. When the patent owner discovers the infringement and confronts the company using it illegally, the company contests the patent’s validity in an IPR proceeding.

Most companies that engage in this practice are large tech giants in Silicon Valley, such as Apple. For them, it is more cost effective to pay the costs to challenge the patent, and if they lose, pay money to the patent holder than it is to legally obtain the use of the patented technology.

New legislation seeks to restore old protections

If passed, the Restoring American Leadership in Innovation Act of 2018 would eliminate the Patent Trial and Appeal Board which conducts the IPR hearings. It would also restore the rights granted by the patent as a property right held by the owner. Events triggering patent protection under the law would return to the first to invent, replacing the newer first to file rule. Automatic publishing of patent publications would also cease.

Another piece of pending legislation is the STRONGER Patents Act introduced in 2017 and the Inventor Protection Act, which may be introduced this year. All of these changes in law are sure to create a new intellectual property legal landscape, so stay tuned.

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