Legislation Seeks to Restrict “Patent Trolls”

by Fred D. Zemel on May 15, 2013

patent troll“Patent trolls,” more neutrally referred to as non-practicing entities (NPEs), are coming under intense scrutiny as courts and lawmakers look to curb abuse of patent infringement litigation.

NPEs do not directly use the patents they own to produce goods, but rather license them to other companies that do. Detractors use the term “patent trolls” because these firms often collect patent rights solely to extract licensing fees.

In the latest effort, U.S. Senator Charles Schumer (D-New York) is looking to provide business with more tools to defend against these patent infringement suits by expanding protections introduced under the America Invents Act (AIA). The Schumer-Kyl provision is a temporary program that established a post grant review process for covered business method patents. It allows a petitioner to request that U.S. Patent and Trademark Office (USPTO) review a covered patent before a patent infringement lawsuit proceeds. Since the provision began, approximately twenty patents have been challenged through the USPTO.

Schumer’s proposal would allow more businesses to take advantage of this process, including technology start-ups. “Patent trolls are bullying New York’s technology companies, stymieing innovation, and dragging down growth,” Schumer said in a statement. “This legislation will provide small technology start-ups with the opportunity to efficiently address these claims outside of the legal system, saving billions of dollars in litigation fees.”

The proposal comes on the heels of an eye-opening study regarding just how many patent cases involve so-called “patent trolls.” Lex Machina’s review of over 12,000 cases found that  patent trolls filed the majority of all federal patent infringement lawsuits in the United States in 2012. More specifically, the number of lawsuits increased from 24 percent of cases filed in 2007 to 56 percent in 2012.

If you have any questions about this legislation or would like to discuss how it may impact your business, please contact me, Fred Zemel, or the Scarinci Hollenbeck attorney with whom you work. 

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