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Reeling in Patent Trolls

September 20, 2013
Senator Chuck Grassley , Dysart Reporter

The resilient U.S. economy owes in large measure its global reputation for prosperity to the ideas, innovation and invention rooted deeply in our American heritage.

Flourishing from free-marketplace principles of economic opportunity and wealth creation, generations of risk-takers, entrepreneurs and high achievers went for all or nothing in pursuit of carrying out their dreams to invent the next big thing.

Throw in a work ethic driven by America's ladder of opportunity and it's understandable how the 21st century tech wizards of Silicon Valley followed in the pioneering footsteps of the Wizard of Menlo Park.

One of the most successful inventors of all time, Thomas Alva Edison is credited for coining the phrase: "Genius is one percent inspiration and 99 percent perspiration." With an inexhaustible supply of fortitude and flow of ideas, Edison holds more than 1,000 U.S. patents in his name. From the light bulb to motion pictures and electrical power generation, Edison's scientific and engineering discoveries changed the way Americans lived.

His formula for success partly is attributable to legal protections granted by the Constitution. Article I, section 8 gives Congress the authority to "To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." For more than 200 years, the U.S. patent system has provided a legal framework to grant inventors exclusive use of their inventions.

The patent system has helped launch amazing discoveries and advances in science, medicine, telecommunications and the arts that have made remarkable contributions to American society and a dynamic economy.

However, the patent system increasingly is being abused by individuals engaging in questionable litigation tactics for their own opportunistic gain. These so-called patent trolls or "patent assertion entities (PAEs)" are utilizing an unsavory business model that threatens to choke innovation and invention like a noxious weed. With no intention of developing or commercializing on the patents they own, patent trolls are giving the U.S. patent system a black eye without batting an eyelash.

Patent trolls are companies that own patents but don't create anything. Instead, they use these patents to sue businesses and consumers. Some of the aggressive litigation tactics of patent trolls include threatening to sue companies without specific evidence of infringement, creating shell companies to hide who is bringing the lawsuits, and asserting patent claims that are overly broad.

Abusive patent litigation saddles cash-strapped start-ups and innovators with often insurmountable financial and legal burdens. Patent troll lawsuits also are targeting legitimate businesses and consumers. The defendants are forced to direct scarce resources away from research, development, wage and job creation and divert those resources to defend complex patent litigation. The majority of defendants settle out-of-court rather than challenge often questionable claims simply because it's the safer route to choose given the risky, disruptive, time-consuming and expensive nature of patent litigation.

Enough is enough. It's time to reel in those who prey on other businesses at the expense of America's spirit of innovation and invention.

That's why I am co-sponsoring legislation with Senator Cornyn to restore the integrity and intent of the U.S. patent system. Responsible patent holders with a legitimate legal grievance are entitled to their day in court. But those who game the system as a personal means of jackpot justice do not. The Patent Abuse Reduction Act of 2013 would make it more difficult to be a patent troll and easier to fight one in court. It would require more specific information about the substance of the infringement assertions in the complaints. It would change the incentives by adopting a "loser-pays" rule to deter frivolous or weak claims. And, it would bring greater transparency and disclosure to identify the plaintiff filing the claim. By pulling back a cloak of secrecy, the bill would take away a tool often used by patent trolls: anonymity via patent-holding subsidiaries, affiliates and shells of operating companies.

Abusive patent litigation brought by PAEs now account for a majority of all patent litigation in the U.S., costing start-ups and innovators an estimated $80 billion annually in direct and indirect costs.

As Ranking Member of the U.S. Senate Judiciary Committee, I've worked to balance the scales of justice in the U.S. legal system, including curbing patents on tax strategies that effectively allow tax laws to be patented and add costly burden to taxpayers. From putting the brakes on frivolous lawsuits to reforming our medical malpractice system, policymakers need to clear litigious roadblocks that increase costs for consumers and decrease wage growth, innovation and job creation.

Patent trolls subvert the system and stifle innovation. The Patent Abuse Reduction Act would help prevent abusive patent litigation, while preserving the ability of patent holders to protect their intellectual property and investments in research and technology. By restoring the integrity of the patent system, America's 21st century big-thinkers, hard-workers and go-getters will be able to give 100 percent in pursuit of Edison's spirit of innovation and invention and help keep America on top of our global economy.



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