By Ros Krasny
WASHINGTON Oct 29 Technology companies on
Tuesday urged fast action on a patent reform bill in testimony
before the House Judiciary Committee, including tackling what
they termed the rising tide of costly lawsuits by "patent
The Innovation Act, introduced last week by Representative
Bob Goodlatte, a Virginia Republican who chairs the committee,
aims to increase transparency and accountability in the patent
Patent Assertion Entities (PAEs), called patent trolls by
critics, are companies that typically do not invent or
manufacture products but instead buy or license patents from
others, primarily for the purpose of obtaining licensing fees or
filing infringement lawsuits.
Companies have said the increase in such litigation stifles
innovation and costs billions of dollars in legal fees.
Patent litigation costs have grown from $7 billion in 2005
to $29 billion in 2011, when 5,842 lawsuits were initiated by
PAEs against 2,150 companies, Krish Gupta, deputy general
counsel with EMC Corp, said in testimony.
While hurtful to giant businesses like EMC, a
multinational computing company, "they have done much more
profound damage to small and medium-sized companies that lack
the resources to counter these frivolous lawsuits," said Gupta.
Abusive PAE suits often claim ownership over what are now
seen as "basic ideas," such as using a "shopping cart" function
on a website or aggregating news articles, Goodlatte said in his
A group representing the U.S. lodging industry applauded the
bill, saying its members had been targeted for providing
wireless Internet access to guests using wireless routers that
the PAEs say infringe on their patents.
Kevin Kramer, deputy general counsel for intellectual
property at Internet company Yahoo Inc, said the high
cost of litigation "means that settlement is almost always the
least costly option, and the patent trolls know it."
About 75 percent of cases settle, creating a "virtually
guaranteed payoff" for assertion entities, Kramer said.
The former head of the U.S. Patent and Trademark Office
warned that some provisions of the bill "would best be deferred"
because of the danger of over-correction.
"We are not tinkering with just any system here; we are
reworking the greatest innovation engine the world," David
Kappos, who stepped down as head of the patent office in January
and is now a lawyer in private practice, told the hearing.
While united against abusive patent litigation, companies
are less unified on how to curtail it.
A coalition of over a dozen small technology companies wrote
this week to Goodlatte expressing concerns about how certain
types of financial software patents known as "covered business
method" (CBM) patents would be addressed.
The bill contains a provision "which extends indefinite
post-grant review at the United States Patent and Trade Office,"
the coalition said in a letter.
"Instead of prolonging the post-grant process, we believe
the next stage of patent improvement should come from a more
robust pre-grant examination process."
Several larger companies, from Caterpillar to Adobe
Systems to Boston Scientific, also opposed the
CBM patent proposals in September, when a draft of Goodlatte's
bill was circulated.
Goodlatte has not announced the timing of the next action on
his bill. A companion bill is expected to be launched in the
Senate by his counterpart, Democrat Patrick Leahy.
Intellectual Ventures, based in Bellevue, Washington, is
possibly the best-known patent aggregator in the United States.
In a statement, its chief policy counsel, Russ Merbeth, said
the company has "been pleased with Chairman Goodlatte's
collaborative approach on patent litigation reform" but had some
"With careful consideration and certain alterations it will
be an effective bill for reducing frivolous lawsuits," Merbeth
To read the text of H.R. 3309, the Innovation Act, see: