WASHINGTON, March 14 (Reuters) - Lawmakers asked on Thursday whether a bill aimed at stopping abusive patent litigation that costs companies millions of dollars each year could end up hurting legitimate companies whose inventions have been infringed.
Cisco Systems Inc, Apple Inc, Google Inc and other tech powerhouses have been pushing for legislation that would reduce the number of times each year that they are sued for infringement by a “non-practicing entity,” a company that licenses patents as its business.
Representative Peter DeFazio, an Oregon Democrat, introduced legislation last month aimed at hurting what critics call “patent trolls” by allowing judges to force such firms to pay the legal fees of companies they unsuccessfully sue.
One supporter of that bill is Cisco, which pays $50 million a year to fight 50 lawsuits filed by companies that do not make or sell anything, testified Mark Chandler, general counsel for Cisco Systems.
Cisco has been further aggravated by lawsuits filed against non-tech companies, like coffee shops, which bought and installed Cisco’s Wi-Fi routers.
However, the prospect of a bill that required the non-practicing entity to pay legal bills if they lose an infringement lawsuit worried several lawmakers, including Representative John Conyers, a Michigan Democrat.
“We have a measure before us that the plaintiff pays and the defendant who might be an alleged patent infringer pays nothing. This is disturbing,” he said.
“To the extent the bill was designed to protect against meritless claims of patent infringement I suspect that the tools to deal with this already exist,” he said.
DeFazio’s legislation allows a judge to decide whether the non-practicing entity should bear the defendant’s costs if the defendant wins. Plaintiffs would automatically be exempted if the original inventor was on the complaint, if the company filing the complaint used it or if a university filed the lawsuit.
Non-practicing entities sued 5,570 defendants in 2011, twice as many as in 2009, Chandler said, citing RPX Research Patent Litigation Data.
Unlike previous years when patent lawsuits focused almost exclusively on manufacturers, retailers, restaurants and other companies that have websites or provide Wi-Fi have been hit, including department store operator JC Penney Co.
The chain’s General Counsel Janet Dhillon said that it faced no patent cases four years ago but had since been accused of infringing patents that cover drop-down menus on a website, activating a gift card, Web browsing on a mobile phones and putting a purchase in an electronic shopping cart, among others.
“The cost to defend these suits is why we have to settle so many,” she said.
The result is that patent litigation now accounts for about half of the chain’s total litigation, and JC Penney is now reluctant to buy technology from smaller companies that could not defend it if an infringement lawsuit were filed, she said.