Senate Judiciary Committee Approves Patent Reform Legislation

NACS-supported PATENT Act reigns in abusive tactics by patent trolls.

June 05, 2015

WASHINGTON – Yesterday, the Senate Judiciary Committee marked up and favorably reported S. 1137: the Protecting American Talent and Entrepreneurship Act (PATENT Act), which seeks to reform the nation’s patent litigation system and address abusive practices by patent trolls. Often, these patent trolls send vague and threatening demand letters to business owners —including many NACS members — and try to shake them down for money by threatening to sue for patent infringement, should the recipient refuse to pay a licensing or other settlement fee.

The bipartisan legislation, which would try to protect American business from these so-called trolls by deterring frivolous patent lawsuits via changes to existing patent litigation procedures, passed by a vote of 16 to 4. Co-authored by Chairman Chuck Grassley (R-IA) and ranking member Patrick Leahy (D-VT), along with five additional committee members – Senators John Cornyn (R-TX), Charles Schumer (D-NY), Orrin Hatch (R-UT), Amy Klobuchar (D-MN) and Mike Lee (R-UT) – the legislation includes many valuable reform provisions.

Particularly important for NACS members, who are generally “end-users” of technology products such as Wi-Fi or card processing technology, the legislation includes a “customer stay” provision that would permit a product’s manufacturer to litigate alleged patent infringement prior to litigation against the end-user of the product. In addition, the legislation would allow the Federal Trade Commission (FTC) to impose penalties on bad actors that send misleading patent demand letters, another provision that would benefit convenience retailers.

More than 20 amendments were filed prior to the markup, and several of those were incorporated into the committee-adopted legislation. The committee accepted a manager’s amendment – a term used to describe an amended version of a bill that is offered by the member managing debate on that bill – that was intended to build consensus between members to make passage of the legislation more likely. That amendment makes a number of technical and substantive changes to the legislation, including changes to certain Patent and Trademark Office (PTO) proceedings, which will weaken the legislation’s reform efforts.

In addition to the manager’s amendment, the committee accepted an amendment offered by Senator Dianne Feinstein (D-CA), which would prohibit patent demand letters from including specific monetary amounts to settle allegations of patent infringement, a tactic she described as extortion and a “financial shakedown.” A separate amendment from Senator Cornyn relating to higher education research institutions was also successful. The committee rejected six amendments that would have weakened the overall legislation by providing carve-outs from the bill’s more stringent standards for certain entities.  The votes against those amendments were similar to the votes for the bill and demonstrated strong support for reform and NACS’ position.

NACS is an executive committee member of the United for Patent Reform Coalition and we will remain actively involved with continuing efforts to reign in abusive tactics by patent trolls as patent reform continues to gain momentum on Capitol Hill. The House patent reform bill, the Innovation Act, is slated to be marked up by the House Judiciary Committee next week. Stay tuned to the NACS Daily for updates on how that plays out.

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