Sen. Patrick Leahy introduced a bill this week that’s directly aimed at making it harder for Patent Assertion Entities, better known as “Patent Trolls,” to leverage the U.S. patent system for financial gain.
James Messen, co-author of Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, said at a September conference on the subject that patent trolls undermine the very purpose of the patent system: Protecting innovative companies and individuals by giving them proprietary rights to their intellectual property.
Bessen said at the event, that system is now “acting as a tax on R&D.”
Experts say patent abusers are buying up patents from companies in need of capital, put the patents in the ownership of a shell corporation, then find companies that could be interpreted as infringing on the patent.
A May lawsuit filed by the state of Vermont alleges that one such shell company sent letters to multiple Vermont businesses claiming that they were infringing on a patent by using office technology that allowed employees to email scanned documents to themselves. Such technology is widely used and the companies weren’t claiming to have created the technology, they were just using it.
The shell corporation threatens legal action against the supposed offenders unless they pay a licensing fee for their use of the patented system.
Critics liken what Patent Assertion Entities are doing to extortion. Leahy said,“The [patent] system is not being used as intended.”
The new legislation, drafted by Leahy in partnership with Sen. Mike Lee, R-Utah, is designed to increase transparency in patent ownership, preventing patent trolls from hiding behind shell companies.
Leahy said the bill also protects businesses that successfully defend themselves from patent trolls. At the September conference, Michael Beckerman of The Internet Association, a D.C.-based lobbying organization, said patent trolls set up these shell companies so they have nothing to lose.
The new bill, Leahy said, provides protections for businesses when they
“What we do is we insulate the company being sued so that someone cannot hide behind a shell corporation,” Leahy said.
