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Could Patent Trolls Be Harder to Defeat Than the NSA?

Tech lobbyists are fighting an uphill battle to get patent troll legislation through Congress.


Silicon Valley lobbyists were feeling pretty good on Tuesday. Several gathered at Bobby Van’s, a downtown D.C. bar, to celebrate their successful campaign to curb the National Security Agency’s mass surveillance practices, after a two-year effort.

But two days later, it was an entirely different story as Senate lawmakers debated a patent bill that’s supposed to curtail patent trolls — companies expressly designed to sue other companies for use of patents they own, a practice some liken to extortion. It wasn’t the bill it once was, tech lobbyists lamented, as Senate leaders approved language that was meant to placate Silicon Valley; the pharmaceutical and biotech industries; and universities that don’t want their patent portfolios devalued.

Patent trolls can be especially dangerous for startups, which don’t have an army of in-house intellectual property attorneys to handle legal threats or demands for payment like big companies.

A former restaurant tech startup called, for example, complained that it had spent $100,000 fighting off a patent troll that surfaced after the startup received funding from Google Ventures and others. The startup closed in April.

Patent troll legislation might seem to be on the fast track to approval — a Senate committee vote today, a House committee vote on similar legislation next week — but there’s so much disagreement about the final product that things aren’t really looking good for Silicon Valley supporters of the legislation right now.

“I don’t think it’s a bad thing that we’re still open to discuss” changes to the bill, said Sen. Amy Klobuchar, D-Minn., during a Senate Judiciary hearing Thursday morning in which lawmakers approved the legislation on a 16-4 vote.

Generally speaking, it isn’t a good thing for a bill’s supporters if there’s still this much disagreement about language before it hits the Senate floor.

Historically, patent bills have been horribly dense pieces of legislation that were barely understood by some of the people voting on them. Since most Americans don’t really care about the issue, it’s basically a fight between corporate lobbyists. That’s not a great thing for tech companies, which don’t spend anywhere close to as much money in Washington as pharmaceutical and biotech companies.

The drug companies, represented by the Pharmaceutical Research and Manufacturers of America, spent $16.64 million on lobbying last year, according to the Center for Responsive Politics. The Biotechnology Industry Association spent $8.28 million. And that doesn’t count the money spent by individual companies on lobbyists or campaign contributions. By comparison, the Consumer Electronics Association, which has aggressively pushed for patent troll legislation, spent $3.2 million on lobbying. The Internet Association spent $1.56 million.

Tech companies are simply outgunned.

They thought they were on the verge of getting patent troll legislation approved last year but then it derailed at the last minute, thanks to a savvy lobbying effort by pharmaceutical companies and other parties that wouldn’t benefit from the law’s changes.

This year, some venture capitalists have also begun having second thoughts about the patent legislation, particularly parts of the bill that would make it easier for courts to require losers of patent lawsuits to pay the winners’ legal fees, or leave investors on the hook to pay them if a company goes bankrupt.

Some of the bill’s congressional sponsors bowed to the concerns of pharmaceutical and biotech companies by agreeing to add language that would make it harder for bad patents to be invalidated by the U.S. Patent and Trademark Office.

That’s an important element for tech companies, since right now the PTO can hold trial-like proceedings to resolve complaints about bad patents, partly as a way to help avoid an expensive legal process. The Electronic Frontier Foundation used this process when it successfully argued to invalidate parts of a patent being used to demand payments from podcasters.

Pharmaceutical companies and others, however, have complained the system is skewed too far against patent holders because the standards used aren’t as high as those employed by federal courts — it has allowed short-sellers to abuse the system, they argue. They want to require a higher burden of proof to invalidate patents.

Some tech industry groups aren’t happy about the changes, while public interest groups have suggested the PTO’s trial process could be improved.

The problem for Silicon Valley is that this late in the process, there may not be much its side can do this year after losing ground to the pharmaceutical industry and others.

One thing to watch is what happens next Thursday, when House lawmakers are scheduled to consider a different version of patent troll legislation, which introduces a whole new set of issues for industry lobbyists to fight about.

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