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Congress seeks to quash patent trolls

Revised legislation would spare universities from being penalized in the same way as unscrupulous companies.

Transgenic mice were the subject of a recent patent-licensing fight in the United States. Credit: Robert F. Bukaty/AP

Predatory ‘patent trolls’ could soon find it harder to operate in the United States. Legislation to curb frivolous patent lawsuits has regained momentum after lawmakers in the US Senate added a provision to stop university patent holders from being penalized along with the trolls.

The process is moving quickly. The Senate Judiciary Committee plans to vote on the bill by the end of the month, readying it for a final Senate vote this summer, and the House of Representatives’ Judiciary Committee is likely to vote this week on a similar measure. That gives observers optimism that Congress will finally enact patent-troll legislation after a failed effort last year. “The Senate version really does seem to be hitting some sort of sweet spot,” says Arti Rai, co-director of the Duke Law Center for Innovation Policy in Durham, North Carolina.

Patent trolls are ‘non-practising entities’ that accumulate patents with no intention of turning the inventions into marketable products. Many of these firms exist solely to enforce their patents, threatening other companies with lawsuits if they are not paid handsome licensing fees. The legal strategy is often a low-risk endeavour, because many patent trolls are shell corporations that are only loosely affiliated with larger firms — and so do not have the financial assets that would support large awards to opponents should they lose a suit.

Congress, urged on by lawsuit-weary high-technology companies and the administration of US President Barack Obama, is trying to fight these kinds of trolls. Non-practising entities filed 63% of all US patent-infringement lawsuits in 2014, and cost operating companies an estimated US$12.2 billion in legal fees, settlements and judgments, according to RPX, a consultancy in San Francisco, California.

To fight the shell corporations, in February, several members of the House introduced a bill that would hold all owners of a patent liable for opponents’ legal fees if the owners lose a patent-enforcement suit. That would mean that the parent firm could be compelled to pay, making nuisance lawsuits more costly — and a higher risk — for trolls.

But the requirement would also have extended to universities, and could have threatened their ability to defend their own patents. Universities, too, are non-practising entities because they patent inventions but often do not directly commercialize them. Instead, they charge other companies for the right to turn those patents into products. The Senate is addressing that problem by introducing a bill that exempts institutions of higher education.

Credit: Source: USPTO

But some legal scholars have raised eyebrows at the carve-out. “Universities aren’t exactly coming to this argument with clean hands,” says Tania Bubela, who analyses health and biotechnology law at the University of Alberta in Edmonton, Canada. Universities sometimes license their patents to other non-practising entities, including some that are widely considered to be trolls (see Nature 501, 471–472; 2013). But, she says, the Senate legislation only skims the surface of the problem. “They’re not addressing the root issue, and that is the mess that is patent examination at the US Patent and Trademark Office,” she says.

The US patent office is often criticized for granting patents too readily, resulting in a gnarly — and growing — thicket of patents (see ‘Patent pile-up’). The result is that companies often struggle to discern when they are infringing intellectual property (see Nature 458, 952–953; 2009). A series of court decisions has begun to address the problem, says Nicholson Price, a legal scholar at the University of New Hampshire in Concord. Foremost among them is a Supreme Court decision last year to limit patents on software, which has yielded a steady stream of district-court decisions to invalidate questionable patents (see Nature 507, 410–411; 2014). The patent office has also created a process by which outside parties can challenge recently granted patents without resorting to litigation, which has helped to tighten patent standards (see Nature 472, 149; 2011).

Drop in the ocean

Even so, says Robin Feldman, director of Institute for Innovation Law in San Francisco, California, there is a need for Congress to enact further patent reforms. “All of these measures are needed,” she says. “There is no silver bullet.”

Universities might even benefit from the added protections. Although patent lawsuits against academic researchers are rare, they are legal. In 2010, a non-practising entity called the Alzheimer’s Institute of America (AIA) in Sarasota, Florida, sued several institutions for infringing its patents on some transgenic mice used to study Alzheimer’s disease. One of the defendants was the University of Pennsylvania in Philadelphia, which had spun off a company to commercialize discoveries made using the mice. The AIA also sued the Jackson Laboratory, a widely used non-profit repository of research mice in Bar Harbor, Maine, and pressured the laboratory to relinquish a list of all researchers who had ordered the mice in question.

The case was dismissed in 2011 without the list being released, but the lawsuit’s legacy still lingers. Some researchers hesitate to share their transgenic mice for fear of putting themselves at risk, says Michael Sasner, who was in charge of the Jackson Laboratory’s Alzheimer’s resources at the time of the lawsuit. “The effect is that these mice aren’t being used to help develop drugs,” he says. “There’s got to be a better way.”

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A patent problem 2015-May-20

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S. 1137: PATENT Act

H.R. 9: Innovation Act

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Ledford, H. Congress seeks to quash patent trolls. Nature 521, 270–271 (2015). https://doi.org/10.1038/521270a

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