Rep. DeFazio Backs Bill to Protect Small Businesses from Frivolous Lawsuits Feb 5, 2015

Posted on Feb 5, 2015 · 4 min read
 Oregon Company Inspires Legislation

Washington, DC- Rep. Peter DeFazio (OR-04) today joined a bipartisan group of lawmakers to introduce a bill that addresses the ever-increasing problem of abusive patent litigation, commonly referred to as “patent trolls.” Patent trolls use broad patents to threaten companies with lawsuits in hopes of forcing a quick settlement. This type of lawsuit costs American companies tens of billions of dollars every year.

“Patent trolls don’t contribute to the American economy. They don’t build things, provide services or keep our country moving – rather, they prey on our small businesses and innovators by manipulating patent laws and extorting billions of dollars each year from them. It’s time for Congress to drive these litigious leeches to extinction.”

Rep. DeFazio is credited with drawing attention to the issue in Congress three years ago, after he spoke with the owner of a small software company is his district that had been targeted. The business owner told DeFazio that they were forced to delay a product launch and put off hiring in order to pay off a patent troll.

Jake Weatherly, the CEO of SheerID, Inc., a small technology business in Eugene, Oregon, has worked extensively with Rep. DeFazio on the patent troll issue. Weatherly said he has seen the disruptive effect of patent trolls first-hand.

“Letters from patent trolls are like ransom notes,” Weatherly said. “We live in a world where hard-working individuals are being held hostage by frivolous attempts to extract money in the form of ransom. I believe that patent trolling can be disrupted or even eliminated if the patent trolls know they will be responsible for all legal fees if the merits of their claims are shown to be unfounded. I believe strongly in United States Small businesses for many reasons, and the more that small business can be fostered, supported, and protected, the faster we will see job growth, economic growth, and innovation take place.”

Today, House Speaker John Boehner said the bill would be among the top legislative priorities for the 114th Congress. The first hearing on H.R. 9 is scheduled for next week.

Background on H.R. 9, Innovation Act

  • Bill introduced by House Judiciary Committee Chairman Bob Goodlatte (R-VA); DeFazio is lead Democrat cosponsor. There are 18 original cosponsors of the bill.
  • Requires plaintiffs to disclose who the owner of a patent is before litigation, so that it is clear who the real parties behind the litigation are. This will ensure that Patent Trolls cannot hide behind a web of shell companies to avoid accountability for bringing frivolous litigation.
  • Requires plaintiffs to actually explain why they are suing a company in their court pleadings.
  • Requires courts to make decisions about whether a patent is valid or invalid early in the litigation process so that patent trolls cannot drag patent cases on for years based on invalid claims.  This prevents invalid patents from being used to extort money from retailers and end users.
  • When parties bring lawsuits or claims that have no reasonable basis in law and fact, the Innovation Act requires judges to award attorneys’ fees to the victims of the frivolous lawsuit.  The bill allows judges to waive the award of attorneys’ fees in special circumstances.  This provision applies to both plaintiffs and defendants who file frivolous claims.
  • Requires the Judicial Conference to make rules to reduce the costs of discovery in patent litigation, so that patent trolls cannot use the high costs of discovery to extort money from small businesses and entrepreneurs.
  • Creates a voluntary process for small businesses to postpone expensive patent lawsuits while their larger sellers complete similar patent lawsuits against the same plaintiffs, to protect customers who simply bought the product off-the-shelf.
  • Requires PTO to provide educational resources for those facing abusive patent litigation claims.

The Innovation Act previously passed the House of Representatives in the 113th Congress by an overwhelming bipartisan vote of 325-91.  That legislation was supported by a wide range of groups that include stakeholders from all areas of our economy representing businesses of all kinds from every corner of our country including independent inventors and innovators.

Lois Lane by Lois Lane