While the process by which patents are acquired may have gained some naming rights in the debate, the use to which a patent is put is of more importance and legal significance. For example, in the landmark eBay decision on the scope of injunctive power of district courts in patent infringement proceedings, both Justice Thomas’s opinion for the unanimous Court and Justice Kennedy’s concurring opinion addressed the relevance of the patent owner’s use of a patent to eligibility for injunctive relief. In a concurring opinion joined by three other justices, Justice Kennedy noted “[a]n industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” He noted further that such firms sometimes employ injunctions for extortionist purposes, including where the patented invention is but a small component of the product in question, and opined that under these circumstances, money damages may be sufficient to compensate for the infringement that has occurred.

However, Justice Thomas’s opinion for the Court reflected no support for this reasoning, and specifically repudiated suggestions by the district court below that “a plaintiff’s willingness to license its patents” and “its lack of commercial activity in practicing its patents” are sufficient grounds to deny an injunction for lack of irreparable harm.

Even before eBay, legislative efforts to identify and sanction activities associated with patent trolls focused on the use (or nonuse) of the patent by an owner seeking to enforce it. In both the 108th Congress (2003–04) and 109th Congress (2005–06), bills were offered in the House of Representatives that called for consideration of the extent to which the patentee makes use of the invention in determining whether the requisite irreparable harm to support an injunction has been established.

The first of these, H.R. 5299, introduced by Howard Berman (D-CA) on October 8, 2004, would have added a new subsection to 35 U.S.C. § 283 relating to injunctions:

(b) Grounds for Granting Injunction–A court shall not grant an injunction under this section unless it finds that the patentee is likely to suffer irreparable harm that cannot be remedied by payment of money damages. In making or rejecting such a finding, the court shall not presume the existence of irreparable harm, but rather the court shall consider and weigh evidence, if any, tending to establish or negate any equitable factor relevant to a determination of the existence of irreparable harm, including, but not limited to, the extent to which the patentee makes use of the technology claimed by the patent.

H.R. 5299 was introduced in the closing days of the 108th Congress, and thus no action was taken on the bill before it expired with the final adjournment of the House a few weeks later. However, the proposal was seen again early in the 109th Congress, in the first iteration of the comprehensive patent law reform package that, six years later, would be enacted as the Leahy-Smith America Invents Act (AIA). With the strong support of the Business Software Alliance, which self-identified as a prime victim of patent trolling, the initial draft of IP Subcommittee Chairman Lamar Smith’s (R-TX) ”Patent Act of 2005” contained in section 7 language aimed at patent trolls that was virtually identical to section 6 of the earlier Berman bill.¹ The Smith draft bill was obviously a work in progress, with particular provisions being added or dropped based on Chairman Smith’s evaluation of the individual proposal and his assessment of its level of support. Two months later, on June 8, 2005, when Smith formally introduced H.R. 2795, the “Patent Reform Act of 2005,” section 7 had been revised to remove any reference to consideration of the extent to which the owner of the patent was making use of the patent. A month and one-half later, the revision process produced Chairman Smith’s Substitute Amendment that effectively replaced H.R. 2795 as introduced. The Substitute contained no provisions relating to injunctions such as those previously found in section 7, and no other provisions specifically designed to address the “troll problem,” nor did any subsequently emerge during the years of further consideration and development leading to the enactment of the America Invents Act in September 2011.

While no troll-specific provisions appeared in post-2005 versions of patent reform bills that produced the AIA, the absence of such provisions does not mean that Congress and other participants in the reform effort concluded that the problem had gone away, or that in reality it was not a serious problem. More likely the absence was due to a growing realization that solutions based on how a patent owner uses a patent miss the mark, or perhaps more precisely, if they hit the mark, they take out much more than just the intended target. This point was made poignantly twice in testimony before the House Judiciary Committee by Dean Kamen, a prolific and highly successful independent inventor. Kamen has become an iconic figure in patent circles and a favorite congressional witness due to his attractive success story and his tendency to express views simply and candidly, with no apparent concern whether the views are ones that his audience would like to hear.²

At a June 15, 2006, IP Subcommittee hearing, Kamen let his written statement for the record speak for itself, and devoted his five minutes allotted time for an oral statement to an explanation why a legal approach that addresses the troll problem by providing less favorable treatment to patent owners who do not practice their patents will not work:

I’ve had two kinds of business models in my life, and I only recently found out after reading the definition of a troll that I am one. So I would like to explain to you what my business was and what it is and why I think it is maybe a little unfair and dangerous to characterize people that license products as trolls.

Kamen then explained how he began his career as a “full service” inventor, developer, and marketer. After several successful years, he realized that “80–90 percent of our people were engaged in manufacturing, marketing, sales, support, and purchasing—activities that were not our strength.” Kamen then decided to concentrate on what he and his company did best—invention and technical development, followed by licensing and partnering with “the big companies” for manufacturing, marketing, servicing, etc. He noted that by switching business models, he became even more successful, but that, in the context of the then current debate, he also became a troll.

Three years later, Kamen was again invited to testify before the IP Subcommittee. The subject of the April 30, 2009, hearing was comprehensive patent law reform, not patent trolls, but Kamen nonetheless once again utilized his five minutes for oral presentation to address the troll problem. In fact, he essentially reprised his 2006 life story testimony, with one variation. After noting that he had been considered a troll because he no longer made and sold a product, he observed with approval that the term “troll” seemed to have gone away in the intervening years, being replaced by “nonpracticing entity,” or “NPE.” However, as Kamen drolly noted, “I think I am one of those too,” since the change from “troll” to “NPE” seems to be one of terminology only and not of substance.

Kamen was by no means alone in identifying a potential fundamental conceptual flaw in attempting to address abusive patent enforcement practices by discriminatory treatment of patent owners who do not make or market products embodying their inventions. Up to and including the enactment of the America Invents Act, no effective response to this line of criticism seems to have been offered. The far-reaching AIA would seem to have been a logical vehicle for addressing the issue, but did not do so, as least not directly or specifically. However, it is interesting to note that principal authors of the AIA seem to credit the need to address troll law suits with launching the six-year reform effort: “A number of patent observers believe the issuance of poor business-method patents during the late 1990’s through the early 2000’s led to the patent ‘troll’ lawsuits that compelled the Committee to launch the patent reform project 6 years ago.”³

Section 18 of the AIA provides a mechanism whereby a party sued for infringement of certain business method patents may initiate an administrative challenge to the validity of the patent in question. The House report on the AIA also appears to credit concerns regarding troll litigation with inspiring the inclusion in the bill of that provision:

The Act responds to the problem by creating a transitional program 1 year after enactment of the bill to implement a provisional post-grant proceeding for review of the validity of any business method patent. . . . A petition to initiate a review will not be granted unless the petitioner is first sued for infringement or is accused of infringement.⁴

Congress frequently takes a breather from attention to a particular subject matter after passing major legislation in that area, especially when that legislative effort was a difficult multiyear effort. This seemed to be the case regarding patent-related legislation following enactment of the AIA in September 2011. However, by the start of the 113th Congress in January 2013, Congress once again seemed inclined to take on the problems created by patent trolls/NPEs, which by then had acquired another descriptive moniker—“patent assertion entity” or PAE. In the first six months of 2013, at least five bills have been offered in Congress to address the problems of abusive patent litigation tactics, all but one of which propose new approaches other than punitive actions against patent owners who do not practice their patents. Significantly, the White House has also signaled its intention to participate with both executive actions and legislative proposals. One state has even decided to enter a battle that is ordinarily reserved for the federal government to fight, with the enactment of Vermont’s “Bad Faith Assertions of Patent Infringements” legislation.

These and other interesting developments will be discussed in a future article in Landslide^® magazine.

Endnotes

1. This version of the Smith patent reform draft bill was never formally introduced. However, it was circulated in a Committee Print dated April 14, 2005, and was the subject of the first hearing on patent reform legislation, held April 20, 2005, by the IP Subcommittee of the House Judiciary Committee.

2. For example, on April 30, 2009, Kamen opened congressional testimony by telling House IP Subcommittee members “[t]hat clause in the Constitution [the IP clause] is one of my favorite things. I hope you guys don’t screw it up.”

3. H.R. Rep. No. 112-98, pt. 1, at 54 (2011), Article no longer available

4. Id.