Patent Reform Plunged Into Deep Freeze

Patent reform is a big deal in California, and not just to Silicon Valley tech companies. Any company that makes money off a patented idea or technology is keenly interested in what happens at the federal level – or doesn’t. 

Senator Patrick Leahy, the Vermont Democrat who chairs the Judiciary Committee, has taken the patent reform bill off the agenda, lamenting in a statement the various industries that rely on patents could not come to terms “on how to combat the scourge of patent trolls.”

"I have said all along that we needed broad bipartisan support to get a bill through the Senate. Regrettably, competing companies on both sides of this issue refused to come to agreement on how to achieve that goal."

The bill was intended to stymie trolls -- companies that exist solely to buy up patents, threaten infringement lawsuits, and then offer to settle for a tidy sum. A recent report issued by the White House quoted one estimate that trolls extracted $29 billion dollars from their hapless targets in 2011, a 400 percent increase from 2005. Trouble is, your attitude about what parts of the system need reforming -- and how -- differs depending on whether you work in software, biotech, a research university, or even a law firm.

So who scuttled the bill on its way to markup? The Washington Post reports it was a coalition of trial lawyers, universities, pharmaceutical firms and biotech companies.

"We believe the measures in the legislation … go far beyond what is necessary or desirable to combat abusive patent litigation, and would do serious damage to the patent system," reads one letter sent to Leahy on May 20. "Many of the provisions would have the effect of treating every patent holder as a patent troll."

"They couldn’t reach consensus on elements of the House Bill and finally just gave up," Congresswoman Zoe Lofgren (D-San Jose) told KQED. Lofgren co-sponsored the House patent reform bill that passed in December with bi-partisan support, a rare feat these days in Washington DC.

Lofgren says the need for patent reform is urgent, especially for small businesses and entrepreneurs. "Nobody likes to be sued, but at least the big companies have the revenue to be able to fight this stuff. The little guys can just be crushed."

The Silicon Valley lobbying outfit Engine was quick to voice its disappointment. In a press release, Engine said:

This news is devastating to the welfare of startups who will continue to face the threat of patent trolls. That no agreement could be reached, especially in light of the efforts being made across the committee to find common ground, is also bad news for the economy where annual losses from patent troll litigation are billions of dollars.

In recent years, it’s become increasingly difficult to get legislation through Congress. Individually and through groups, tech titans have spent a lot of money trying to get comprehensive immigration reform passed -– to no avail.

While retail, software and IT firms have born the brunt of troll attacks so far, biopharmaceutical firms are fat targets, too, and word is that industry will face increasing pressure to seek protection from changes in the law.

But after weeks of frustrating negotiations, it looks like patent reform may have to wait for the next legislative session.

Or maybe not. Congresswoman Anna Eshoo (D-Palto Alto) had a different read.

"Senator Leahy has pushed the pause button," she told KQED, noting there has been no vote killing the bill. "I always welcome in negotiations a time out. Their responsibility is to reach consensus, for the sake of the country."

Like Lofgren, Eshoo wants to see legislative action now, not next year.

"It really is a racket," Eshoo says of the patent troll industry. "It's a hold up, and it places an economic gun at the head of companies. There's too much of a cost to our national economy. We can't afford this."

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