Tech companies urge action on "patent trolls" in U.S. patent bill


By Ros Krasny

WASHINGTON, Oct 29 (Reuters) - Technology companies onTuesday urged fast action on a patent reform bill that tackleskey aspects of the U.S. patent system, including the rising tideof abusive lawsuits by so-called "patent trolls."

The "Innovation Act," introduced last week by Rep. BobGoodlatte, a Virginia Republican who chairs the House JudiciaryCommittee, aims to increase transparency and accountability inthe patent litigation system.

Patent assertion entities, or PAEs, known by critics aspatent trolls, are companies that do not invent or manufactureproducts but instead buy or license patents from others,primarily for the purpose of obtaining licensing fees.

Companies have said the rising tide of such litigationstifles innovation and costs billions of dollars in legal fees.

Patent litigation costs have grown from $7 billion in 2005to $29 billion in 2011, when 5,842 lawsuits were initiated byPAEs, Krish Gupta, deputy general counsel with EMC Corp., saidin prepared testimony to the committee.

While hurtful to giant businesses like EMC, amultinational computing company, "they have done much moreprofound damage to small and medium-sized companies that lackthe resources to counter these frivolous lawsuits," Gupta said.

Abusive suits often claim ownership over "basic ideas," suchas offering free Wi-Fi in a coffee shop, Goodlatte said in hisopening statement.

Kevin Kramer, deputy general counsel for intellectualproperty at internet company Yahoo Inc., said the highcost of litigation "means that settlement is almost always theleast costly option, and the patent trolls know it."

About 75 percent of cases settle, creating a "virtuallyguaranteed payoff" for assertion entities, Kramer said.

The former head of the U.S. Patent and Trademark Officewarned that some provisions of the bill "would best be deferred"because of the danger of over-correction.

"We are not tinkering with just any system here; we arereworking the greatest innovation engine the world," DavidKappos, who stepped down as head of the patent office in Januaryand is now a lawyer in private practice, told the hearing.

Goodlatte has not announced a markup schedule for his bill,and a companion bill is expected to be launched in the Senate byhis counterpart, Democrat Patrick Leahy.

To read the text of H.R. 3309, the Innovation Act, see:

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