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

By Ros Krasny

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

The "Innovation Act," introduced last week by Rep. Bob Goodlatte, a Virginia Republican who chairs the House Judiciary Committee, aims to increase transparency and accountability in the patent litigation system.

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

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

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

While hurtful to giant businesses like EMC, a multinational computing company, "they have done much more profound damage to small and medium-sized companies that lack the resources to counter these frivolous lawsuits," Gupta said.

Abusive suits often claim ownership over "basic ideas," such as offering free Wi-Fi in a coffee shop, Goodlatte said in his opening statement.

Kevin Kramer, deputy general counsel for intellectual property at internet company Yahoo Inc., said the high cost of litigation "means that settlement is almost always the least costly option, and the patent trolls know it."

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

The former head of the U.S. Patent and Trademark Office warned 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 are reworking the greatest innovation engine the world," David Kappos, who stepped down as head of the patent office in January and 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 by his counterpart, Democrat Patrick Leahy.

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