How The New Patent Abuse Reduction Act Levels The Playing Field

The patent abuse fight is picking up momentum, and we have new ammunition. Yesterday, the senior Senator from Texas, John Cornyn, introduced the Patent Abuse Reduction Act of 2013 (the “PAR Act”). My home state U.S. Senator has just taken a huge step to solve the patent troll epidemic. This bill is a breath of fresh air in the battle against patent trolls and their brazen abuse of the patent system. The PAR Act is designed to “deter patent litigation abusers without prejudicing the rights of responsible intellectual property holders,” Cornyn said in a statement.

We encourage you to read the PAR Act – we have linked it at the bottom of the page. For everyone out there who is not a lawyer, though, we want to take a minute to explain what this bill means and why it is so important:

  • Patent trolls are notorious for hiding their claims behind flimsy lawsuit pleadings. The current standards for making an accusation of patent infringement do not require plaintiffs to explain what they allege to be infringing or how the defendant infringes. This lack of clarity forces anyone accused of patent infringement into an endless (and expensive) guessing game. Section 281A of the Patent Abuse Reduction Act forces patent assertion entities (PAEs) to spell out their claims and be specific about their complaints. These specifics include how the patent is being abused; the names, model numbers and other information of the products or services alleged to infringe the claim and where the infringement occurs; and a host of other factors most patent trolls can currently omit from their suits.
  • Patent trolls usually hide their actual owners behind shell companies. These patent trolls don’t want publicity because they don’t want to be known for who and what they are. Section 281A of the bill removes the anonymity of patent trolls and forces them out of hiding, by requiring them to identify not only themselves, but any other businesses or individuals who are co-owners, assignees, licensees or have a legal right to enforce the patents in question, along with exposing any person or business with a financial interest in the patent infringement case.
  • Another common tactic of patent trolls is to find a first patent, sue people on that patent with a first shell company, and settle… only to find and sue the same people again on a second patent with a second shell company. This bill makes it possible to expose the money machine behind patent trolls, and to make them come to the table and take part in the case.
  • One of the most expensive parts of a patent lawsuit is something called “discovery” – where companies are forced to organize and hand over mountains of internal documentation to the patent trolls so that they can introduce “evidence” of patent infringement. Trolls use discovery to drive up the cost of the lawsuit, making it cheaper to settle, and to fish for more ways in which they can apply their claims. Section 300 of the PAR Act adds fairness to the discovery process by limiting discovery until after the meaning of the patent (called “claim construction”) has occurred, and shifting much of the cost of unreasonable discovery back to the patent troll.
  • Finally, section 285 institutes a “loser pays” rule for unreasonable litigation. This is the ultimate tool for balancing litigation, freeing businesses and individuals from having to shoulder the massive financial burden of fighting a frivolous patent infringement claim.

The Patent Abuse Reduction Act beams necessary sunlight onto these all-too-frequent proceedings and is a major step toward fixing the problem of patent abuse. It has a fitting acronym – the “PAR” Act – because it helps put companies “at par” and on an even playing field with those who would abuse the system.

At Rackspace, we’ve been on the front line of the problem; patent trolls have become our most pressing legal issue. We have seen a 500 percent spike since 2010 in our legal spend combating patent trolls. And we’re not alone. We hear almost daily about companies and developers that have been impacted by patent infringement suits filed for no other reason than to extort money.

We’ve stood up and fought back. Just recently we fought a troll in court, and won; we turned the tables on another, suing them in Federal Court; and we filed a challenge with the patent office against a third.

An army is now forming to fight patent trolls, and, if passed, Sen. Cornyn’s Patent Abuse Reduction Act of 2013 will be a very powerful weapon with which to battle them.

Read the full Patent Abuse Reduction Act of 2013 here.



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