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Patent Reform on Hold in Senate; APTA Takes Active Role in Reform Efforts
Sen. Patrick Leahy (D-VT) recently announced that he would shelve his proposal for introducing a sweeping patent reform bill before the Senate Judiciary Committee, which he chairs. His action stalls comprehensive patent reform in the Senate after a similar bill passed in the House last year.
The call for patent reform gained traction in 2013 after “non-practicing entities”—commonly known as “patent trolls”—made frivolous patent infringement claims against many industries. Public transportation agencies and the companies that support them were subjected to meritless claims as well.
APTA responded at that time, enlisting the aid of the Public Patent Foundation, and filed a lawsuit in federal court to stop the barrage of these claims by two off-shore companies. The companies had sued at least 11 public transit agencies and filed claims against many more. APTA’s suit led to a comprehensive settlement that protects its public members and their vendors from subsequent claims and lawsuits. (See the July 1, 2013 Passenger Transport for details.)
As for the stalled effort in the Senate, Leahy said there was a lack of agreement on combating “the scourge” of patent trolls and differences of opinions on the long-term impact of the House bill.
“We have heard repeated concerns that the House-passed bill went beyond the scope of addressing patent trolls, and would have severe unintended consequences on legitimate patent holders who employ thousands of Americans,” he said. “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.”
Instead of a comprehensive patent reform bill, some policymakers are drafting legislation targeting “demand letters,” which patent trolls send in bulk threatening lawsuits in the hopes of collecting fees from the letter recipients to avoid going to court.
For example, Sen. Claire McCaskill (D-MO) recently introduced a demand-letter bill that would permit the Federal Trade Commission (FTC) to define a deceptive demand letter and bring charges against the companies that send them. And in the House, Rep. Lee Terry (R-NE) has drafted a bill allowing the FTC and state Attorneys General to fine demand-letter senders.
APTA has been an active proponent of patent reform that addresses frivolous patent infringement claims and has worked with a broad coalition to call for action in the 113th Congress. The announcement by Leahy has raised serious concerns within the public transit industry that Congress will not address this problem this year and agencies will continue to face warrantless claims.
“Regardless of whether there is absolute consensus across all industries on patent reform, it is our hope that the Senate would refocus its efforts and attempt to move legislation that will prevent these warrantless claims from going forward in the future,” said APTA President & CEO Michael Melaniphy.
Some public transit agencies have chosen to pay monetary settlements to patent trolls rather than challenge them in court, since court costs would be prohibitive even if the agency wins the suit. Laura Calderon, executive director, Illinois Public Transportation Association (IPTA), said this has happened with systems in her state.
IPTA is part of a Chicago-based coalition calling for patent reform. “This is happening all over the country,” Calderon said. “We got involved in this effort and have been working with the coalition’s consultants to get the word out there.”
Karl Gnadt, director of market development/managing director designate, Champaign-Urbana Mass Transit District (CUMTD), Urbana, IL, described how a patent troll went after a small business that provided technology to the system. The primary settlement was with the vendor, but it also included CUMTD.
“That vendor, as a part of the settlement, was not allowed to market its projects to any other transit systems outside of the three already named in the settlement,” Gnadt explained. “The firm would have to pay additional settlement fees if it wanted to expand this part of its business. That meant the company shut down its software development division—and we lost our resource. We had to hire our own in-house developers; I hired one of the five employees the vendor laid off.”
However, Gnadt added, that wasn’t the end. “About a year and a half later, we got a letter from the same patent troll with the same threat they made to the vendor. We had to show them how we were named in their earlier settlement.”
Vermont passed a law targeting patent trolls in 2013. This year, state legislatures have approved similar measures in Alabama, Georgia, Idaho, Maine, Maryland, Oklahoma, Oregon, South Dakota, Tennessee, Utah, Virginia, and Wisconsin.
As for federal legislation. Leahy indicated that he may revisit submitting a more comprehensive reform proposal.
“If the stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the committee,” he said. “We can all agree that patent trolls abuse the current patent system. I hope we are able to return to this issue this year.”
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