House Judiciary Chairman Bob Goodlatte, R-Va., said his recently reintroduced Innovation Act (HR-9) is a necessary “updated and modernized statute” for patent reform, in an opening statement Thursday at a House Judiciary IP Subcommittee hearing on recent patent-related cases at the Supreme Court. “Many of the provisions in the Innovation Act do not necessarily lend themselves to being solved by case law, but by actual law -- congressional legislation,” Goodlatte said. The Patent and Trademark Office shouldn’t “simply be in the business of granting patents and leaving the mess created for the courts and Congress to fix, but rather focus on strengthening the requirements for patent eligibility to reduce the overall number of weak or overly broad patents from entering the system,” he said. HR-9 addresses the “patent trolls, which continue to burden businesses across the country with abusive patent litigation,” said subcommittee ranking member Jerrold Nadler, D-N.Y., in an opening statement. “A smartphone can contain hundreds of patents -- on everything from touch-screen technology to cameras to GPS mapping,” he said “There is also a patent for that. And worse, we are finding there is a patent troll for that too.” Several groups expressed support for HR-9 upon its introduction, including CEA, NAB and NCTA (see 1502050036).

It’s “time for a Republican-controlled Congress to “unleash the pent-up energy of pro-innovation policies,” and address tech priorities such as patent reform, data privacy, high-skilled immigration reform and Internet governance, Sen. Orrin Hatch, R-Utah, said during a keynote speech at Lincoln Labs’ Reboot Congress event Thursday. As chairman of the Senate Republican High-Tech Task Force, Hatch said he has developed an innovation policy agenda for the 114th Congress to “protect legitimate intellectual property rights from abusive patent litigation.” Patent trolls “bring thousands of frivolous patent infringement lawsuits each year in attempts to extort settlements from conscientious, hard-working technology innovators,” costing the U.S. economy about $60 billion each year, Hatch said. Current law fails to combat patent trolls, he said. He said it’s time to reform the America Invents Act, which Hatch introduced in 2005 with Sen. Patrick Leahy, D-Vt. Patent reform legislation has been proposed, but Hatch said he will “oppose any bill that fails to prevent patent trolls from litigating-and-dashing.” Hatch encouraged continuing bipartisan support for updating U.S. privacy laws, encouraging action so “privacy laws correspond to present realities and keep up with technological advances.” The Electronic Communications Privacy Act (ECPA) should be updated immediately “to safeguard data stored abroad from improper government access,” he said. “Congress has not adequately updated the law since its enactment, and technological developments have resulted in disparate treatment between online and offline communications.” Though Hatch said he agrees with the premise of the ECPA reform bills (see 1501280044) that were recently introduced in the House and Senate, they don’t establish a “framework for how the U.S. government can access data stored abroad,” he said. Americans' privacy would not be protected by foreign governments, he said. “If the federal officials can obtain emails stored outside the United States simply by serving a warrant on a provider subject to U.S. process, nothing stops governments in other countries -- including China and Russia -- from seeking e-mails of Americans stored in the U.S. from providers subject to Chinese and Russian process.” Hatch said he plans to reintroduce the Law Enforcement Access to Data Stored Abroad Act, or LEADS, in the coming weeks to ensure Americans' privacy is protected by all governments. “We must strengthen privacy in the digital age and promote trust in U.S. technologies worldwide by safeguarding data stored abroad,” Hatch said, “while still enabling law enforcement to fulfill its important public safety mission.”

Patent reform is necessary, especially for software, because “juries and courts often fail to distinguish between patented code" and the end function of a software product, Heartland Institute Policy Adviser Steven Titch wrote in a Feb. 5 policy brief that was released Tuesday. “Frivolous patent litigation costs U.S. businesses $29 billion a year in direct costs and $80 billion in indirect costs,” Titch told us. Titch’s comments echoed President Barack Obama's 2014 State of the Union address, in which he encouraged Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.” Congress should confirm Michelle Lee as director of the Patent Office, and the FCC should “avoid heavy reliance on patented technology,” the paper said. In the past several years, there has been an increase in “patent stockpiling” or “aggregation” as an increasing number of companies and individuals file frivolous or “mostly” baseless lawsuits, it said. Especially in today’s high-tech environment, where one personal computer, smartphone, gaming console or TV can “incorporate dozens or even hundreds of patented products or processes,” patent reform needs to occur, the paper said. These patent assertion entities (PAEs) or “patent trolls” such as Soverain Software, exploit weaknesses in the patent system, such as when Soverain claimed that any website shopping cart function was an infringement of its patent, it said. Soverain had a $40 million settlement with Amazon and a multimillion-dollar settlement with both Avon and Victoria’s Secret, the paper said. Due to the profitability of patent trolling, companies such as Nokia are now using patent litigation to earn revenue, which Titch said has made companies more reluctant when it comes to innovation. U.S. patent laws aren't broken, but “need to be reformed to better recognize the way innovation happens in the twenty-first century,” the paper said. "Enterprises should be using the marketplace, not the courtroom, to evaluate investment and return opportunities,” Titch said. “Patent reform can help by changing the cost-benefit ratios of litigation so frivolous patents are deterred but plaintiffs with legitimate cases are still able to bring a case." Soverain had no immediate comment.

It’s big business for “litigation factories that take advantages of anomalies in the patent system to extort financial settlements out of businesses large and small,” said Cisco General Counsel Mark Chandler Tuesday in a blog post on the formation last week of the United for Patent Reform. Cisco is a charter member (see 1501150035). United for Patent Reform is “a broad-based coalition of businesses” that will work “to fight wanton abuse of the patent litigation system by patent assertion entities (PAEs),” said Chandler. PAEs are companies that “neither invent nor produce products, but simply buy patents for litigation value,” he said. Citing Allied Security Trust data, Chandler said PAEs bought as many patents in the first half of 2014 as they did in all of 2013. The number of lawsuits brought by PAEs in 2014 were triple those of 2006, he said. “As our coalition’s membership illustrates, this is a problem that includes businesses of all shapes and sizes.” Among the congressional remedies the coalition seeks are measures that put the “burden of litigation costs on those who bring suits that prove to be for extortion value only or where parties demand inefficient, costly litigation procedures,” he said. “Over the next weeks and months, Cisco, in conjunction with United for Patent Reform and its member companies, will make the case for patent reform in the hope that Congress will approve meaningful reforms soon. This is imperative if we’re to break the outlandish and exploitive business model that has encouraged patent assertion entities to thrive.”

CEA stopped short of declaring its intention to join United for Patent Reform, the coalition started last week by the National Retail Federation to seek legislation to reduce abusive patent litigation (see 1501150035). United for Patent Reform “is a strong and broad coalition that plays a critical role, and we are considering how we can be most helpful," said Michael Petricone, CEA senior vice president-government affairs, in an emailed statement Friday. Several tech and telecom companies belong to the coalition -- Adobe, Amazon, Cisco, Dell, Facebook, Google, Oracle and Verizon -- as do several trade associations, but no trade groups from the tech industry. CEA has identified patent reform as one of its top legislative priorities in the new Congress (see 1411050022).

The National Retail Federation is starting United for Patent Reform, which will seek via legislation to reduce abusive patent litigation, NRF said in a news release Thursday. NRF and Oracle are the coalition’s co-chairs, and its members include Adobe, Google and retail and housing associations, it said. “Patent trolls have abused our patent system with their coercive bribery schemes for far too long,” said David French, NRF senior vice president-government relations. “Main Street businesses and our allies in Silicon Valley have had enough and are fighting back in an all-out effort against patent trolls.” Public Knowledge cheered the coalition’s launch, in a news release. “The diversity of members of United for Patent Reform proves what we already knew: that patent reform is important for everyone who uses technology, from Silicon Valley companies to Main Street businesses to individual consumers,” Charles Duan, PK Patent Reform Project director, said. The coalition also sent a letter to the Senate and House Judiciary committees’ leadership, seeking seven legislative patent reforms. Those included stopping “discovery abuses” and forcing those who allege patent infringements to “explain their claims." House Judiciary Chairman Bob Goodlatte’s, R-Va., Innovation Act (HR-3309) could have done “even more to prevent abusive patent litigation,” but the bill was an “excellent start to the legislative reform effort,” it said. Goodlatte said in a speech Wednesday that he plans to work with the Senate in the 114th Congress to pass HR-3309 quickly (see 1501140031). The bill overwhelmingly passed the House last year. Other members of the coalition are Amazon, Cisco, Dell, Facebook, the Food Marketing Institute, Intuit, JCPenney, Macy's, the National Association of Chain Restaurants, the National Association of Convenience Stores, Salesforce.com, SAS and Verizon, the group said. There are "several others who are still in the process of joining at this date of announcement," it said. At CEA, which has made patent reform one of its highest legislative priorities (see 1411050022), Michael Petricone, senior vice president-government affairs, said in an emailed statement Thursday that "the breadth of the coalition shows that bogus patent lawsuits are not just a tech issue." As CEA sees it, "patent trolls extort and bedevil industries ranging from retailers to restaurants, from hotels to health care," Petricone said. "Patent abuse is a daily, costly challenge for a large swath of the U.S. economy, and that is why we fully expect sensible, common sense patent reform to be signed into law in 2015.”