The Innovation Act of 2015 – Promoting Innovation by Stopping Abusive Patent Litigation

By Steve Rodgers, senior vice president and general counsel for Intel

Earlier this month, the House Judiciary Committee approved H.R. 9, the Innovation Act of 2015. This bipartisan bill aims to curb abusive patent litigation by non-practicing entities (NPEs) while still protecting the rights of patent holders to bring legitimate patent infringement suits. I strongly support this progress and hope that the most significant provisions of the bill become law.

Patent litigation by NPEs has skyrocketed since 2004. It is a plague, and our economy has been one of the many victims. Over the last ten years, over 90% of the patent infringement claims filed against Intel have been filed by NPEs. Most of those claims had little or no merit, but the plaintiffs pursued them anyway—not because they were crazy and dumb, but because defendants routinely settle for substantial sums in order to avoid the even higher cost of defending the litigation. Defending against an ordinary patent case typically costs between $2 million and $10 million, and, under our system, defendants normally can’t recoup those costs even if they win outright. Moreover, because NPEs typically have few documents or even real assets, they spend far less to bring cases than defendants spend to defend them. That asymmetry distorts incentives and results in litigation abuse. It is high time for Congress to step in to fix this abuse, which diverts resources away from innovation, manufacturing and job creation.

As originally introduced, the Innovation Act included provisions designed to protect all types of businesses, end-users and customers from abusive litigation behavior. For example, the bill provided accountability on the front end of litigation with the common sense notion that plaintiffs should specify their allegations when they file a lawsuit.  Far too often, Intel and other companies are sued in lawsuits that do little more than state the name of a product and cite to a patent number.  Defendants should not have to wait long period, sometimes years, to be told what they supposedly did wrong. On the back end, the Act as introduced would have allowed prevailing parties to recover their attorneys’ fees in more—but not all—cases. Unfortunately, these provisions were weakened during the amendment process, reducing my confidence that the Act will be successful in stopping abusive patent litigation. In fact, those amendments, many of which were supported by the trial lawyers and investors who profit from abusive patent litigation, caused some companies that actually make products to turn from staunchly supporting the bill to opposing it.

I am encouraged, however, by the current bill’s inclusion of a provision addressing venue abuse. Under current law, plaintiffs may sue a defendant in any district where a defendant is subject to personal jurisdiction—typically nationwide.  Currently, over 30% of all patent infringement suits and nearly half of all NPE suits are filed in only one district court, even though in most of those cases neither the defendant nor the alleged infringement has any greater connection to that district than to any other.  The resulting concentration of patent cases places a disproportionate burden on the judicial resources in that district and imposes undue costs on defendants. I hope the Senate will recognize the wisdom of this provision and consider adding it to its own patent litigation reform bill, the PATENT Act.

I applaud the House Judiciary Committee, and especially Representatives Goodlatte, Issa, and Lofgren, for its leadership on this issue. And I strongly encourage Congress to come together and address the real dangers presented by patent litigation abuse so that American companies can focus more on innovation and less on litigation.

 

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