If the House bill becomes law, will that fix the patent troll problem?
Roughly speaking there are two kinds of patent trolls. There are the low-level kind that some people call a bottom-feeder troll or a smash-and-grab troll. These are the folks who are basically in the business of using the high cost of defending against patent suits to extract settlements. The bill is mostly focused on dealing with that problem. If there's one thing motivating legislation now, I think it's the fact that in the last year or so there's been this increasing number of and exposure to entities that are just sending hundreds or thousands of demand letters, particularly to end users of technologies hoping that some of them will pay a couple of thousand dollars.
The procedural aspects [of the Goodlatte bill], for example codifying the customer suit exception [which says that end users of a product such as a WiFi router can't be sued for infringing uses of that product] are directly targeted at a company like Innovatio sending letters to coffee shops and hotels [accusing them of infringing a wireless networking patent]. The idea is that if they're trying to go after the hotels and the coffee shops and the Whataburgers and the White Castles and all that, and Cisco and Netgear want to take them on, we should stay lawsuits against the end users and retailers against the product and have one or a small number of lawsuits against manufacturers.
For me, that's the most important part of the bill, protecting end users. These are smaller entities that aren't technology companies, don't know much about patent litigation, don't know much about federal court. There's no good reason to sue hundreds or thousands of end users or retailers other than to threaten them with the defense of the case in order to extract a nuisance-value settlement.
At the other end of the spectrum, there are larger, more sophisticated trolling operations, such as IP Nav and Intellectual Ventures. They spend more time selecting their patents, do a lot of research up front to get patents that are very broad, appear to be rather strong. They're not necessary seeking small-value, low-dollar settlements but are willing to take the case to trial. [They look for an] early, broad patent that probably shouldn't have been granted in the first place, and are willing to take it all the way through to trial. IP Nav and Intellectual Ventures, somewhat surprisingly, seem to be publicly supportive of the legislation. I think [the Goodlatte bill] is unlikely to have much impact on that form of the problem.
Besides the customer stay language, what other provisions of the legislation help combat patent trolling?
Fee-shifting: this helps because if you're an individual company and get sued, all things being equal you have an incentive to settle and then sic the person who sued you on your competitors. But with the fee-shifting, you're giving individuals who wouldn't normally fight at least some incentive to go ahead and fight—at the margin increasing the numbers defending these suits, decreasing at the margin incentive to bring these suits in the first place.
E-discovery reform: a lot of the expense of fighting these cases is the discovery—producing all the e-mails, taking all the privileged information from all the e-mails, hundreds of thousands of documents. [The bill is] not reducing discovery, not saying legitimate plaintiffs [don't] get to find out what they need to find out, but push that back in the case a little bit, so there's an opportunity to learn about the case, get a claim construction order out of the court [which interprets the patent's scope and helps determine whether the plaintiff infringed] before going through all of the expense of the discovery process. Early adjudication of patent cases is a key to reducing this litigation cost holdup problem. Pushing discovery costs further back in the case.
Raising the pleading standard: Part of what goes into this nuisance-value model [of patent trolling] is being very vague. "I have a right to enforce this patent, you're infringing, that's my complaint." I haven't told you what claims you infringe, what products you sell that infringe, let alone how you infringe. So getting more information sooner in the case, making the patentee stake out its case early on rather than filing a vague complaint, and using discovery to flesh out its allegations early on. You're supposed to have done investigation before you sue, tell me what claims [I] infringe. That's part of your duty as a litigant to investigate these claims before you file suit.
Some critics have argued that the Goodlatte bill would unduly burden legitimate patent plaintiffs. What do you think about that?
That doesn't strike me as a big concern. If you're a patentee and you have a strong, valid, valuable patent, the things that are in this bill don't really impact you. You're not in this for a litigation cost holdup. You have a valid, valuable patent, you want to be paid by the infringer based on the value of your technology and not based on the cost of litigating and defending against that suit. Nothing in this bill is going to [stop you].
For example, in past patent reform bills there was talk of damages reform [which could have affected legitimate patent holders]. There's nothing [in the Goodlatte bill] touching on damages for example.
This is really about trying to curb abusive litigation--litigation particularly involving weak patents and weak claims of infringement. If you don't have those this shouldn't bother you that much. You see some of the companies that rely a lot on patent licensing for revenue, being generally supportive of the bill, including Microsoft, IBM, IP Nav, Intellectual Ventures.