Make Patent Litigation Fair and Efficient
The amount of patent litigation dipped in 2016 from a record high of the previous year, due in large part to the success of Inter Partes Review and judicial application of the Supreme Court’s Alice decision. Despite that dip, patent trolls continue to bring a majority of all patent litigation and sue at historically high levels. The number of defendants sued by patent trolls nearly tripled from 2005 to 2016. These suits account for 90% of patent litigation involving high-tech products and services. They continue to deter innovation by leveraging the high cost of litigation to obtain settlements that tax innovation and create a drag on job growth and R&D investment.
Litigation is expensive and inefficient for defendants, but trolls face relatively little expense because they have little evidence to produce in discovery. With a vague assertion that a defendant’s product infringes a patent, they can trigger broad-ranging discovery and disrupt the work of engineers and executives. Liberal patent venue rules had allowed them to shop for the friendliest forum having only a contrived connection to the case.
This litigation environment undergirds the troll business model of demanding settlements based on avoiding high litigation costs rather than the merits of the case. But legitimate patent owners, defendants, inventors and the public would all benefit from focused, efficient resolution of patent cases. While recent developments in the courts involving fee shifting and pleadings are a step in the right direction, more progress is needed, including formalizing and strengthening those developments. Needed changes include:
Venue rules must ensure that patent disputes have a substantial connection to the district in which they are adjudicated. The Supreme Court’s decision in TC Heartland v. Kraft Foods provided a welcome statement that the previously ignored patent venue statute does indeed apply to patent cases, but the interpretation of that statute raises several new questions. In order to prevent the rampant forum shopping that has weakened the patent system in the past, courts should interpret the statute to require a substantial connection between the defendants “regular and established place of business” and the alleged infringement.
Patent owners should be required to explain in detail their allegations of infringement when filing a complaint.
Litigation procedures should focus a case on fast resolution of dispositive issues and prevent discovery “fishing expeditions.”
A losing party that took objectively unreasonable positions in litigation should be required to pay the other side’s fees and costs.
Targets of baseless demand letter campaigns and customers sued for using or selling products that they don’t manufacture should receive relief.