A U.S. senator has introduced legislation allowing the U.S. Patent and Trademark Office to review and invalidate controversial patents challenged by technology startups in an effort to discourage so-called patent trolls.
Senator Charles Schumer, a New York Democrat, introduced a bill Wednesday that would extend a patent-challenging provision in the 2011 patent reform bill the America Invents Act. The patent bill included a temporary program that allowed companies in the financial products industry to challenge business-method patents at the USPTO, and Schumer’s new bill would expand the provision to include business-method patents challenged by technology start-up companies and would remove the provision’s temporary status.
Schumer’s legislation is targeted at so-called patent trolls, patent-holding companies with business plans focused on suing for patent infringement and not on making or selling products.
“Patent trolls are bullying New York’s technology companies, stymieing innovation and dragging down growth,” Schumer said in a statement. “This legislation will provide small technology startups with the opportunity to efficiently address these claims outside of the legal system, saving billions of dollars in litigation fees.”
The provision in the America Invents Act, authored by Schumer and former Senator Jon Kyl, an Arizona Republican, has led to about 20 patents being challenged at the USPTO.
Schumer noted that patent trolls cost U.S. software and hardware companies $29 billion in 2011, according to a study from the Boston University School of Law.
Under current law, a company defending against a patent suit has two options: pay to defend the suit or settle and pay a licensing fee, Schumer noted. The average settlement with a patent troll costs a small or medium company $1.33 million, while an in-court defense would cost the same company an average of $1.75 million per case, he said.
Some tech trade groups praised the new bill.
The bill is a “step toward curbing patent troll abuse,” Jon Potter, president of the Application Developers Alliance, said in a statement. “Patent trolls hamper innovation and pose a looming threat to all entrepreneurs and innovators. They prey on startups and independent app developers who do not have the time or resources to undergo an expensive legal battle.”