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PATENTS AND TRADEMARKS

Congress Takes on Patent Trolls

House passes legislation to cut down on frivolous lawsuits that can stifle innovation and cost businesses billions.

The U.S. House of Representatives passed a bill Thursday aimed at cracking down on "patent trolls," the term given to individuals and businesses that acquire patents mainly for the purpose of suing others for infringement.

HR 3309, known as the Innovation Act, passed by a vote of 325-91. The bill received wide support from both parties.

If passed into law, the Innovation Act would discourage frivolous patent lawsuits by making patent holders detail the products and patents in their claims from the outset, as well as by requiring courts to examine patents before defendants have to begin the onerous process of document discovery. It would also allow winning defendants to recover their court costs from plaintiffs.

Facing potentially long and expensive lawsuits, companies that patent trolls have targeted often elect to pay a settlement. According to one study, claims filed by trolls--known officially as patent assertion entities, or PAEs--cost defendants $29 billion to fight or settle in 2011. The study also found that most of the defendants were small- or medium-sized companies.

"Small businesses and startup companies--who are working to create jobs and grow the economy--are being suffocated by these egregious lawsuits," Rep. Jason Chaffetz (R-Utah) said in a statement. "The Innovation Act is a commonsense solution that protects the little guy and penalizes those who file groundless claims."

The Innovation Act would allow small businesses to postpone patent lawsuits until similar suits between larger companies and the same plaintiff have been completed.

Rep. Bob Goodlatte (R-VA) is the bill's chief sponsor. Goodlatte is the chairman of the House Judiciary Committee, which approved the bill in November. 

A companion bill was introduced in the Senate last month.

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Last updated: Dec 5, 2013

DOUG CANTOR | Staff Writer | Senior Editor

Doug Cantor is a senior editor at Inc.com. His work has appeared in Bloomberg Businessweek, Popular Science, Esquire, and other publications.




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