Update on the Current Landscape of Patent Troll Lawsuits

June 30, 2016Articles Fox Rothschild LLP Emerging Companies Insider Blog

These days, patent infringement lawsuits are increasingly being filed by “patent trolls,” entities that buy up vague and overly broad patents and send out demand letters asking for money in exchange of not being sued. Many patent trolls specifically target start-up companies.

More than a year after the Senate defeated a bill aimed at curbing patent troll lawsuits, another bill recently emerged in the House referred to as the “Innovation Act.” A copy of this bill can be found via the Library of Congress.

The Innovation Act is designed to weed out patent troll lawsuits by requiring courts to determine the validity of the patent at the early stages of the case. The Innovation Act also imposes greater pleading requirements in a Complaint requiring the patent owner to identify: i) each patent allegedly infringed; ii) each patent claim allegedly infringed; and iii) each product that the patent owner alleges is infringed, among other things.

On June 11, 2015, the bill was passed by the House Judiciary Committee. Many people believe that the prospects for Congress passing this bill is improved this year due to a “super-coalition” of supporters, known as the United for Patent Reform coalition, consisting of technology and social media companies, such as Google, Adobe Systems and Facebook, as well as retailers like Macy’s, restaurant and hotel trade groups and start-ups and small businesses through trade groups. A listing of the members of this coalition can be found here.

While the bill, if passed, may curb some patent troll lawsuits, the bill should not be viewed as immunizing a start-up from a patent infringement lawsuit. In fact, there is no absolute way of avoiding such a lawsuit. However, there are steps a start-up can take to mitigate risks. A good start is to obtain patents covering the start-up’s technology. By doing so, the start-up can beat others to the punch by being the first to secure rights on its own technology. Patents may also incentivize venture capital firms to provide investment in the start-up because the patents may provide some assurances to the venture capital firm that the start-up has rights on its technology.