On May 21st Senator Patrick Leahy (D-VT) announced he was yanking the Patent Transparency and Improvements Act (S. 1720) he had introduced last November. This Bill represented the Senate’s attempt to work towards compromise legislation to trim the broader – and certainly more controversial – House Bill (H.R. 3309) that was passed last December. Just the day after Senator Leahy’s announcement, the House held a hearing at which legislation focused on regulating abusive patent infringement demand letters was discussed. This demand letter legislation was proposed by Rep. Lee Terry (R-NE) in a draft Bill entitled “Bill to Enhance Federal and State Enforcement of Fraudulent Patent Demand”. Representative Terry remarked that the Senate, by pulling its Bill now “puts us in a position where we have to do something”.
Both the stalled patent litigation reform legislation, and now the more focused demand letter Bill, are attempts by Congress to curb abusive patent practices by non-practicing entities (NPEs), more commonly known as “patent trolls”. Although there is generally agreement that abusive patent practices do occur and are highly damaging to the economy, there is, however, little agreement on how to deal with these practices. The biotech and pharmaceutical industry, the information technology (IT) industry, universities and research institutions, small businesses, and the investment community each have very different business and economic drivers, which must be weighed as part of an integrated approach if a workable solution is to be found.
Adding even more complexity to the Federal legislation are the attempts by state legislatures and state attorneys general to pass and enforce their own laws to curb abusive practices. Most of the state activity has been driven by consumer protection laws to stop certain demand letter practices. To date, eleven states have enacted such consumer protection laws.
My take on all this is that the stalled Federal legislation is probably a good thing, particularly for the biotech industry. Although, the issue of abusive practices by non-practicing entities must be addressed, the original House Bill and the various Senate versions would have gone too far and would have had unintended consequences. The legislation could undermine entrepreneurship, the formation and sustainability of new biotech companies, and slow progress in developing new healthcare technologies, medicines, and cures. Rather, a more thoughtful and integrated approach is needed to avoid harming any one sector of our economy. Likewise, the proposed demand letter legislation being considered by the House needs careful scrutiny.
The fate of Representative Terry’s proposed demand letter Bill should be known by the end of this month. Furthermore, Senator Leahy is still hopeful that broader compromise legislation could pass Congress and be signed into law before the end of this year.