Patent trolls have long plagued the technology frontier, preying on unsuspecting and vulnerable startups and tripping up the tech giants.  Known more formally as non-practicing entities (“NPEs”) or patent assertion entities, patent trolls buy mediocre, broadly-worded patents, wait for a company to develop a similar technology, and then sue for alleged infringement.  Although many of the suits are meritless, most companies settle early on knowing that defending the suit can be extremely expensive, $1.75 million on average.  While this amount is negligible for larger companies, it can spell disaster for smaller companies and startups.

It’s estimated that in 2011 lawsuits initiated by NPEs cost U.S. companies $30 billion in direct costs and nearly $80 billion when indirect costs are factored in.  And costs continue to rise.  Fortunately, the outrage from the tech industry has finally caught Congress’ attention.  When Congress convenes this Monday, May 6, Senator Charles Schumer (D-NY) will present legislation to amend the 2011 America Invents Act (“AIA”), a bill that was intended to reform and modernize the patent system and which converted the U.S. from a first-to-invent to a first-to-file system.

Senator Schumer’s amendment will require the United States Patent and Trademark Office (“USPTO”) to assess all patents being asserted before a case moves forward in order to weed out the meritless claims.  The hope is that this will rid the patent trolls of the niche they have found in the patent world and drastically reduce the number of lawsuits.

While on its face the amendment makes sense, some are viewing this extra-judicial review skeptically.  In a traditional lawsuit, a thorough review of contested patents already occurs during expert testimony.  These expert witnesses, typically engineers, provide an explanation of the patents in dispute and the related technologies.  Both plaintiffs and defendants may call on their own expert witnesses to testify, which provides the opportunity for the parties to cross-examine each other’s witnesses. Placing this review in the hands of the USPTO as the new amendments do, not only requires the USPTO to play judge and jury, which it is not equipped to do, but removes the discussion from a public forum to behind closed doors.  Parties would be prevented from presenting expert testimony in their favor and thus the impartiality and equity of the process would be questionable.

Another proposal is the Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 (“SHIELD”) which would force the losing party to pay the prevailing party’s attorney’s fees.  This is a departure from the current rule in the United States in which each party is responsible for their own lawyer’s fees.  Whatever the solution, there is a clear consensus that something needs to be done.  These two proposals, while not perfect, are at least a sign that a solution is near.