Patent reform in peril as trial lawyers flex muscle

The Senate Judiciary Committee failed to go forward with a vote on patent reform that had been expected to take place during a Thursday hearing. The delay comes at a time that lobbying groups are increasing their efforts behind the scenes to influence the Innovation Act, a bi-partisan bill intended to cure a U.S. patent system widely regarded as dysfunctional.
The delay on the vote came the same day as a new patent booster group appeared on the scene. The group, named “Partnership for American Innovation,” is an odd clustering of seven big companies, including Apple(s aapl), Ford(s f), Microsoft (s msft) and Pfizer.
It’s not clear if the Senate delay and the emergence of the new patent group are related, or if the hold-up is due instead to pressure exerted by trial lawyers on Democratic Party leaders.
According to people familiar with the matter, trial lawyers are concerned about fee-shifting provisions in the Innovation Act, which are intended to deter patent holders from filing flimsy lawsuits. The lawyers’ groups, fearful that the patent rules could inspire broader tort reform, are reportedly moving to obstruct or water down the bill.
The delay comes as patent reform advocates are racing to get a bill passed before members of Congress become consumed with midterm elections. The bill is being led on the Democratic side by Sen. Patrick Leahy (D-Vt) and Sen. Charles Schumer (D-NY), who have repeatedly blasted so-called patent trolls — companies that don’t produce anything, but instead use patents to bring lawsuits against companies that do. Earlier this week, Schumer described the trolls as “leaches on the system” during an event where Etsy, AOL(s aol), and Foursquare described the burden on their companies of paying patent trolls.
If the Senate bill falters, it will deal a blow to a patent reform movement that gained momentum in December when the House of Representatives passed a version of the Innovation Act by a wide bipartisan measure. The proposed law is designed to undercut the economic incentives of patent trolling by making it harder for the trolls to swamp their targets with expensive litigation costs.
Recent academic studies suggest that patent trolls, which target everyone from big tech companies to small town coffee houses, have cost the economy billions of dollars. Congress attempted to fix the problem with the America Invents Act, signed by President Obama in 2011, but the law proved ineffective, leading to the current push for reform. Meanwhile, the giant patent troll Intellectual Ventures is pouring money into a lobbying vehicles to promote its business model.
Sources say that, even as the window for passing new laws is rapidly closing for this term, the current version of the Innovation Act still stands a chance of passing.
“The train’s not coming off the rails yet,” said one person involved in the process, who predicted the Judiciary Committee is likely to vote on the bill next week. The bill would then have to go to the floor of the Senate, and then to a mark-up process with the House before being sent to President Obama, who supports patent reform, for passage.