Patent reform dies in Senate as Leahy pulls plug on key bill

A closely watched patent reform bill failed on Wednesday as Sen. Patrick Leahy (D-Vt), who chairs the Senate Judiciary Committee, announced that he lacked the bipartisan support to push the bill forward.

In a statement, Leahy said he hoped the Committee “will return to this issue,” but made clear the process is finished for now. The statement read, in part:

“We have been working for almost a year with countless stakeholders on legislation to address the problem of patent trolls who are misusing the patent system …Because there is not sufficient support behind any comprehensive deal, I am taking the patent bill off the Senate Judiciary Committee agenda.”

The move is a major blow for retailers, tech companies and a wide variety of businesses that have been shaken down by “patent trolls” — shell companies whose sole business consists of forcing their targets to pay for a patent license in order to avoid expensive litigation.

The failure of the patent reform bill, which passed the House of Representatives by a wide margin and had the support of President Obama, is a victory for troll companies like Intellectual Ventures, which have lobbied hard to stop the reforms.

A person familiar with the matter said the process failed in large part because “Leahy was unwilling to choose winners and losers.”

Another source, meanwhile, say that Leahy’s ability to build a bipartisan coalition was undermined by recent pressure from the pharma industry and from universities.

As Gigaom reported last Friday, Sen. Leahy had initially been a vocal supporter of patent reform, but appears to have shifted his position in recent weeks in response to lobbying pressure. Despite ongoing bipartisan support for patent reform in the Senate led by liberal Sen. Charles Schumer (D-NY) and conservative Sen. John Cornyn (R-Tx), a new law is now effectively impossible until after the midterm elections.

The outcome was greeted with disappointment on Twitter by activists who had worked to assemble a coalition of tech and retail companies to stop patent trolling:

Meanwhile, the trolls continue to do brisk business. In late April, for instance, trolls filed nearly 200 lawsuits in a single day, using old patents to target everyone from Etsy to the NFL.

For patent reformers, any hope of change for now rests with the Supreme Court. The court is in the course of deciding a major case called Alice Corp that could eliminate or reduce software patents, which have proved easy to obtain and are a popular weapon of patent trolls.

This story was updated several times as new information became available