The U.S. House of Representatives has passed bill called the Innovation Act by an overwhelming majority. The bill, which now heads to the Senate, would force patent holders to detail their products. This would create a significant roadblock for so-called “patent trolls,” firms which acquire patents for the purpose of suing companies for patent infringement.
The Innovation Act would also increase the risk associated with patent lawsuits by allowing defendants to recover their court costs from plaintiffs. If this provision becomes law, the primary cost to defendants of frivolous patent lawsuits will be the time needed to defend the suit, which is not insignificant. Non-practicing entities (patent trolls) tend to target small to medium-sized companies, and offer a quick settlement for less than the cost of going to court. This law would change that cost/benefit analysis for defendants.
The wireless industry has been particularly attractive to non-practicing entities, as industry consolidation has forced some struggling companies to sell their patents separately from their operating units. Some of Nortel’s patents ended up with companies that are not involved in any business related to mobile or wireless.
Small and mid-sized companies are not the only potential targets of non-practicing entities. Recently some holders of patents related to Wi-Fi access points have sued hotels and coffee shops, claiming that they are infringing patents by offering Wi-Fi to their customers. A lawyer for one of those patent holders reportedly said that his client might eventually target anyone with an 802.11 Wi-Fi access point, including home users.
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