Andy Kessler, a former hedge fund manager and the author of “Eat People”, has a compelling opinion piece in the Wall Street Journal (subscription required) arguing for further patent reform to reign in the damage patent tolls are doing to the economy.  As I have discussed many times, last year’s patent reform (the America Invents Act) did little to curb patent trolls.  And Kessler has some good ideas in his article:

  • Limit Patent Length.  Kessler argues for reducing patent life.  He reasons that patent length should be industry specific based upon technology life cycles.  Assuming a 3-5 year (at most) life cycle for internet and software technologies, many retailers would strongly support reduced patent life.  This may be the most significant change to patent law.  It would significantly reduce the potential exposure for a troll case and, therefore, might also reduce the number of trolls as trolling becomes less lucrative.
  • Remove Damages From Juries.  Kessler argues that the market, not juries, should decide the value of the patent/infringement.  This touches on an ongoing debate – how to make patent damages commensurate with the technology value.  Any retailers that have been accused of internet-based patent infringement and asked to pay a percentage of all corporate revenues know how critical this issue is.  But taking damages away from juries will not necessarily change anything, at least without changing the damages law.  Uniloc was a good start, but the law needs to be tightened even further so that damages are based upon the value of the technology, and not just a percentage of all revenues.
  • Exclusivity.  Kessler argues that a plaintiff should be required to make or sell a patented product in order to sue.  There are obvious issues that Kessler does not address — universities that innovate but do not manufacture and true solo inventors — But those issues could be dealt with.  Additionally, the law would have to be very strong to avoid trolls selling (or ineffectively offering to sell) a covered product before suing.

Here are some additional reform proposals that Kessler did not address:

  • Cap Troll Damages.  Instead of requiring an entity to manufacture a product to sue, it may be more palatable and effective to limit damages for trolls.  And a small enough damages ceiling would likely effectively end, or severally limit, troll litigation.
  • Tighten Venue.  As proposed in early versions of the America Invents Act, limit venue in patent cases to a defendant’s principal place of business.  Requiring trolls to sue around the country would significantly increase the trolls litigation courts and reduce the scope of patent enforcement campaigns.  Some of this is happening already as, post-AIA, courts increasingly transfer defendants to their home districts. But tightening the venue provisions directly would cut out the cost and uncertainty of transfer motions and let trolls know up front that they would be litigating across the country.
  • Limit Re-Seller Liability.  Just like bare trademark licensors are not liable for patent infringement, end-user and re-sellers should not be liable for infringement as long as they do not make any relevant changes to the product.  This would make sure that patent defendants actually had the necessary knowledge to defend themselves.  Plus forcing trolls to sue manufacturers or vendors would naturally limit damages by focusing on the manufacturer/vendor price, as opposed to the retail price or all of a retailer’s revenues.

These are some key patent reform proposals.  But I am curious to hear others from you.  Feel free to email me with your ideas and I will follow up with future blog posts.