The 26 organisations, which included retail groups, marketing associations and public interest advocates such as the Electronic Frontier Foundation, said the system is being exploited by patent trolls who impose “huge costs” that “drain funds from job creation." They claimed that in 2011 alone, patent assertion entities (PAEs) cost American businesses at least $29 billion.
The authors claim that defending a patent lawsuit typically a small or medium business $1.75 million and the average cost of patent litigation is $6 million. They claim that 7,000 businesses were sued by PAEs in 2011-2012 and that the number of companies sued by patent assertion entities has increased by 28% a year of average since 2004.
“Because proving a PAE’s patent invalid through litigation can take years and cost millions, a targeted company faces a no-win situation: it can pay lawyers, the PAE, or both,” they said.
The groups want Congress to expand Covered Business Method (CBM) review, which is limited at present to financial services patents, to other industries. Under CBM review, a procedure for challenging business method patents, a party being sued for patent infringement can ask the USPTO to invalidate a patent. The USPTO can consider whether a patent is abstract, vague, or too broad during CBM, but these grounds for invalidation are not available under other procedures conducted through the USPTO.
Attempting to get a patent invalidated under CBM costs around $100,000, including around $30,000 in USPTO fees, compared to multimillion-dollar litigation. Several businesses targeted by one patent owner would also be able to split the fees and costs for the procedure.
Expanding CBM review to cover all types of patents has previously been proposed by several pieces of legislation, including the Innovation Act, introduced earlier this month, and the Stopping the Offensive Use of Patents (STOP) Act, introduced in July.
