Momentum is building on Capitol Hill to stop "patent trolls" from harassing businesses and inventors, with optimism high that legislation will pass this year.
With wide bipartisan support, the House has approved a patent reform bill aimed at stopping the so-called trolls -- patent-holding companies that extract licensing fees or file infringement lawsuits that many executives complain are frivolous and cost legitimate companies millions of dollars.
The Senate Judiciary Committee is considering its own bipartisan measure, with its members hopeful a bill will reach the full Senate for a vote as early as this spring.
"Members on both sides of the aisle agree that abusive patent tactics hurt the ability of businesses to expand and flourish, and undermine the integrity of our patent system," said Sen. Chuck Grassley of Iowa, the panel's top Republican.
With lawmakers in both parties and the White House on board -- President Obama called for reform in his State of the Union address -- patent reform legislation could be among the few significant bills passed this year.
"The fact that there have been ongoing conversations since this process started [last year] between the two chambers and the White House I think is a positive sign of something actually happening this year," said Beth Provenzano, a lobbyist for the National Retail Federation, which is pushing for the legislation.
Patent trolls buy or license patents from others at low cost, with no intention of using them other than to threaten litigation. They then seek money from businesses that use technology that infringes on patents they have collected or on vague, conceptual technology they have patented.
And while the patents are real, trolls apply them for uses that critics say are absurd extremes.
In one example, a troll demanded a small business pay a licensing fee of $1,000 per employee, or risk a lawsuit, for using an office scanner to send emails.
While trolls target businesses of any size, Congress is focused on protecting small and mid-size businesses, which trolls see as easy prey because they often lack the resources to fight back. Troll companies typically send their targets vaguely written letters, threatening to sue unless they're compensated.
The letters often sound dubious, but the threats are real. And with the average cost of fighting patent challenges in court about $2 million, small businesses often pay up.
"When my parents ran a printing press in Vermont, they did not keep a patent expert on staff. I do not know many Main Street businesses that do," said Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., who has written the Senate's patent reform proposal with Sen. Mike Lee, R-Utah.
Such litigation is estimated to cost legitimate businesses almost $30 billion a year.
"This is a big deal," Provenzano said. "This is taking a drain on us."
When a business does defeat a patent infringement lawsuit, the troll -- typically a shell company for a larger firm -- often declares bankruptcy and disappears, making it difficult if not impossible for the winner to collect court-awarded damages.
The final Senate bill is expected to be similar to the House version, which calls for plaintiffs to disclose who the owner of a patent is before litigation — a move designed to ensure patent trolls can't hide behind a web of shell companies to avoid accountability for bringing frivolous lawsuits.
When courts determine that a patent infringement lawsuit is frivolous, the measure would require the party that brought the challenge to pay the defendant's legal fees. It also calls for the Patent and Trademark Office to examine ways to update its patent-approval process.
Some small businesses and inventors have raised concerns that legislation written too broadly could harm legitimate businesses seeking to enforce their rights. Research universities are particularly worried, complaining that provisions in the Senate proposal would hinder their efforts to protect their patents.
Grassley suggested that while he's willing to compromise on those concerns, "I'm also not willing to accept language that is so weak that it won't really put a stop to patent trolls."
Leahy has vowed a "properly tailored" measure that would deter abusive conduct while protecting the rights of legitimate patent holders.