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Patent tug-of-war pits Congress vs. courts

– U.S. lawmakers, influenced by companies including Cisco Systems, Eli Lilly & Co. and Qualcomm, are considering the second set of patent-law changes in three years as the courts try to race ahead of Congress.

The goal is to rein in entities that buy patents and demand royalties from as many companies as possible. Often derided as “trolls,” such firms filed 19 percent of all patent lawsuits from 2007 to 2011, the Government Accountability Office found.

Finding a balance among protecting products from knockoff competition, rewarding inventors for making their ideas public and limiting nuisance suits has been debated for more than 200 years, even more so now that some lawsuits are targeting users of ubiquitous technology like e-mail and Wi-Fi.

“There’s just a lot of pressure being put on Congress and the courts to address the abusive practices,” said Tom Molino, head of government relations for BSA – the Software Alliance, in Washington, whose members include Microsoft Corp. and Oracle Corp. “Both sides are trying to assert their authority where they can to move the dial.”

The U.S. Supreme Court is considering when to penalize patent owners for filing questionable claims, while the federal courts’ administrator has proposed disclosure rules that may lessen litigation costs.

The legislation Congress is considering would do some of the same things – make patent companies pay the other side’s legal fees if they lose and tell the courts to change their discovery rules.

“You do not need Congress to mandate things courts are already willing to consider,” Circuit Judge Kathleen O’Malley of the U.S. Court of Appeals for the Federal Circuit, which handles all patent appeals, said in a speech Sept. 17 to the Intellectual Property Owners Association.

The struggle between the courts and Congress has divided companies along the lines of who gets sued more often.

Google, Cisco and other technology companies in the Coalition for Patent Fairness back legislation introduced Oct. 23 by Rep. Bob Goodlatte, R-Va., who heads the House Judiciary Committee. It would allow collection of legal fees from licensing companies that lose at trial and require they provide more details about patents and how they were infringed.

Companies like Qualcomm that make money from licensing patents say weakening patents would hurt their business.

The Qualcomm-backed Innovation Alliance seeks limited congressional action, and is pushing lawmakers to stop diverting money from the U.S. Patent and Trademark Office, which is funded entirely by user fees.

The Coalition for 21st Century Patent Reform – made up of General Electric, Johnson & Johnson, Eli Lilly and other patent holders – says the Goodlatte bill takes some power from courts.

Industries reliant on patent protection for revenue, which include technology companies, drugmakers, and manufacturers, had 3.9 million jobs and accounted for $763 billion, or 5.3 percent of gross domestic product, in 2010, according to a 2012 Commerce Department report.

Patent litigation is expensive. The cost of defending a patent suit through trial, not including damages, starts at about $650,000 and can reach several million dollars, an American Intellectual Property Lawyers Association study found.

Some companies say Congress is getting it wrong.

“You’ve got this incredibly powerful organized lobby that wants to kill innovation because it’s a threat to them,” said Loudon Owen, chairman of I4i LP, a Canadian designer of software for drug companies that won a $200 million verdict against Microsoft in 2011.