A Pyrrhic Victory for the Patent Trolls

At the behest of influential allies—reportedly led by the trial bar—Senate Democrats on Wednesday took patent litigation reform off the agenda before a committee vote was ever taken.

This abrupt setback shocked reform supporters, who believed after weeks of negotiations that a bipartisan Senate compromise was finally at hand and a successful Judiciary Committee vote imminent. They had every reason to be optimistic: legislation combating abusive lawsuits and extortionist tactics by so-called patent trolls was strongly supported by President Obama and buoyed by a massive bipartisan vote for the Innovation Act in the House of Representatives (325-91). Indeed, patent litigation reform looked to be one of Congress’s few achievable legislative compromises in 2014.

The trial bar and other reform opponents surely celebrated their triumph. But their celebration may be short-lived and their victory Pyrrhic.

That’s because there’s a good chance that the Senate Democrats who bottled up reform in 2014 could find themselves in the minority after November’s midterm elections. Should Republicans take control of the Senate, which many political handicappers say is more likely than not, Judiciary Chairman Patrick Leahy (D-VT) would be replaced as chairman by Sen. Chuck Grassley (R-IA). Grassley is a co-sponsor of the suite of patent litigation reforms authored by Sen. John Cornyn (R-TX), which their fellow Judiciary Committee Republicans had rallied around and patent troll victims had hailed. Patent reform in 2015 would be a golden opportunity for a new GOP-controlled Senate to demonstrate that it can solve big, complicated policy challenges.

In his statement yesterday, Chairman Leahy lamented that industry stakeholders could not reach consensus. But significant compromises had been made by troll victims throughout the legislative process.

In the interest of making a deal with Democrats this year, Cornyn offered major concessions on fee-shifting, heightened pleading, and discovery abuse during his negotiations with Sen. Chuck Schumer (D-NY). Those concessions won’t necessarily be on the table next year in a GOP-controlled Senate. And House Judiciary Chairman Bob Goodlatte may similarly be unmotivated to make concessions with Democrats in his chamber. Moreover, the trial bar certainly can’t count on the President to be a backstop. President Obama has championed many of the litigation reforms they oppose, including loser-pays and heightened pleading standards.

Reform opponents made the calculation that they’ll take their chances in 2015 rather than swallow a bipartisan compromise this year. Living to fight another day may prove to be a smart move if Democrats maintain control of the Senate and continue to be opponents’ only backstop.

To be sure, there is still time for Senate Democrats and their allies to reconsider and pass a bill. They should acknowledge the hard work done by Schumer and Cornyn—and recognize that this year’s Schumer-Cornyn deal is probably as good as it gets, regardless of who controls the Senate in 2015.

Make no mistake: the deal between the senior senators from New York and Texas is no small thing. The two powerful Senate leaders will be motivated to work together in 2015 on patents and other big issues. Regardless of who controls the Senate, a Cornyn-Schumer patent deal in 2015 probably looks very different than this year’s version.

Troll victims would be wise to keep up the drum beat for reform by telling their stories and urging Congress to act this year. While the media may simplistically frame patent reform as a battle between “Big Tech” and “Pharma,” the reality is that the latest push was driven by a diverse coalition of business interests that range from retailers to restaurants to real estate. The voice of patent reform over the past year has been small business and startups. The giant step they have taken toward reform—in a relatively short amount of time—is commendable. They certainly should not lose faith in the process.

Many observers are stunned that trial lawyers have emerged as a chief defender of the patent trolls. If sources are correct, they appear to have strongly influenced Majority Leader Harry Reid’s decision to delay reform. A GOP-controlled Senate likely gives no quarter to the trolls or the trial lawyers.

Matt Johnson

/ @MLJDC

Matt Johnson is an Executive Vice President in the firm’s advocacy business unit. Matt provides strategic counsel to clients who must navigate high-stakes, complex policy and regulatory challenges and hedge political risk. He joined McBee Strategic in September 2013 after nearly a decade of service as a lawyer and policy adviser in the United States Senate, where he collaborated in the development of more than fifty bipartisan bills.