As you probably know, patent reform legislation is moving again. Bills in both the House and Senate have been passed out of committee with bipartisan support and are moving to their respective chamber floors. We are cautiously optimistic we could see a patent reform bill signed into law in 2015. However, some issues remain unsettled and they must be addressed in order for patent reform legislation to be effective in fighting the patent troll problem. We’ll be breaking down these issue areas for you in separate blog posts - they concern Inter-Partes Review (or “preserving the ability to more affordably challenge the validity of a patent outside the court”), venue (or “dealing with the Eastern District of Texas”), pleadings (or “including basic information in the plaintiff's initial complaint”), and discovery (or “limit unnecessary fishing expeditions for evidence before the validity and scope of the case has been determined”).
Discovery reform may be the kind of subject that makes non-lawyers’ eyes glaze over, but it is a crucial element of comprehensive patent reform. One might ask, what is discovery? Why does it matter? Why does it need to be fixed? Good questions. Let’s take them in turn.
Discovery is the phase of litigation where parties obtain information from the other side so they can build their cases. In the best of circumstances, it is often the most expensive and burdensome part of litigation. In a patent troll case, it is unmanageable. A patent troll may sue a startup and allege that the startup’s “website” infringes its patent(s) with no more specific information. The troll can then spend months requiring the startup to turn over all the information on its “website”—including by requiring that engineers and management sit down for day-long depositions and demanding that thousands, if not millions of emails, be turned over. Even worse, the troll, being in the business of patent litigation, has these discovery costs baked into its business model, so discovery for them is no great burden.
Currently, there are few limits in place to prevent a bad actor from requesting large amounts of irrelevant information just to drive up the cost of litigation early in the case. When costs balloon out of control, startups and small businesses have little choice but to give in, settle, and encourage the troll to continue its suing spree. While this kind of cost can be detrimental to a small startup’s product development, hiring goals, and market-entry, for a patent troll who doesn’t make or sell anything, the cost of discovery is next to nothing.
This is why any real patent reform must also include reforms to the discovery process.
In their current forms, the House and Senate bills curb some of the worst of these practices by delaying discovery until a party has had a chance to make certain early motions, like an effort to get a case dismissed (we would like this these fishing expeditions delayed even longer, until the point at which the court determines the boundaries of the patent). If this were the case, discovery would be inherently narrowed and less wasteful. As such, these reforms are also good for patent holders who want to efficiently move their cases through the system, too.
Only with a more streamlined the discovery process can small companies and startups afford to litigate. Furthermore, these changes would lead to earlier, more informed settlements as well as relieve some of the burden in the courts confronting the flood of patent cases. Greater transparency and fairness are essential for a well-functioning patent system - and discovery reform is an essential step to achieve this.