Innovators beware. There is news this week that bears attention concerning innovators and patents.

The Fox Business Small Business Center reports that on December 5th, the U.S. House of Representatives passed HR 3309, the so-called Innovation Act.

What is the Innovation Act?

The bill’s goal is to stop “patent trolls” – or non-practicing entities – from sending out slews of demand letters as soon as an innovation is announced, while, on the other hand, to continue to protect the ability of those who hold legitimate patents to bring forward cases of patent infringement. The patent troll demand letters effectively extort the innovator into paying the non-practicing entity or spend even more to go to trial to prove patent infringement.

Who supports the Innovation Act and who is against it?

Fox’s Small Business Center says that the bill has bi-partisan support including that of the White House. On the other hand, the small business community and the community of start-up entrepreneurs are divided about its benefits. Fox reports that some stakeholders believe the Innovation Act to be an important step in putting a stop to abusive practices, but other stakeholders find the bill to harm small inventors by driving up the costs of defending their patents.

The Consumer Electronics Association (CEA) supports the bill. Fox Business Small Business Center reports that CEA President, Gary Shapiro, issued this statement: “‘Patent trolls have been running a legalized extortion racket shaking down American businesses for everything from using features on their copiers to running wireless networks in their offices. The costs of hiring lawyers, devoting top executive and engineering time and paying settlements is verging on catastrophic levels.’”

The National Retail Federation (NRF) also supports the bill. According to Fox Business Small Business Center, the NRF’s senior director for federal government relations, Beth Provenzano, said that while innovation is a key player in growing the retail industry, many patent infringement claims "are on the very innovation that retailers are using, like online shopping carts [and] search engines on websites.’”

The community of small businesses is divided itself on the bill, but the National Small Business Association (NSBA) opposes it. Fox’s Small Business Center reports the NSBA as weighing both sides and concluding that the bill hurts small innovators more than it prevents patent trolling.

We note, too, that patent trolling does nothing to build our economy, while innovators do.

Two key provisions in the Act

Provisions in the Innovation Act that are troubling the start-up community include:

• a requirement that the losing side in a trial pay all the legal costs of the other side; and
• a requirement that plaintiffs be more specific in infringement claims.

Both requirements could drive up costs significantly to innovating. This has raised the hackles of universities, whose research often is turned into new commercial innovations, and venture capitalists, whose investments often provide the initial support for start-ups.

What’s next?

The U.S. Senate is expected to act before the year ends on the innovation Act.

Where do you stand on this, and why?