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In surprise stance, venture capital trade group opposes patent reform

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Troll Warning, Trollstigen (The Troll Path), Norway.Photograph by Douglas Pearson — Getty Images

The latest attempt by Congress to curb the problem of “patent trolls” is on the ropes yet again, and this time the opposition is coming from an unlikely source: The National Venture Capital Association, a trade group which is taking steps to water down patent reform legislation, even though many of its members are vocal advocates for it.

The NVCA’s attempts to undercut reform have come in several forms, including its mark-up of a bill being considered by Senate Judiciary Committee. A leaked copy of those mark-ups, which are typically submitted to Congressional staff, shows the NVCA wants to weaken key provisions of the proposed bill.

The provisions in question relate to issues like discovery reform and pleading standards—topics that sound arcane, but that deeply affect the viability of the patent troll business model.

A review of the leaked document also reveals another surprise: the names of the lawyers that the trade group has assigned to examine the law. One of them is Michael Spillner, who is general counsel for Tessera, which has been widely described as a patent troll. Another is William Nelson, a partner at the law firm Tensegrity, which was founded in 2012 by several elite lawyers seeking to cash in on the popularity of patent trolling.

Ben Veghte, a spokesman for NVCA, disavowed knowledge of the document, but did concede that the NVCA asked lawyer Bob Taylor, who runs an intellectual property consulting firm, to review the bill. (Taylor’s name also appears on the mark-up document alongside Nelson and Spillner.)

Veghte added that some NVCA members with ties to the bio-tech sector opposed the proposed reform measures.

It’s not surprising that some members of NVCA oppose reform, especially as certain VCs likely hold patent trolling ventures in their portfolios. But the trade group’s activities do raise eyebrows in light of the deep skepticism held by many venture capitalists towards the current state of the patent system. Comments on Twitter last year by high profile VC’s Marc Andreesen and Chris Dixon reflect the flavor of the debate:

And in March of this year, more than 100 VCs, including partners from NVCA member firms Avalon Ventures, Andreessen Horowitz and Bowery Capital, signed a letter calling on Congress to implement broad patent reform.

As of this week, such reform appears to be in serious peril, in part because of proposals to weaken changes to things like fee-shifting and the legal discovery process (right now, patent trolls use the threat of expensive, drawn-out discovery to browbeat defendants into settlements).

Scott Sandell, a partner with VC firm New Enterprise Associates and the NVCA’s former chairman, has meanwhile been opposing the reform measures through op-eds in the Wall Street Journal and The Hill. Sandell has been invoking language like “unintended damage to our innovation economy”—which is also a common refrain used every year by patent trolls like Intellectual Ventures and other reform opponents.

As for the final fate of the proposed reform measures, the end game likely will come this summer. On Thursday, a committee of the House of Representatives will mark up the latest version of the bill while. A source familiar with the process says that, behind the scenes, senior figures like Rep. Bob Goodlatte (R-Va.) and Sen. Charles Schumer (D-N.Y.) will explore ways to keep the substance of the reform measures intact.

If patent reform collapses again, it will be the third time in five years this has happened. In 2014, former Senate Majority leader Harry Reid (D-Nv.) pulled the plug on a bipartisan bill at the 11th hour. In 2012, meanwhile, Congress did pass reform legislation but in a form that was so watered down that it did little to halt the patent troll’s business model.

Update, June 11, 2015: Veghte, the NVCA spokesman, supplied a statement that reads in part: “No doubt this is a contentious issue and there certainly isn’t unanimity amongst our membership. We have some members that would like to see the bills passed as they were originally introduced and we have others that would prefer they never saw the light of day.”