Patent nonsense

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Reform of the U.S. patent system, the 218-year-old wellspring of American innovation and material progress, has suddenly become a rush project in the Senate and House committees of jurisdiction.

Leading the way is the Senate Judiciary Committee, pushing a bill that could cripple most of America’s smaller inventors and even the larger industrial firms that depend on patents. The bill could also weaken the ability of our universities to play a prominent role in technology development. Senate Judiciary is rushing this bill through without allowing many of those affected, especially U.S. manufacturers, to present their views to the committee.

Judiciary Chair Pat Leahy, Vermont Democrat, held a hearing June 6 on the bill, his proposed Patent Reform Act of 2007 (S. 1145). Though testimony revealed many serious drawbacks in the legislation, Mr. Leahy wants a quick markup of the bill this month, ramming it through committee to please some powerful information technology (IT) firms.

Overseas interests, who for years have been trying to slow America’s innovation engine under the guise of “harmonization” with foreign law, will also be happy. But do we really need to be “harmonized” with a calcified European system or the impossibly unfair Japanese system, not to mention the Chinese system, where intellectual property theft is a way of life?

The patent system is rooted in the Constitution. Congress is charged with “securing for limited times to authors and inventors the exclusive right to their respective discoveries.” The Founders understood that protection of intellectual property was vital to innovation and progress. James Madison wrote in the Federalist Papers, “The utility of this power will scarcely be questioned.” Yet, today it is being questioned in the Senate and the House.

At the June 6 hearing, Mr. Leahy said, “Over the years, our patent laws have served our inventors and our economy well, but they were crafted for a different time when smokestacks, rather than microchips, were the emblems of industry.” This bias against “smokestacks” — still a major part of our economy — was made evident when not one manufacturing firm was invited to testify, though technological innovation and industrial advancement are closely intertwined. Indeed, manufacturers undertake 60 percent to 70 percent of America’s research and development and hold 60 percent of its patents.

Lawyers, bankers and leading high-tech firms like Microsoft, Palm, and Intel have dominated this year’s hearings. Yet, smaller enterprises have driven true innovation. About one-third of all patent applications are made by independent inventors, small companies, universities and nonprofit research groups. These efforts are usually the most important for leading-edge scientific advancement.

Many larger IT companies, however, fear having their market positions disrupted or constrained by new ideas outside their control. They want current law rewritten to make challenges to patents easier and more frequent after they’re granted, and to curb what they view as “abusive litigation” by patent-holders seeking to protect their rights.

By creating a new, expensive procedure to challenge the validity of a patent throughout its life, the benefits to patent-holders become less certain. Incentives to seek patents are weakened, and venture capitalists face higher risks when backing new ideas. This would raise barriers to independent innovation.

The pending legislation would also make it harder for patent-holders to enforce their rights or win just compensation from those who infringe their rights. It would be harder to prove “willful” infringement, which entails punitive damages. The bill also includes a mandatory apportionment test that would lessen the value assigned to patents in most products.

A final objection to the new bill is simply that it grants unprecedented rule-making authority to the Patent Office. This delegation of authority from Congress is an abdication of its responsibility and will only add to the Patent Office’s problems. What is needed instead is a full funding of the Patent Office so it can do its main job of granting patents smoothly and expeditiously.

S.1145’s assault on intellectual property rights has created a wide-ranging alliance of opposition among high-tech firms, independent inventors, university research centers, and large manufacturers. Opposition also comes from groups like the high-tech Innovative Alliance and the Coalition for 21st Century Patent Reform, which numbers over 40 global corporations including 3M, Caterpillar, General Electric, Procter & Gamble, and Johnson & Johnson.

The quality and breadth of the opposition to S. 1145 indicates the need for a full debate, but Mr. Leahy has already tossed his lot in with Microsoft, Intel and their allies. His desire to rush the bill through the Senate does a grave disservice to a patent system that has served the nation so well. The future of American innovation hangs in the balance.

Kevin L. Kearns is president of the U.S. Business and Industry Council (USBIC).

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