As Congress appears to be rushing towards a massive “patent reform” bill, inventors, entrepreneurs and defenders of Intellectual Property are becoming increasingly concerned about the direction of the debate.
Congressman Goodlatte’s Innovation Act (H.R. 9) is too broadly written and will penalize numerous inventors and companies who develop and commercialize patented innovation. Further, it is based on flawed and unreliable data about “patent trolls.” Rather than rushing to pass this legislation, we should slow down and ask more questions. Only by asking questions will we understand the potential downfalls, unintended consequences, and effects on all stakeholders of the innovation economy.
Who is the Innovation Act aimed at? H.R. 9 is a knee-jerk reaction to solve the “patent troll” problem. But there are some problems with this—namely, not all bad actors are “patent trolls” and not all “patent trolls” are bad actors. The pejorative “patent troll” captures too many different types of business models that are important to today’s innovation economy—inventions can come from many places, but not all inventors can or wish to bring a product to market, such as universities and legitimate small inventors, both of whom are considered “trolls” in the proposed legislation. The world needs intermediaries and patent licensing firms to connect these inventors with manufacturers who can get the technology to the public.
What is the purpose of the Innovation Act? The legislation claims to prevent “patent trolls” from engaging in bad behavior, but it will also keep good, honest innovators from enforcing their patent rights. Heightened pleading requirements, limited and delayed discovery, and potential fee shifting that are meant to deter patent trolls will also detrimentally affect legitimate small to medium innovators. A better example of “what” patent reform we need is seen in Senator Coons STRONG Patent Act. This bill is narrowly targeted at specific mechanisms used by the worst patent trolls, rather than containing the sweepingly onerous requirements to legitimate patent enforcement proposed in the Innovation Act.
Where should patent reform take place? Although the Innovation Act is supposed to prevent “patent troll” behavior, the courts have already done this. Studies have shown there has been an impact on troll litigation due to these judicial decisions. Two quick examples are Alice v. CLS Bank, which invalidates a number of patents which are alleged to be overbroad or vague (the type of patents that “patent trolls” like to assert) Additionally, the duo of Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare Health Management Systems, make it easier for district courts to award attorney fees in exceptional cases, such as those with bad actors. This is fee shifting not based on who you are, as it is in the Innovation Act, but rather on how you behave—a much more tailored and appropriate approach.
When should patent reform legislation be passed? Not before Congress carefully considers the questions posed here, as well as the other issues at work. Just a few years ago, Congress passed the America Invents Act (“AIA), and some of the provisions are still working their way into full fruition. Prudence requires waiting to see whether or not any of these reforms have the desired effects. Also, the FTC’s 6(b) study of patent trolls is currently ongoing and could shed light on what is truly happening in “patent troll” litigation, allowing for more tailored patent reform. For these reasons, Congress should slow its consideration of H.R. 9.
Why is Congress so dead-set on passing the Innovation Act now? The “patent troll” story has grown from a few anecdotes into a fairy tale, and now has a life of its own. It is supported by questionable data, data that is suspect based on empirical work by solid researchers, such as Professors Jay Kesan, David Schwartz, and Chris Cotropia. Two separate letters have been sent to Congress by a large number of law and economics professors, one urging action on “patent troll” reform as soon as possible, the other urging a careful and measured review before voting. With so many educated people in disagreement, it seems we don’t understand the extent or the depth of the “patent troll” problem.
Patent reform should be narrowly tailored to address problems that have been clearly identified by solid data after looking at all of the open questions. Otherwise, we will end up with patent reform that weakens our patent system,deters innovation, and stifles the economy.
Kristen Osenga is a Professor at theUniversity of Richmond School of Law, and Senior Scholar at the Center for the Protection of Intellectual Property