Inventors Should Have Same Chance to Succeed as Reps. Issa and Massie
This month, Congress is moving forward on significant legislation to revise the patent system, and President Obama has said that he will sign into law any legislation that reaches his desk. Last week, the Senate Judiciary Committee voted on S. 1137 (the PATENT Act), and this Thursday, the House Judiciary Committee is planning to vote on H.R. 9 (the Innovation Act).
In the ongoing debate over H.R. 9, two Congresspersons have been prominent voices speaking out about it – Representatives Darrell Issa (R-CA) and Thomas Massie (R-KY). Both Reps. Issa and Massie are inventors with many patents to their names. Both of them have very different views of this patent legislation.
Rep. Issa is a prominent supporter of the patent legislation, which would drastically curtail the ability of inventors to defend their patents. Rep. Massie opposes it.
Although H.R. 9 is ostensibly aimed at nuisance lawsuits brought by some patent owners, it places unprecedented and extremely costly burdens on all innovators who are forced to sue to protect their property rights. Rep. Massie explains that “the bill attempts to ‘fix’ a few isolated abuses of the patent system, but instead it sets forth a comprehensive overhaul of the existing legal framework that compromises the rights of all legitimate inventors.”
By contrast, Rep. Issa contends that raising obstacles to enforcing patents won’t harm inventors. When the patent legislation was officially announced, Rep. Issa declared that it was necessary because it would stop “patent trolls who exploit loopholes in our patent system, bullying inventors and small businesses with frivolous lawsuits to the tune of $29 billion each year.”
Which congressional inventor has the more convincing argument?
The $29 billion figure cited by Rep. Issa has been exposed repeatedly as misleading and invalid and was criticized in a recent letter to Congress by forty economists and law professors. But more important, Rep. Issa’s past experiences as an inventor and entrepreneur enforcing his patents against infringers teach important lessons about the impact that the patent legislation would have on future inventors and startup companies.
Many years ago before he was elected to Congress, Rep. Issa, like many entrepreneurs, built a new business with his spouse that depended on his patented innovation. And his company had to go to court to protect those patents. Court records show that while Issa was still the controlling shareholder of his company, Directed Electronics, it had to do what many innovative startup companies are forced to do: it filed well over a dozen lawsuits to hold many infringers accountable for pirating his patented innovation.
Rep. Massie’s words are thus backed up by Rep. Issa’s experiences in America’s innovation economy: Inventors and startups need to be able to go to court to defend their patent rights.
The need for Rep. Issa’s company to enforce its rights reminds us that inventors and small businesses often have to protect their patents through litigation. But the patent legislation supported by Rep. Issa will make it much harder for all patent owners to protect their rights, imposing extensive financial and procedural burdens that go far beyond what is necessary (or helpful) to curb abusive litigation practices. Whereas true patent reform should be a scalpel, this patent legislation is a sledgehammer. All legitimate inventors and startup companies, like Reps. Issa and Massie, are treated as acceptable collateral damage in the effort to eliminate the handful of bad actors who file nuisance lawsuits.
Moreover, this legislation has become less justified in the past year. In the last year, the number of patent lawsuits has collapsed, probably in response to the Supreme Court issuing a slew of opinions in the past couple years that have tightened up standards for obtaining and litigating patents, as well as loosening the standards for awarding attorneys’ fees and costs to anyone defending themselves against a frivolous patent lawsuit.
In fact, one of last year’s important decisions by the Supreme Court, Alice v. CLS Bank, has thrown the high-tech industry into disarray as wide swaths of tech patents very similar to the patents Rep. Issa received two decades ago are now being invalidated almost daily as unpatentable “abstract ideas.”
All of this reinforces the points repeatedly made by individual inventors, universities, venture capitalists, and many other stakeholders in the innovation economy: Congress should back off from overbroad legislation that harms inventors and companies who rely on strong patents. It should instead proceed cautiously and narrowly.
Rep. Issa’s successes as an inventor and entrepreneur are commendable, and his company’s many lawsuits to defend his patented innovation against infringers free-riding on his inventive labors are just as commendable. Notwithstanding the anti-patent rhetoric sweeping Washington these days, the next great innovators deserve the same chance to succeed and protect their innovation that both Reps. Issa and Massie enjoyed in their day.
Join the Discussion
12 comments so far.
Night WriterJune 13, 2015 09:39 am
Anon: Continuing in my role as Devil’s Advocate, I would posit that Big Corp “gets away” with the purposeful ignorance
I deal with these people and have been one of them. The fact is that in corporate life the P&L statement rules. Either you live the P&L or you are spit out.
AnonJune 13, 2015 12:14 am
Sadly, the evidence all about you says otherwise.
Dale B. HallingJune 12, 2015 11:02 am
Yes, you are describing efficient infringement, which Pat Choate discusses. I don’t think a judge or a jury is going to be very impressed by this argument.
AnonJune 12, 2015 09:51 am
Continuing in my role as Devil’s Advocate, I would posit that Big Corp “gets away” with the purposeful ignorance on more occasions than they do not, and that they make more money doing so than in any single case of getting caught and having to pay for that singular transgression.
The “proof” of my case is the reality that Big Corp is successfuly turning patent infringement into a general contract law type of calculated risk/reward and de minimus penalty on the aggregate such that – again, on the aggregate – NOT taking certain risks may even be shown to be NOT acting in the best interests of shareholders.
I fully realize that this does in fact turn the rationale of having a patent system on its head, but that is the plain reality that we are faced with in today’s anti-patent environment. The plain fact of the matter is that “crime pays” to twist that statement and that patent infringement has been made into such a “light” offense so as to not shock the conscience. We allow contract “infringement” (of course, not the correct term, but you get the analogy) with minimal consequence because we want to “move quickly” – Big Corp has successfully (albeit perversely) succeeded in changing both the public sentiment and the judicial one to treat infringement as “no big thang.”
Dale B. HallingJune 12, 2015 09:17 am
I think you put this to a jury and show that for even the most basic decisions the corporation does extensive due diligence. For instance, lets look at all the due diligence they do to just hire a janitor or secretary, but then they launch a major product and have a policy of purposeful ignorance that cost the corporation money. I think you pick one of the most egregious cases, where any competent clearance search would have discovered the patent that was infringed.
AnonJune 12, 2015 08:17 am
Playing the Devil’s advocate for a moment, would not such a suit lose for the defense that the actions of counsel (if attributable, which is not a given**) in advocating a “don’t look” policy, would have had saved the corporation from the treble fee penalty? That is, after all, the “gist” of the policy.
**For your suit to be successful, would you not have to show that but for the policy, the company would not have infringed? And that the corporate counsel has the final business decision for putting that policy into effect? Each of these are serious obstacles, not overcome quite easily.
Dale B. HallingJune 11, 2015 10:38 am
I have tried to find a good securities litigator, because I think these policies would make an excellent shareholder derivative lawsuit. For example, large company A gets sued for infringing a patent they should easily find with a simple clearance search. They lose the patent lawsuit and have to pay hundreds of millions of dollars. Then a shareholder derivative suit seems likely to win if brought against the general counsel for example
AnonJune 11, 2015 07:26 am
To Dale’s point I will share that I have been expressly told by client’s that they refuse to allow their employee’s to do any type of patent search. Any. That is their policy.
When a corporation can have a policy that flies in direct opposition as to what the patent system was built for (put aside for the moment any pro or con views of how well it is built for that purpose), one does have to wonder.
Dale B. HallingJune 10, 2015 12:48 pm
I was told by my congressman’s aide that the bill HR9 is a done deal and the only thing they can do is proposed amendments. With that in mind here is my proposed amendment:
Any person (entity) sued for infringement who did not obtain a reasonable clearance opinion before launching a product into the marketplace shall be presumed to willfully infringe, if a clearance search by a reasonably prudent person would have uncovered the patent the person is accused of infringing.
The reason for this proposed language is that many large companies pretend to be innocent victims of inventors, when they have a policy of purposeful ignorance of patents that might relate to their product. This is like undertaking the construction of a building without doing a title search on the underlying land. I know companies do this because I worked for large companies that had these policies. They would tell their engineers and attorneys to not look for relevant patents, because they feared that the company would be hit with 3X damages for willful infringement. This was also the advice of many venture capitalists. However, we should not be rewarding this policy of purposeful ignorance. In addition, this policy is bad for the US economy. It causes people to waste resources recreating inventions (recreating the wheel) that already exist. What we want is people working on new inventions so we get the most technological progress for the money and time invested. Finally, this would make HR9 an infinitely better bill.
JNGJune 10, 2015 12:33 pm
I think it would be useful to go through these new “reform” provisions, one by one, and highlight exactly how each is purportedly addressed to so-called things we call evil “trolls,” because each new word, restriction, applies to every patent owner large or small ever attempting to enforce his/her patent. We need some kind of campaign that says “Congress has decreed, if you have a patent, and want to enforce it, you must certify first that you can pay whatever exorbitant attorney fees they decided to burn against you, before you can ever have your case heard first. This new price of admission is brought you to by your “paid for legislators” trying to insulate big companies from ever having to pay another inventor another dollar.”
Kaila Geary HallingJune 10, 2015 12:16 pm
Since this is the Speaker’s bill, it will be passed. Our representatives who do not support the bill are looking for Amendment language and revision. How can we get that to them?
EGJune 10, 2015 10:24 am
Professors Mossoff and Schultz,
Thanks injecting some reality into this debate on the nonsensical legislation being pushed by many (e.g., certain large multinational companies, certain IP law professors, etc.) as “patent reform” (it’s no such thing) who simply want to “burn down” our patent system. The propaganda spewed by the proponents of this legislation is utterly disingenuous and shameful.
Our country deserves better than to have its system for protecting active “theft’ of the innovation of small US businesses and individuals destroyed by those pushing agendas funded by huge lobbying dollars. That includes our Royal Nine who should be chastised for creating undefined standards for patent-eligibility(will we ever get from them a definition of “abstract idea”?), as well as failure to follow the explicit letter of our patent statutes (where do these so-called “exceptions” appear in Section 101?).