The Innovation Act (H.R. 9) Is the Latest Threat to the U.S. Patent System

Despite its attractive name, the Innovation Act has nothing to do with “innovation!” It is an attempt by lobbyist for the large, high-tech corporations to make it easier for them to infringe patents, and more difficult, more expensive and riskier for independent inventors, universities, and small and start-up businesses to assert their intellectual property rights.

Opposition to the Re-Introduced Innovation Act (H.R. 9)

Opposition to this anti-innovation, anti-IP rights, anti-job legislation has come from all sectors of the economy.

Each of the clauses in the Innovation Act are analyzed in "Patent Law Gone Awry: How Bob Goodlatte's Bill Combines Useless Rigidity with Dangerous Discretion,"an article by Richard Epstein, the Laurence A. Tisch Professor of Law at New York University School of Law, in Forbes Magazine. Prof. Epstein concludes that “It is a sad commentary to say that the Goodlatte bill manages to combine the worst of both worlds: false precision where it is not needed and open-ended discretion where it serves no useful purpose. The entire bill should be scrapped and sent back to the drawing board.”

Additional problems with the Innovation Act are included in “Celebrating Inventors’ Day by protecting strong patents," an OpEd by Charles Sauer, President of E4 Growth, that appeared in The Hill. Mr. Sauer explains that “Inventors depend on a strong patent system to ensure our ideas and innovations are protected and have a chance to go from idea to product, which also means jobs. While we celebrate inventors today and highlight the fact that our Founding Fathers created a patent system and literally enshrined it in the Constitution, we are in danger of undermining this very fragile system in the hunt to stamp out a few bad actors.”

Why the Innovation Act will make it more difficult for start-ups to raise capital to commercialize their innovations is explained in "Innovation Act 2.0 gets it all wrong – will destroy startup IP value" that recently appeared in Venture Beat, a magazine that serves the venture capital industry. The article shows that the claim that patent assertion entities cost the economy $29 Billion is simply not true, that the increase in patent litigation is the result of the Supreme Court’s Alice vs. CLS decision and not more active patentees, and a recent survey found that only 12% of marketers believe patent litigation is a major issue.

Originally appearing at IP Law360, “Patent Law Reform – Proceed with Caution” also appears at our website. The author, Howard J. Klien, served on the Patent Public Advisory Committee of the U.S. Patent and Trademark Office, and he addresses the fee-shifting and disclosure clauses in the Innovation Act, and explains why both of these provision would create more harm than good.

The role that patent licensing companies serve in the innovation continuum is examined in “Patent Trolls Serve Valuable Role in Innovation” by Stanford University political scientist Stephen Haber. His research shows that patent assertion entities “…play a useful intermediary role between individual inventors and large manufacturers.”

The negative impact of H.R. 9 is explained in “The Innovation Act Will Harm Income, Employment, and Economic Growth” by Daniel Spulber, Professor of Strategy at the Kellogg School of Management at Northwestern University. He writes that the Innovation Act would “…‘tilt the scales’ of justice in an unprecedented manner.” He goes on to write that the Innovation Act is a “…rush to judgment based on a phony ‘crisis.’”

The California Healthcare Institute is just one of many basic research organizations that is opposed to the Innovation Act. “The Wrong Direction on Patents” by Todd E. Gillenwater, Senior Vice President of Public Policy at the California Healthcare Institute, addresses the impact the Innovation Act would have on pharmaceutical research. He concludes that the bill would add significantly to the already risky, expensive and uncertain nature of biomedical research.

The Patently-O website features a letter from 40 law school professors. “Professor to Professor: You Are Wrong about Patent Reform" re-butts the argument from another group of law professors that patents are a deterrent to innovation, challenging the facts on which the original letter was based. In their rebuttal, the law professors write that “Recent studies further indicate that new patent infringement filings were down in 2014, with a significant decline in non-practicing entity (NPE) case filings.”

In a letter to to Senators Grassley and Leahy and Reps. Goodlatte and Conyers, the American Association of Universities explains the opposition of 144 universities to the Innovation Act. AAU found the fee shifting and involuntary joinder clauses in the proposed legislation to be especially troubling because they would “…make the legitimate defense of patent rights excessively risky and thus weaken the university technology transfer process, which is an essential part of our country’s innovation and entrepreneurial ecosystem.”

Rep. Dana Rohrabacher writes in an OpEd in the Washington Times, “Patent ‘Reform’ Is Killing the Right to Invent,” how the pretrial discovery clause in the Innovation Act is tilted “…heavily against the small inventor…” He suggests that the popular Smithsonian Air and Space Museum “…would not exist with patents as we have known them.”

Support for TROL Act

This bill that was actually introduced last year by the House Commerce Committee, and the TROL (Targeting Rogue and Opaque Letters) Act of 2014 was just reported out of the Commerce, Manufacturing, and Trade Subcommittee. This is a common sense and focused bill that specifically addresses the issue of demand letters by giving the Federal Trade Commission, an effective and well-respected agency, the authority to regulate them. AIPR supports the TROL Act, and the bill has drawn broad-based support from diverse groups including the Innovation Alliance, the Coalition for 21st Century Patent Reform, American Intellectual Property Law Association (AIPLA), Biotechnology Industry Association (BIO), Intellectual Property Owners Association (IPO) and the American Conservative Union.

AIPLA provides an excellent summary of the TROL Act.

Support for STRONG Patents Act (S. 632)

This bill very effectively represents the interests of inventors and small businesses while still addressing the “patent troll” issue. There is an excellent summary of the bill at Senator Christopher Coon’s website. The bill addresses the imbalance in Post-Grant proceedings, addresses the issue of “demand letters” (letters send to small businesses demanding payment for using an allegedly infringing product or service), full funding for the USPTO, and patent-related assistance for small businesses.

AIPR also support the STRONG Patents Act because it does not include the overkill approach that the Innovation Act takes toward abusers of the patent system, but instead puts the issue under the auspices of the Federal Trade Commission.

To learn what you can do to promote REAL patent reform, contact our Executive Director, Alec Schibanoff.