We Need Patent Reform, Not Patent Deform!

By Alexander Poltorak, Founder and Chairman of AIPR

We Americans have a love-hate relationship with patents. We can’t live with them, and we can’t live without them. Everybody wants to reform the patent system. After many years of contentious debate, in 2011, the America Invents Act (AIA) was signed into law. Alas, this Act did not help America to invent anything! Nor was it ever intended to do that. It was pork-belly legislation written by lobbyists on the payroll of Microsoft, Cisco and other tech giants whose only goal was to weaken our patent system by making patents easier to infringe and more difficult to enforce. The Act changed the American first-to-invent system into a European-style first-to-file regime, which favors big business. It handed large corporations an arsenal of additional weapons – such as post-grant review procedures – to kill patents, if they feel threatened by them. Truth be told, AIA more readily stands for America Infringes Act.

The ink hasn’t dried on the AIA and today Congress is voting on new patent reform legislation. This time around, the large corporations are determined to put the nail in the coffin of our patent system. The center feature of this proposal is the fee-shifting provision requiring the losing party to pay the legal fees of the winning party. Sounds fair enough? Not if you understand what is behind this proposal. It is far from the balanced and symmetrical proposal it seems to be on first blush. It is squarely aimed at small patent owners – universities, small R&D companies and independent inventors – who are the true American innovators. With the median cost of patent infringement litigation at $4.5 million, small patent owners often cannot afford to pay their own legal fees, let alone that of the defendants in the event they were to lose. This proposal, purportedly aimed at the so called patent trolls – a few bad actors who use frivolous lawsuits to extort nuisance settlements from defendants – if passed into law, would put a serious damper on the ability of small patent owners to bring legitimate claims against corporate infringers.

Some proposals suggest we single out a special class of patent owners – the so called non-practicing entities (NPEs) – and apply fee-shifting only to them. If you are Apple or IBM, and you sue your competitor for infringement and lose, you are home free. But if you are an independent inventor, university or a small R&D company that doesn’t sell any products, you’d be on the hook for millions of dollars expended by the defendant on legal fees. This is wrong for at least the following reasons:

First, the European loser-pays-all system is incompatible with a long-standing American tradition of equal access to justice for all. We in the U.S. never wanted to impose defendants’ legal fees on plaintiffs for fear it would discourage legitimate claimants from bringing their grievances to court. But this is precisely the goal of the businesses pushing for “reform” – to discourage inventors and innovators from bringing legitimate patent claims to court.

Second, if we want to change from an American each-litigant-pays-its-own-fees system to the European loser-pays-all regime, why not do it across the board? Why not require states to pay the legal fees of defendants whose guilt they could not prove? Why single out patents? The answer is obvious: Because this is what Big Corporate Infringers want! This is another typical example of pork-belly legislation.

Third, why single out a special class of non-practicing entities? Aren’t we all equal under the law? Isn’t Lady Justice, Femida, blindfolded to signify that law is blind to whom the litigants are and examines only the merits of the case matter?
Last but not least, the very notion of a non-practicing entity is a red herring. A Patent is a result of a bargain between the inventor and the state, where the inventor discloses her invention to the public in exchange for a limited monopoly (more precisely, public franchise). In other words, a patent is a quid-pro-quo for invention disclosure, not for its practice, which is entirely beside the point. Practice of the invention has no place in the patent law, nor does it have anything to do with the reason we have patents. To penalize an inventor who does not practice her invention is the same as to penalize a composer for not performing on stage, or a designer who doesn’t herself sew the dresses she designed. It doesn’t get sillier than that.

The proposed patent “reforms” currently before Congress threaten to permanently deform our patent system – the bedrock of American innovation. There will be fewer new drugs in the pipeline to treat diseases, less innovation, fewer start-ups and, therefore, fewer jobs for Americans. The future may not be as rosy as we once hoped it would be. Although small inventors will be hit the hardest, in the end, our national economy will suffer. Perhaps we should reform another law and require our lawmakers when sworn to office to take a Hippocratic Oath – do no harm!