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© 2017 - Austin Meyer / Laminar Research

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House Judiciary Committee’s Subcommittee on Courts, Intellectual Property and the Internet - July, 2017

How we got here?
 

The patent system is enshrined in Article I Section 8 of the Constitution, which simply says: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Courts, Congress, the Patent Office (the “PTO”), and practitioners alike have been trying to unpack those 27 words for generations. To understand the meaning, and the resulting patent system, you must start with the first clause: “to promote the progress of science and the useful arts.” What, then, promotes that progress?

 

That progress—”innovation” in modern parlance—inevitably requires a balancing act. As the Government Accountability Office put it in its 2016 report (“GAO Report”), the “patent system gives rise to complex trade-offs involving innovation and competition.” Those trade-offs exist between two groups of stakeholders: patent holders and the public domain. In exchange for a 20-year monopoly, a patent holder must dedicate to the public an explanation of her invention and how to practice it. This bargain should allow the public to benefit from the innovation and, as with traditional real property rights, understand the boundaries of what belongs to the patent holder and what does not.

 

Unfortunately, that bargain has stopped functioning properly. Low-quality patents, particularly in the high-tech and software space, make it nearly impossible for small businesses and startups to productively engage with the patent system. First, patents are often described in unreasonably vague terms, making their application and scope difficult to understand. Indeed, nearly half of patent examiners (patent professionals!) encounter terms in an application’s specification that are not well defined. And all too often, those terms end up in granted patents. If an examiner cannot understand a term, it is ludicrous to think that a small business could without racking up exorbitant legal fees.


Second, the volume of software patents is prohibitively daunting and weakens the system. It has been estimated that at least 40,000 software patents are granted in any year. When one considers the scope of the system, and the fact that software and high-tech patents do not have easily searchable indices or consistent definitions, it is easy to understand why a small company cannot clear the path of potential patent suits and therefore might not even try.

 

The good news is that Congress, by the America Invents Act, and the Courts, through decisions like Alice v. CLS Bank, have started to right the ship. But with more than 2.5 million active patents, there remains much work to be done.


 

 

Where are we going?
 

In the last few years, Congress has seen an aggressive bipartisan push to further fix the patent system and rein in the problematic "patent trolls." House Judiciary Chairman Bob Goodlatte has repeatedly introduced his Innovation Act, a bill aimed at making it harder to bring and threaten to bring patent troll lawsuits. The bill passed the House overwhelmingly in 2013 and passed the House Judiciary Committee in 2015. The Senate Judiciary Committee passed its own version of the bill, called the PATENT Act. Despite the support both bills saw in committee, neither was put to a floor vote.

 

At the same time, some lawmakers have been introducing legislation aimed at making it harder to invalidate patents, including the bad patents that easily weaponized by patent trolls. In 2017, Sens. Tom Cotton and Chris Coons introduced the STRONGER Patents Act, which would make it significantly harder to use a process at the Patent and Trademark Office to challenge bad patents. Fortunately, that measure hasn't gained much momentum either.

 

While Congress has debated but failed to move legislation that would protect inventors against patent trolls, the Supreme Court has issued a number of rulings in recent years dealing with the U.S. patent system. In 2014, the Supreme Court ruled in Alice v. CLS Bank that the prohibition on patenting abstract ideas applies even when those abstract ideas are executed on a computer. The same year, the court's rulings in Octane Fitness v. Icon Health and Fitness and Highmark v. Allcare Health Management Systems gave lower courts more flexibility in determining when to require plaintiffs to pay defendants' attorney’s fees. In 2017, the Supreme Court ruled in TC Heartland v. Kraft Foods Group Brands that patent infringement cases must be brought in courts related to where the defendant resides or conducts business, a direct threat to the wave of patent troll lawsuits brought in courts that are perceived to be friendly to patent trolls.


 

What can you do to help?
 

Contact your Member of Congress and tell them to oppose the STRONGER Patents Act.

The STRONGER Patents Act contains many terrible ideas. It would gut inter partes review (a valuable tool for challenging bad patents). It would overturn the Supreme Court’s decision in eBay v. Mercexchange (thereby allowing patent trolls to get injunctions to shut down productive companies, even though the patent infringed is only on a tiny piece of the larger product). Additionally, the bill includes a provision that would discourage companies from doing research and development in the United States. The STRONGER Patents Act shows how far certain patent owners are willing to go to serve their narrow interests at the expense of everyone else.

 

Make your voice heard with Engine
 

Engine is a non-profit research and advocacy organization that works with policymakers on issues relevant to the startup community. Engine has been engaged in the patent fight for years and is always looking to help startups educate their lawmakers on the dangers of patent trolls.

 

Contact Rachel Wolbers at rachel@engine.is for more information.