Patent Reform that Will Damage Innovation

Wealth of Ideas Newsletter, March 2009

The Patent Reform Act of 2009 was recently introduced in Congress, and the Senate Judiciary Committee has already conducted hearings on the bill. Unfortunately, the title of the bill is very misleading. Reform connotes an improvement, modernization, changing something for the better.

In fact, there is nothing progressive about the “reform” in this bill. It will improve nothing. Instead of strengthening and modernizing our patent system for the 21st Century, this legislation will stifle innovation, weaken patent protection, and ultimately result in job loss and loss of competitiveness for our great country in the global economy. Should this Bill pass, great we’ll be no more!

Few liberties ever disappear overnight. They are chipped away at over time, and that is exactly what the Patent Reform Act of 2009 and its proponents are trying to do.

History of the Bill
The Patent Reform Act of 2009 is virtually identical to the Patent Reform Act of 2007 that passed in the House of Representatives but failed to win approval in the Senate. Now that the Democrats have a larger majority in the Senate, they regurgitated this ill-conceived bill in the hopes of quick passage.

The bill was introduced by Senators Leahy and Hatch on Thursday, March 5, and the very next week, on Tuesday, March 10, they were already holding hearings! Not surprisingly, not a single representative of independent inventors, small business or universities was invited to testify. Last week, March 26, the Judicial Subcommittee already adopted in a hurry the first amendment to the Bill.

How This Bill Weakens Patents
This proposed legislation, rather than actually reform anything, will deform and weaken the current patent system. The legislation has several faults, but here are just three of its main failings.
1. Apportionment of Damages: Apportioning damages will diminish what patent owners receive when their patents are infringed. Facing small award settlements, large corporate infringers and offshore counterfeiters will actually be encouraged to infringe patents because even if they get caught, what they end up paying the patent owner will be a fraction of what the patent owner really deserves for his (or her or its) patent! Apportionment of damages will devalue patents en mass.
2. Post-Grant Opposition: Under the proposed Bill, patents will be subject to post-grant opposition. Within 12 months of issuance, a third party would be able to oppose issuance of the patent and file a cancellation petition based on any ground of invalidity. What it means is that an infringer can forever tie a patent in endless reexamination proceedings, which will become so expensive that no independent inventor could afford them.
3. First-to-File: The U.S. Patent system has always been based on a “first-to-invent” basis. Whoever first created the patented invention is awarded the patent, not who got to the Patent Office first. A first-to-file system will substantially favor large corporations and will work against small businesses and individual inventors!

For more detailed list of proposed changes see Alex Poltorak’s blog post on the Patent Reform Act of 2009.

What Patent Reform Should Be
1. Injunctive Relief: Congress should clarify and reaffirm the Constitutional right of inventors to exclude others from unauthorized practice of patented inventions, i.e., the right to obtain a permanent injunction that the Supreme Court put in limbo in the Ebay decision.
2. Business Method Patents: The Congress should clarify the status of business method patents which have been all but disallowed by the recent decision by the Courts of Appeals for the Federal Circuit in Re Bilski.
3. Stronger Protection: Patent reform should make it more expensive – and, therefore, more painful – for businesses to infringe patents, and willful patent infringement should be criminalized as is willful infringement of copyright.

A Broad Coalition for Real Patent Reform
Fortunately, we do not stand alone in our opposition to the Patent Reform Act of 2009. It is rare that groups representing both Corporate America and the labor movement agree on anything, but this proposed legislation will so weaken American industry that both groups are unified in their opposition!

Here are just five organizations that are opposed to this legislation with links to each group’s statement.
• Pharmaceutical: The Pharmaceutical Research and Manufacturers of America (PhRMA) is opposed to this legislation.
• Biotech: The Biotechnology Industry Organization (BIO) is also opposed.
• High-Tech Sector: The Innovation Alliance, a trade group of high-tech companies such as QualComm and Dolby, has joined the opposition to the Patent Reform Act of 2009.
• Manufacturing Sector: The Coalition for 21st Century Patent Reform, an association of large manufacturers that includes 3M, GE and Exxon-Mobil, is opposed to this proposed legislation.
• Labor Unions: The Executive Committee of America’s largest union, the AFL-CIO, just met, voted and announced their opposition to the Patent Reform Act of 2009!
• Other Groups: The Business and Industry Council (USBIC) is a coalition of 28 business, social and religious groups that have joined in opposition to this pending legislation!

The World Will Not End
If this legislation passes, the world as we know it will not end. It will not be like Frank Valli's song “The Sun Won’t Shine Anymore.” The earth will continue to spin on its axis, inventions will be created, new patents will be issued, and life will continue. But should this legislation be adopted, it will be yet another significant weakening of a patent system already weakened by an over-active judiciary. Someone has to draw a line in the sand, and we and the organizations in the previous paragraph are drawing that line. And we hope you will join us!

Action and Not Just Words
General Patent Corporation’s founder and CEO, Alexander Poltorak, founded a non-profit association, American Innovators for Patent Reform (AIPR), and we invite you to join and put your voice forward in favor of true patent reform, not a weakening of the patent system disguised as patent reform.

The coalitions that have announced their opposition to the Patent Reform Act of 2009 − PhRMA, BIO, Innovation Alliance, The Coalition for 21st Patent Reform, the AFL-CIO and the Business and Industry Council − represent specific industries and interests, while AIPR represents inventors, engineers and researchers, small business owners and entrepreneurs, patent agents and patent attorneys, and other IP professionals who cannot afford to join one of these other groups.

In fact, membership in AIPR is free for a limited period, and you simply join online. Once you join, we will let you know what you can do to join the fight to re-establish the strong patent system envisioned by the Founding Fathers.

Patent Reform that’s Really Reform
We are not automatically opposed to all patent-related legislation. An example of patent reform legislation that is really reform is H.R. 628. The House of Representatives passed this bill, sponsored by Rep. Darrell Issa (R - California), by a lopsided vote of 409 to 7.

The bill establishes a pilot program for increasing the number of patent-experienced judges in U.S. district courts, and it requires the Administrative Office of the U.S. Courts to designate at least six district courts to participate in the program.

We applaud Congressman Issa for this legislative initiative that will strengthen our patent system. The Senate version of the bill, S. 299, is awaiting consideration.