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Saturday, May 27, 2017
Commentary

The death of American innovation?

America has certainly derived substantial revenue, recognition and reward from its place as an innovation leader. This should come as no surprise, as our Founding Fathers called for protection of patents in our Constitution. But now our patent system is under attack.

America has prospered by rewarding those who innovate and seek patents with the ability to protect their intellectual property for a limited duration, while sharing the knowledge and fruits of their ideas with society as a whole. Edison’s light bulb, Xerox’s photocopying device, the Wright brother’s flying machine, Google’s search engine and even Tesla’s electric cars have all been protected with patents. But, unfortunately, some bad actors have given patents a bad reputation, and Congress has set out to fix the supposed problems.

Five years ago, Congress passed the America Invents Act to bring America in line with the rest of the world in the manner in which we decide who should be entitled to a patent. But also included in this act was a new system for invalidating (or eliminating) an already issued patent. Before the act, you could invalidate a patent through a narrow process in front of the Patent Office or in a lawsuit in federal court. The act changed this.

As of September 2012, a new procedure for invalidating patents in front of the Patent Office was created. The fee the Patent Office charges for filing such a request is $30,000. But even with this high filing fee, the Patent Office is not required to review the patent. In fact, if the Patent Office decides not to review the patent, it must return $18,000 of that filing fee to you. Why would the Patent Office choose not to review the patent when it would have to give back more than half of the filing fee? Does that sound American?

Any guesses on what has happened to the Patent Office’s revenues since 2012 when this new procedure took hold? In 2011, the Patent Office’s net income from operations was $88 million. In 2014, net income from operations was $214 million. It seems the Patent Office now gets most of its money from eliminating patents rather than from helping innovators protect their inventions. It’s no wonder the former chief judge of the federal appeals court that hears all patent appeals described this part of the Patent Office as the “patent death squad.” Sadly, that nickname appears to be ringing true.

Are there bad patents out there? Yes. But those patents are less likely to be used as they can (and will) be invalidated during litigation. Are there parties that buy up bad patents and assert them too broadly? Perhaps. But there were already measures in place to protect against those activities.

With this act, more good patents are being attacked in the Patent Office for significantly less than defending against those patents in litigation. So, the patents under attack at the Patent Office tend to be the “good” patents, as opposed to the nuisance patents that were supposedly the cause of so much harm.

Now, Congress is again taking up patent reform legislation. Looking to reduce the number of “nuisance” patents, the latest reform seeks to make patent litigation significantly more costly for patent owners. For instance, should the new legislation become law, a losing patent infringement plaintiff may automatically have to pay the defendant’s attorneys’ fees. This is antithetical to our American legal system and the notion that patents are supposed to be presumed valid.

Many states have also taken it upon themselves to solve this “nuisance” problem. Florida is no different. This past year, our Legislature passed the Patent Troll Prevention Act, creating a legal cause of action to someone who receives a demand letter from a patent owner. Imagine you’re a small inventor who has invented the best thing since sliced bread. You send a letter to “Acme Corporation,” which appears to have stolen your idea. Acme has a lot more money than you, so what do they do? Rather than get your permission to use your invention, they sue you in Florida to collect their attorneys’ fees for having to deal with your letter and pay the Patent Office $30,000 to try to invalidate your patent.

Time will tell whether this law withstands scrutiny under various constitutional challenges.

Our patent system helps to reward our innovation so that we — and the rest of the world — all can benefit from new ideas. We should focus on ways to help inventors protect their ideas, not new ways to eliminate patents. Courts already have tremendous power to protect against abuses. Congress’ desire to improve our patent system is noble but appears one-sided, focused only on those accused of infringement without accounting for those that are inventing new ideas and want the protections of a strong patent system.

Congress’ last changes to our patent laws appear to have done a lot of harm to innovators. Perhaps it’s time for Congress to hold off on proposing more ways to limit the rights of inventors and let their previous fixes take hold for a few years to see how things balance out.

Tampa patent attorney Woody Pollack, a Stanford-educated computer scientist, is with the law firm of GrayRobinson. He recently won a case before the U.S. Patent and Trademark Office.

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