Sensenbrenner and Baldwin: Patent Bill Changes Threaten Economy

Posted June 15, 2011 at 4:18pm

As we work to rebuild our economy, Congress should do all that it can to foster small-business innovation and investment. Yet provisions in the patent reform bill recently approved by the House Judiciary Committee will do just the opposite.

In particular, the expansion of secretive “prior user rights” will undermine investor and innovator confidence and limit small-business growth and job creation.

We support sound reforms to our patent system that will provide innovators and investors with greater confidence, address the inexcusable backlog of patent applications and expand opportunities for our brightest minds and most innovative businesses to transform ideas into new products and to create jobs.

However, by expanding prior-user rights, the latest version of the legislation could be disastrous for small American innovators and university researchers, and it ultimately could slow job creation.

Expansion of prior-user rights would give new rights to those who have previously developed and used the same process or product, even if they never publicly divulged their innovation and never applied for a patent. It would transform our patent system from one that values transparency to one that rewards secrecy.

This change would stifle scientific progress at our leading universities — resulting in diminished investment, fewer products being brought to market, greater threats of intellectual property theft and increased litigation.

It is not surprising that many of our nation’s leading universities, from the University of Wisconsin to the University of Kentucky, have expressed opposition to this proposal.

Each year, 3,400 U.S. patents are issued to our nation’s universities, spurring the formation of nearly 600 new companies that create jobs and strengthen our communities. Our state of Wisconsin has benefited from a strong tradition of intellectual property rights, with UW-Madison ranking third in the nation with 117 patents in 2009.

The U.S. patent system is the envy of the world, thanks to its strong legal support for the value of innovative ideas. By establishing a system that rewards disclosure and creates incentives for investment, our patent system also fosters new ways of thinking and raises the level of scientific discourse for further advancements.

Under current law, the inventor can confirm through publicly available databases whether another person or company has previously developed and patented a substantially similar product. As a result, the patent gives the innovator 20 years of exclusive use.

Exclusive rights are critical for inventions to gain marketplace value and acquire investments. For startups and small businesses, raising necessary capital is vital and challenging, but the expansion of prior-user rights would reward secrecy and make that task more difficult.

Under this new system, an inventor would have no way of determining whether anyone had previously developed and used the process or product. Securing a patent would provide only conditional exclusivity.

It would be subject to the claims of an unlimited number of people or companies who could later claim prior use. In such a scenario, a patent might be valuable or relatively worthless; the inventor and potential investors would have no means of determining which was true.

In the global economy, companies spend tens of millions of dollars defending intellectual property from infringing activities domestically and overseas (such as in China or India). The expansion of prior-user rights would invite intellectual property thieves to steal innovations and then raise a prior-user defense with fabricated evidence.

The potential for such claims is virtually unlimited and would dramatically undermine investor confidence because a risk analysis of what is “secret” is impossible, and litigation costs against a prior-user defense would be prohibitive.

The expansion of prior-user rights is bad for researchers, small-business innovators and patent holders. Instead, we support patent reforms that will preserve the benefits of patent holders and encourage job creation here at home.

Rep. Jim Sensenbrenner (R-Wis.) is a former chairman of the Judiciary Committee. Rep. Tammy Baldwin (D-Wis.) is a member of the Energy and Commerce Committee.