Goodlatte’s Patent Bill Is Two Steps Forward, One Back | Commentary

Posted November 19, 2013 at 10:13am

The House Judiciary Committee, led by Chairman Robert W. Goodlatte, R-Va., is making a well-intentioned play to reform patent litigation by reining in the frivolous and costly lawsuits that all too often act as a roadblock to innovation.

Goodlatte’s Innovation Act (HR 3309) — aimed at curbing abuse of the patent litigation system — contains many provisions that will undoubtedly help foster advancements in science and technology in America. The bill is particularly promising because it focuses exclusively on litigation reform, but it faces competing legislation in the Senate that would be detrimental to innovation in the software industry.

The federal patent system is rooted in the Constitution, which empowers Congress 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.” In modern context, this clause compels the government to serve as a guardian of the rights of America’s creators and innovators. Through legislation, the patent system has evolved alongside the inventions it protects — most recently through the America Invents Act of 2011.

HR 3309 attempts to succeed where other patent bills have failed, aggressively targeting the predatory behavior of “patent trolls” who buy or file for patents with the sole purpose of suing legitimate businesses and innovators and collecting windfall settlements. Although the right to seek protection for one’s intellectual property in court is essential and inalienable, frivolous “troll” lawsuits are costly and time-consuming for innovators and discourage research, development and experimentation — moving our entrepreneurial economy in reverse.

Goodlatte’s legislation reforms the patent litigation process by addressing some of the asymmetries in cost between troll plaintiffs and their targets, including requiring most specificity in pleading, shifting certain discovery costs, and empowering judges to award costs and attorney’s fees in appropriate circumstances (a “loser pays” system). Each of these reforms maintains the integrity of the patent litigation system while also protecting innovators — particularly small businesses unable to retain high-priced intellectual property lawyers for the thousands of hours it often takes to fight a lawsuit — from unsubstantiated suits when they’ve done nothing wrong.

The litigation reform elements of this legislation are welcome news for America’s innovators, but a looming Senate patent bill could ultimately undermine their rights. Sen. Charles E. Schumer, D-N.Y., is seeking to expand and make permanent a highly flawed transitional program for challenges to covered business method patents introduced under the America Invents Act of 2011. Expanding this review program would place a cloud of uncertainty over innovators’ patents by making them subject to commercially motivated challenges for the duration of their lifetime. It also creates a needless, 18-month waiting period during which a challenger can openly infringe and profit on a patent-holder’s rights and poach market share, even if their challenge is eventually rejected.

Most damagingly, the expansion of this review program would discriminate against certain fields of technology over others, most significantly the software industry, directly contradicting more than 200 years of congressional precedent that subjects all patents in a certain field to the same rules and requirements. Injecting this level of uncertainty into such a critical sector of our economy is a recipe for disaster.

By following up reform of patent litigation with the expansion of an arbitrary and unfair review system, lawmakers would be putting out one fire but starting another.

Erik Telford is senior vice president at the Franklin Center for Government and Public Integrity.