Congressman Bob Goodlatte’s Innovation Act 2013, framed as a piece of legislation designed to curb the activities of “patent trolls” in the US, is due to be voted on in the House of Representatives later today. But before legislators make any final decisions there are a few things that we believe they need to consider very carefully, given that if the legislation as it stands is passed it will represent a seismic change in the functioning of a litigation system which has underpinned the US’s global innovation leadership for decades. So, here are a few points to think about:
- As yet, there is no widely-agreed definition for what a patent troll actually is. One person’s troll seems to be another person’s patent assertion entity, which is another person’s technology company. If you cannot define a problem, how can you possibly hope to put in place effective measures to deal with it?
- While no-one disputes that there is a degree of bottom feeding trolling activity in the US which does have a negative impact on those who are on the receiving end of it, there is very serious disagreement about how widespread this activity is and how damaging it is. The widely repeated claims that it sucks $29 billion a year from corporate America, for example, or that there has been an explosion in litigation, or that patent assertion prevents investment in innovation and job creation are hotly disputed, to say the least. In short, as yet no convincing data exists to show that there is a problem with “patent trolls” in the US so serious that it needs legislative reform to solve it.
- What we do know, however, is that venture capital investment in software – an area that pro-change campaigners consistently claim is adversely affected by “trolls” – is at a record high; while the US software industry overall is a world beater – and certainly far more dynamic, lucrative and successful than comparative industries in countries which have patent regimes that those who favour reform would like to see in the US.
- What we also know is that the overwhelming majority of US patent owners will never encounter a “patent troll”; while the percentage of all US businesses that come across them is infinitesimally small. On the other hand, if the Goodlatte act is passed every single US patent owner of whatever size, in every single industrial sector, will find it more expensive to assert their patents, more complicated and more time-consuming.
- Congressman Goodlatte has said that the legislation will not discourage legitimate assertions. This is highly debatable. If you are a cash-strapped SME and you feel your patents are being infringed by a large corporation, the cost of litigating is already high. The Goodlatte act will make the costs even higher. True, loser pays means that these might be redeemable if you end up winning the case in court; but most cases do not end up in court – they are settled. Put it another way, the Goodlatte act gives deep pocket defendants further tools to drive up plaintiff costs. If they are fighting companies where every cent counts they will, for what is relative pocket money, be given greater ability to push such companies to bankruptcy or into early, disadvantageous settlement. And this is exactly what they will do. In litigation you use every weapon at your disposal.
- As a result, it would be fair to describe the Goodlatte act not as “anti-troll”, but as anti-plaintiff. As much as Congressman Goodlatte would like to deny it, that makes the legislation pro-defendant. As such it runs the risk of incentivising copying and infringement at the expense of invention and innovation. Without doubt, it favours deep pocket defendants over cash-strapped plaintiffs. In other words, it is for the big guy and against the small guy.
- While there is a vocal and undeniably large lobby in favour of reform, there is an equally large group have expressed serious concerns about the Goodlatte act in its present form. These are not vested interests, but representative organisations and people that know an awful lot about how patent law, litigation and value creation work in practice. They are also a disparate group from a range of industries and backgrounds, including the Licensing Executives Society, the National Small Business Association, the Biotechnology Industry Organization, the Institute of Electrical and Electronic Engineers, the American Bar Association, the American Intellectual Property Law Association, the Committee on Rules of Practice and Procedure of the Judicial Conference of the US, the National Association of Patent Practitioners, the Pharmaceutical Research and Manufacturers of America, the American Council on Education, the Association of American Universities and the Association of American Medical Colleges. None of these groups represent “patent trolls”. Shouldn’t their views be given serious consideration before final, irrevocable decisions are made?
- It may be coincidence, but a number of the big technology companies that have been so vocal about making patents harder to assert have business models that would be greatly enhanced if patents were harder to assert. That does not disqualify their opinions, but it might be something worth factoring in when listening to what they have to say.
- The Goodlatte Innovation Act is not a small step. It would represent a fundamental change in the way that patents are litigated in the US: one that tips the balance in favour of deep pocket defendants (infringers) and against cash-tight plaintiffs (innovators and inventors). There is no doubt that the current system could be improved – it is expensive, it lacks transparency, it is unwieldy and time-consuming; and it is certainly open to abuse. But look, too, at what has been achieved in the US while it has been in place: world leadership in invention and innovation in industries as diverse as computer technology, the life sciences and energy. To justify legislation so significant, you need to be clear that what you put in place will not have a negative impact on that leadership. Are you sure you have worked through all the possible unintended consequences? Are you sure the intended consequences are genuinely achievable? If you cannot answer No and then Yes to those two questions with absolute certainty, you should not be voting in favour of the Goodlatte act today, you should be delaying it or rejecting it. Make no mistake, the stakes are extremely high.