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Business Observer Friday, Jun. 12, 2015 3 years ago

MY VIEW | 'Patent Death Squad'

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A stifling federal bill will be a “blow to patent owners and independent inventors” if it passes, agues a Tampa attorney.

Our nation has faithfully protected the rights of American inventors for well over two centuries, and U.S. patent law has inevitably changed over the course of 200 years. 

But none of these changes have been as dramatic, radical and far reaching as those implemented in the last five years. President Barack Obama signed these changes into law in 2011 as part of the America Invents Act. The AIA has favored larger companies and those accused of patent infringement at the expense of smaller companies and patent owners.

And now Congress is contemplating further changes as it debates passage of the Goodlatte Innovation Act (HR3309). If passed, the Innovation Act would deal another blow to patent owners and independent inventors.

The U.S patent system is unlike any other in the world. Patents are provided for in Article 1 Section 8 of the U.S. Constitution, which gives the federal government the power to “promote the progress of the science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” 

Our Founding Fathers adopted this clause into the Constitution during the Constitutional Convention in Philadelphia in virtual unanimity. James Madison reasoned that the power of government to award patents “will scarcely be questioned.” Most countries have laws protecting inventors, but few, if any, provide such protection in their nation's charter. In the U.S., patent rights are constitutional rights. You might say that patents are part of our national DNA. 

It is not surprising that Americans are an inventive people. According to statistics from the U.S. Patent and Trademark Office, of all patents issued worldwide, 55% have been issued to American inventors. Thus, while accounting for less than 5% of the world's population, the U.S. is responsible for over half the innovation. This includes some of the greatest advancements in human history, such as the airplane, motion pictures, the digital computer, email, the Internet, the incandescent light bulb, the electric motor, the telephone (both mobile and wired), and the transistor. This inventiveness will only continue if we live up to the promise of the Constitution by providing economic incentives to inventors by assuring them the “exclusive right to their respective discoveries.”

Unfortunately, this promise is in danger.

The passage of the AIA in 2011 greatly weakened existing patents. It did so by ushering in a host of new administrative procedures for challenging a patent's validity. A party accused of infringement has always had the ability to challenge the validity of a patent in court before a judge and jury. The AIA, however, created a specialized tribunal called the Patent Trial and Appeal Board, or PTAB, for hearing these validity challenges.

The standard for invaliding a patent before the PTAB is much lower than before a judge and jury. Not surprisingly, since the PTAB's creation, patent invalidity has skyrocketed. Of the decisions rendered by the PTAB under two of the new established procedures, 90% held at least one patent claim as invalid.  This high rate of invalidity led a well-known commentator to refer to the PTAB as a “patent death squad.” The work of the PTAB has had a chilling effect on patent owners seeking to enforce their rights: Recent statistics show a 40% decrease in new patent litigations being filed.

It is against this backdrop Congress now debates the Innovation Act.  The Innovation Act would create a presumption whereby the losing party in a patent litigation would pay the legal fees of the prevailing party. This would upend the long standing “American Rule” under which each party is responsible for its own fees.

But the Innovation Act does not stop at fee shifting. If the patent owner is the non-prevailing party, the Innovation Act would allow third parties to be brought into the litigation for purposes of satisfying the fee award. As long as it could be established that a party has a financial interest in the patent, such a party could be liable for any fee award.  The Innovation Act also would greatly increase the pleading requirements needed to bring a patent infringement action. It would dispense with the current notice pleading requirements by demanding that patent owners lay out their entire case at the outset of any litigation.  

It is difficult to imagine a set of rules more stifling to patent owners than those contemplated by the Innovation Act. And all of these changes would come on the heels of the damage already inflicted by the AIA. If Congress proceeds, the AIA and the Innovation Act may go down in history as the one-two punch that finally killed American Innovation.

By Michael Colitz | Contributing Columnist
Board certified by the Florida Bar in patent law, Tampa intellectual property litigator Michael Colitz is a shareholder with the statewide firm of GrayRobinson.

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