U.S. can't afford to mar innovation

Proposed patent reforms mean less protection for the underdog.

Ever wonder why the US now turns the clock back one hour right after Halloween? According to a book by Michael Downing, it's largely due to the candy lobby that spent much time and money giving out candy-filled pumpkins and making election donations to members of Congress.

Similar forces are at work in another Washington debate that threatens to turn back the clock on innovation as early as February: the so-called Patent Reform Act of 2007. Despite the fact that improvement in some fashion is needed, this sweeping reform, if made law, will undermine the core of the patent system in the United States. It will mean weaker protection for small inventors, university researchers, and entrepreneurs across America.

The frequent characterization of the issue as a struggle between big pharmaceutical companies (against this reform) and the high-tech computer industry (for this reform) is not quite right. In fact, just a handful of high-tech giants – Microsoft, Intel, Cisco, Oracle, and Dell – support the proposed reforms. Small high-tech companies – the true innovators of this industry – overwhelmingly reject them as do innovators from other industries.

There are several serious problems with the current bill. First, the proposed changes weaken the protection patents are meant to afford by introducing an "apportionment of damages" provision that chips away at the economic value of patents. By diminishing damages that would occur from infringing a patent, it devalues all issued and future patents.

Second, the bill creates a mechanism for endless post-grant oppositions. This would throw a cloud of uncertainty over all issued patents, further diminishing the incentive to innovate and invest in the manufacturing of new products. Many inventors, exhausted from defending the validity of their patent repeatedly, will be forced to abandon their patents.

The bill also proposes changing from the American "first-to-invent" system, which favors true innovators, to a European-style "first-to-file" regime, which favors the winners of a sprint to the patent office. Large corporations, with their legions of patent attorneys on staff, would undoubtedly have the upper hand against small inventors and university researchers in this race.

Other proposed changes take the teeth out of patents and make rights harder to enforce. For example, they make it more difficult to prove willful infringement; diminishing the threat of treble damages will only encourage infringement and promote litigiousness.

The proposed changes in US patent law will make it easier for offshore copycats to bring their pirated goods into the US with impunity. More jobs will be lost as a result, with devastating consequences for American competitiveness in the global economy.

A self-proclaimed goal of the Patent Reform Act is to decrease patent litigation. But lawmakers have forgotten that a patent does not even give an inventor the right to practice the patented invention – only the right to exclude others from practicing it.

The average cost of defending a patent in court is already about $4 million, an exorbitant cost for independent inventors, small companies, and universities. The proposed legislation would make it even more costly and reduce recoverable damages. Reducing patent litigation by making it more expensive to defend a patent only encourages unscrupulous theft of ideas.

Sadly, the patent reform legislation is well on its way to becoming reality. The House approved the reform bill on Sept. 7 and the Senate Judiciary Committee released a parallel bill, with Senate leadership pushing for a full vote as well. The Democratic leadership is aligning itself with corporate giants such as Microsoft and Intel, abandoning the little guy and the underdog.

Do we need patent reform? Yes. A 2006 Supreme Court decision, eBay vs. MercExchange, muddied the fundamental "right to exclude," which is the definition of a patent. Congress should correct this by giving an inventor the ability to stop an infringer from unauthorized use of a patented invention (except in the case of a national emergency or public health concern).

But to truly improve the quality of patents and strengthen their protection, Congress must not only reform the patent system, but the US Patent Office itself. Congress should once and for all stop diverting funds from the Patent Office, which needs more examiners to shorten the ridiculously long pendency of applications, and improve the quality of the examination of issued patents.

In 1998, Congress extended the length of a copyright as a result of Disney lobbying to prevent the expiration of Mickey Mouse's copyright.

If lawmakers strengthened copyrights, one form of intellectual property protection, why are they now moving to weaken patents? We are at the mercy of deep-pocketed lobbyists playing trick-or-treat with legislators in Washington. But can we afford to turn back the clock on innovation?

Alexander Poltorak is CEO of General Patent Corporation, an intellectual property management and licensing firm, and is the coauthor of two books on intellectual property.

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