More than 200 years after our Founding Fathers enshrined patent protections into our constitution, America continues to be a shining beacon for innovation and ingenuity. It is not by chance that our economy remains the envy of the modern world, it is a testament that strong intellectual property (IP) rights are essential to building a first-class economy.
Unfortunately, a small group of predatory litigants too often undermines the very system that helped build America’s economy. In recent years, frivolous patent litigation has increased as non-practicing entities whose patent claims are unfounded — “patent trolls” — target small businesses and entrepreneurs with lawsuits.
To be clear, not all non-practicing patent holders are “trolls.” Some, such as universities and inventors, possess legitimate patent claims. Unfortunately, businesses targeted by actual “patent trolls” are forced into unnecessary litigation or extortionate settlements instead of investing their resources in creating new jobs or new technologies. That not only harms the targeted businesses, but it also inflicts further harm on our economy and weakens our patent system itself.
The targeted employers, particularly small businesses and innovators, often stand at a disadvantage because they lack the resources and deep pockets of larger corporations to enforce their patent rights or defend against improper lawsuits. The “patent trolls” know they possess the upper hand in these situations, and they often launch threatening lawsuits with the intention of cornering defendants into costly settlements and licensing agreements. Not only do improper lawsuits cripple innocent businesses and bring their operations to a halt, they also suck billions of dollars from our economy. That is money that should instead remain in the pockets of hard-working men and women building their American Dream.
Fortunately, Congress has the power to return greater justice back to our patent litigation system. Last session, the U.S. House passed the Innovation Act by an overwhelming 325-91 vote margin, attracting majority support from both parties in a rare display of bipartisanship. Despite that remarkable achievement, Democratic leadership on the U.S. Senate side failed to bring the bill to a vote. So earlier this year, Congressman Bob Goodlatte, R-Va., reintroduced the same Innovation Act. The legislation represents common-sense reforms that will protect our patent system from the litigious trolls.
The Innovation Act is narrowly targeted to address bad actors while maintaining the broader integrity of the patent system itself. For example, the bill’s reforms would increase transparency in our litigation process by heightening pleading standards. Accordingly, parties would be required to provide more detailed information to support their allegations, instead of their current habit of relying upon vague and threatening demand letters. As another example, the current discovery process would be streamlined so that defendants are no longer left with oppressive production demands and costs. Importantly, the bill would also begin requiring vexatious losing parties to pay the legal fees of prevailing parties whom they unjustifiably dragged into a mess that disrupted their enterprises and even their entire lives.
Those are all manifestly reasonable reforms.
Unfortunately, Innovation Act opponents falsely argue the bill would harm legitimate patent owners trying to protect their intellectual property. The truth is that no legitimate patent holder, whether plaintiff or defendant, would be worse off under the Innovation Act. Legitimate patent plaintiffs would be more secure in the expectation that they would recover litigation costs from improper defendants and legitimate defendants would be more secure in the expectation that they would recover costs from improper plaintiffs. And in close cases where both parties possessed colorable arguments, costs would not be assessed against the losing party, as is the case under our current system.
Everyone agrees that any bill passed by Congress must ensure that legitimate patent rights remain robust and healthy. And if we are to preserve America’s patent system for future generations, we must stand up to those exploiting it as a vehicle for frivolous litigation.
Any fair assessment of today’s landscape reveals that the status quo will continue to undermine innovation and further deteriorate one of the best patent systems in the world. Congress cannot solve all our problems, but with the Innovation Act they have a golden opportunity to strengthen our economy and encourage American ingenuity for years to come.
Tim Lee is the senior vice president of the Center for Individual Freedom (www.cfif.org). Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
