WASHINGTON (Legal Newsline) – Entrepreneur Bryan Pate, a self-described “risk taker” and “optimist,” admits that few things scare him, but count proposed changes to the nation’s patent system among them.
Pate, a former Marine officer and now CEO of ElliptiGO Inc. — named by Fast Company Magazine as the sixth most innovative fitness company in the world, behind Nike and Zumba and ahead of CrossFit — told federal lawmakers Wednesday that he has spent a “considerable” amount of time trying to understand how the provisions contained in the House’s Innovation Act will impact his business.
Pate
“I am afraid that if H.R. 9 is enacted as written it will have the unintended consequence of hurting American innovators and companies like mine, while perversely protecting unscrupulous foreign competitors,” he said during a hearing of the U.S. House Judiciary Subcommittee on Courts, Intellectual Property and the Internet.
Pate warned lawmakers to tread carefully, noting that intellectual property-intensive industries, alone, support $8.1 trillion of the U.S. gross domestic product, generate 27 million jobs and pay employees more than 30 percent more than other industries.
“Sweeping changes to the patent system will have major repercussions in these industries, and threaten the innovative ideas and job growth they generate,” he said, adding that if the Innovation Act was law in 2005, his company would cease to exist today.
Pate was among four company executives who testified at the subcommittee’s hearing, “Patent Reform: Protecting American Innovators and Job Creators from Abusive Patent Litigation.”
Also testifying were Mark Griffin, general counsel for Overstock.com; Kathryn Underwood, president and CEO of Ledyard National Bank; and Todd Moore, founder and CEO of TMSOFT LLC.
To read their complete testimonies, click here.
House Judiciary Chairman Bob Goodlatte, R-Va., also spoke at Wednesday’s hearing. Goodlatte reintroduced H.R. 9 in February, along with Rep. Darrell Issa, R-Calif., who serves as chairman of the subcommittee.
Goodlatte’s bill requires:
– Plaintiffs to disclose who the owner of a patent is before litigation, so that it is clear who the real parties behind the litigation are. Goodlatte says this will ensure that patent trolls cannot hide behind a web of shell companies to avoid accountability for bringing frivolous litigation;
– Plaintiffs to actually explain why they are suing a company in their court pleadings;
– Courts to make decisions about whether a patent is valid or invalid early in the litigation process so that patent trolls cannot drag patent cases on for years based on invalid claims. This prevents invalid patents from being used to extort money from retailers and end users;
– The U.S. Judicial Conference to make rules to reduce the costs of discovery in patent litigation so that patent trolls cannot use the high costs of discovery to extort money from small businesses and entrepreneurs; and
– The U.S. Patent and Trademark Office to provide educational resources for those facing abusive patent litigation claims.
Also, when parties bring lawsuits or claims that have no reasonable basis in law and fact, the Innovation Act requires judges to award attorneys’ fees to the victims of the frivolous lawsuit.
The bill allows judges to waive the award of attorneys’ fees in special circumstances. This provision applies to both plaintiffs and defendants who file frivolous claims.
The measure also creates a voluntary process for small businesses to postpone expensive patent lawsuits while their larger sellers complete similar patent lawsuits against the same plaintiffs, to protect customers who simply bought the product off-the-shelf.
Goodlatte told subcommittee members that addressing abusive patent litigation is “critical” to the nation’s future economic competitiveness.
The patent system, he said, was never intended to be a “playground” for litigation extortion and frivolous claims.
“The Innovation Act puts forward reasonable policies that allow for more transparency and brings fundamental fairness into the patent system and the courts,” he told the subcommittee members. “The bill contains needed reforms to address the issues that businesses of all sizes and industries face from patent troll-type behavior, while keeping in mind several key principles, including targeting abusive behavior rather than specific entities, preserving valid patent enforcement tools, preserving patent property rights, promoting invention by independents and small businesses, and strengthening the overall patent system.”
Goodlatte contends his bill targets abusive behavior and not specific entities, and doesn’t attempt to eliminate valid patent litigation.
“When we use the term ‘patent troll’ it is more of an adjective describing behavior than a noun,” he said. “Our goal is to prevent individuals from taking advantage of gaps in the system to engage in litigation extortion.”
His bill also doesn’t diminish or devalue patent rights, he said.
“Supporters of this bill understand that if America’s inventors are forced to waste time with frivolous litigation, they won’t have time for innovation,” Goodlatte said.
“And that’s what innovation is really about, isn’t it? If you’re able to create something, invent something new and unique, then you should be allowed to sell your product, grow your business, hire more workers and live the American dream.”
Brian Pomper, executive director of the Innovation Alliance, a group made up of research and development-focused companies, encouraged lawmakers to listen to all stakeholders in the patent debate and search for a more “balanced” approach.
“The Innovation Alliance will continue to work with lawmakers to ensure American innovators and job creators are able to flourish under a strong patent system; and we reiterate our support for the STRONG Patents Act, which would help ensure the U.S. remains a world leader in innovation,” he said ahead of Wednesday’s hearing.
Pate said he also supports the STRONG, or Support Technology and Research for Our Nation’s Growth, Patents Act. The bill was introduced earlier this month by U.S. Sens. Chris Coons of Delaware, Dick Durbin of Illinois and Mazie Hirono of Hawaii.
Venture capitalists and universities already have come out in support of the legislation.
From Legal Newsline: Reach Jessica Karmasek by email at [email protected].
