The conservative case for patent reform

Jeremy Kolassa Associate Policy Analyst, R Street
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What would you think if someone knocked on your door one day and threatened to sue you for everything you’re worth unless you paid a settlement fee to make them go away? That’s what patent trolls do to thousands of small businesses every year, causing tens of billions in economic damage.

Fortunately, with growing awareness and support, the patent trolls’ lucrative racket is in jeopardy. On Thursday a new bill sponsored by House Judiciary chairman Bob Goodlatte (R-VA) called the Innovation Act in set to go before the House of Representatives. If passed, the bill promises to put in place vital litigation reforms to undermine the trolls’ business model.

Important changes include implementing “loser pays” (the cost of litigation), improving transparency and research into the actual owners of patents, and tightening up standards regarding potential infringements — all points explained in a letter authored by my colleagues at the R Street Institute, and endorsed by other conservative groups including Americans for Tax Reform, Americans for Prosperity, Generation Opportunity, and more.

So why is this important, and why should conservatives back this?

Patents play a legitimate role in our economy, giving innovators the incentive and the breathing room to develop new medicines, technologies and products that improve all of our lives. They’re so important, in fact, that the Founding Fathers placed patent protection within the Constitution itself, under Article One, Section 8:

The Congress shall have power … To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries

Though many provisions drafted at the Constitutional Convention were controversial, this language was agreed to unanimously and without debate. So while the Constitution gives Congress a duty to protect legitimate intellectual property from infringement, it also sets out that it must balance those efforts against the broader goal of promoting innovation.

Then there are patent trolls. They own patents, but don’t really make anything, or invent anything. They don’t advance a useful secondary market, either. Instead, they exploit the system to sue anyone and everyone for settlement money. In fact, over half of these lawsuits target small and medium businesses who don’t have the resources to fight back, even when the infringement claims are completely spurious.

In 92 percent of cases brought to court, the trolls lose. But most companies simply settle because they can’t afford to fight. Many of these patents are so broad and abstract, they could cover just about anything.

For example, US Patent #6128617: “Data display software with actions and links integrated with information.” More specifically, it covers “A hierarchical graphical listing or chart rendered on a display”.

Ever used the Start menu on Windows? That’s so banal any software developer could be sued. Or anyone down the chain of commerce, from Best Buy to you, the consumer.

Or Patent #7103380: “Wireless Handset Communication System: A small lightweight modular microcomputer-based computer and communications systems, designed for both portability and desktop uses.” (The owner of that patent, NetAirus Technologies, was just defeated by Apple last week.)

More than any other reason, Conservatives should support these litigation reforms because the victims of these spurious lawsuits are not big businesses who can afford it — it is the small businesses down the street, who cannot afford a lawsuit, and are forced to settle with the trolls. The legal fees and the drawn out court process would shutter them completely. And with that goes more American jobs.

Opponents of the Innovation Act, in a recent letter of their own, argue that the act will harm individual inventors trying to protect their property rights. In reality, the bill does a lot to protect rights and minimize costs for legitimate intellectual property holders, as our friends at EFF expertly explain here, here, here, and here. The bill is also endorsed by top law professors, various major industries, tech companies, startup investors, inventors, and more.

Goodlatte’s Innovation Act is a win-win. By protecting small businesses from the prospect of ruinous litigation, they keep more of their money and hire more Americans.

By reducing the pressure on the court system, it will decrease the cost for innovators to defend their legitimate patents. And by reforming litigation so that it properly focuses on those patents that truly “promote the progress of science and useful arts,” we will be following the Constitution and honoring the Founding Fathers.

We don’t like it when people threaten us. So why do we let it happen to American businesses? Now is the time for conservatives to rally together and stop the trolls.