Congress is weakening patents and threatening to kill the innovation economy

Would you invest untold hours and thousands if not millions of dollars in developing new property where the rules change every few years? Where savvy lobbying and PR campaigns stampede political leaders into reducing the value of your property in a matter of months?

Unfortunately, this increasingly describes the U.S. patent system. In 2011, Congress enacted the America Invents Act (the AIA), widely recognized as the largest change to the U.S. patent system since 1836. Two years later, the House has just passed HR 3309, yet another vast overhaul of the patent system, creating numerous new rules for how all patented innovation is used, licensed and litigated against infringers.

Much of the AIA is not yet fully tested and implemented. So, why the rush?

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Over the past year, a well-funded, aggressive lobbying campaign backed by a few large tech companies has conjured an alleged state of emergency over the specter of so-called “patent trolls,” a rhetorical term that has no settled, agreed-upon meaning. This epithet has been used to attack individual inventors, universities, and even startups, the very people who rely most on a stable patent system and strong patent rights.

But inflammatory rhetoric and skillful lobbying have won again in D.C. The House has rushed to judgment by passing H.R. 3309.

The law would vastly change the rules for how patented innovation is licensed in the marketplace and litigated against infringers. The changes are far too many to recount here, but, simply put, H.R. 3309 makes it harder and more expensive to license and enforce patent rights. Among other things, it creates a “loser pays” system in patent law, requires patent owners to provide information they may not yet have at the start of their case, and makes it harder to get the information they need to prove their case.

Both the substance of these proposed changes and the process by which they have been reached should worry anyone who cares about economic growth and the innovation that makes it possible.

The rush to enact H.R. 3309 was caused in large part by allegations of a “patent litigation explosion” in recent years caused by “patent trolls.” or “nonpracticing entities” (NPE). Proponents repeatedly cited academic studies purporting to show this litigation explosion, but these studies are unreliable. This past August, Congress’ very own Government Accountability Office (GAO) declined to rely on them in its much-anticipated report on patent litigation, describing them as “nonrandom and nongeneralizable.”

The GAO further recognized that the only significant, measurable increase in patent litigation occurred solely in 2012, and this was entirely the result of changes to patent litigation practices wrought by the AIA.  A recently released study by three leading legal empirical scholars, Christopher Cotropia, Jay Kesan, and David Schwartz, also concluded that there was “no explosion in NPE litigation between 2010 and 2012,” and they also found that increases in litigation after 2011 are explained by changes to litigation rules instituted by the AIA. The irony is that these rule changes were advocated by the very parties who are now complaining about the increase in litigation!

We should not base public policy on dubious studies, and Congress should not ignore solid advice from its own experts at the GAO. Let’s hope the Senate proceeds more cautiously.

The vote on H.R. 3309 is also a cause for worry because it has demonstrated that the U.S. patent system is open to constant political revision, given enough PR muscle and an extensive enough lobbying budget. First proposed this summer, H.R. 3309 was rushed out of committee and to the floor without hearings, against bipartisan objections from many members and affected parties.

That’s no way to run a property rights system. Investment and economic growth suffer when property owners cannot rely on stable rules, and changes are driven by political haste rather than sound evidence. Such treatment of property is foolhardy even when it comes from local zoning boards and aldermen. With intellectual property-intensive industries adding over $5 trillion to U.S. GDP in 2010, it’s positively reckless when applied to the patent system.

As former US Patent and Trademark Office Director David Kappos recently remarked in Capitol Hill testimony, Congress is “reworking the greatest innovation engine the world has ever known, almost instantly after it has just been significantly overhauled. If there were ever a case where caution is called for, this is it.”

The Senate should stop this legislative stampede before real harm is done to the U.S. innovation economy.

Mossoff is professor of Law at George Mason University and Schultz is associate professor of Law at Southern Illinois University. They are both senior scholars at the Center for the Protection of Intellectual Property, which receives support from companies in the innovation industries affected by H.R. 3309.

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