Tech giants are aiming to infringe

Legislation to weaken patent protections for inventors is again before the Congress. The question is why, in the middle of the greatest recession since World War II? At precisely the moment when America needs to create more and better jobs from new industries, why would Congress want to weaken the incentives for inventors and the venture capitalists who invest in innovation?

Advocates of this legislation claim the nation is suffering a crisis created by the Patent Office’s issuance of weak patents, excessive damage awards in the courts, and a surge of patent litigation by unscrupulous litigants.

ADVERTISEMENT
The facts refute these claims. The Patent Office is rejecting almost 58 percent of applications, and 90 percent of those patents challenged by re-examination are surviving.

As to the question of excessive damage awards, the PriceWaterhouseCoopers 2008 annual report on patent litigation concludes that the annual median damage award since 1995 has remained consistent, when adjusted for inflation.

Moreover, there is no surge of patent litigation. The annual Federal Judicial Statistics Report reveals the ratio of patent lawsuits filed per the number of patents granted has remained at about 1.5 percent since the early 1990s. The report also documents that an average of 96 patent cases went to trial annually between 2000 and 2008. By no measure can anyone claim that an average of only 96 cases per year in the federal courts constitutes a litigation crisis.

The advocates’ factual arguments for this legislation fail. The next logical question is, why has this legislation been pushed so hard in the 109th, 110th and now the 111th Congress?

The answer is that 14 giant global technology corporations operating as the Coalition for Patent Fairness, plus IBM, and their trade associations, want to weaken U.S. patent protections for their own gains. To ensure success they have mounted a multi-year lobbying campaign. These 15 companies are IBM, Apple, Cisco, Dell, Hewlett Packard, Intel, Micron, Oracle, Palm, RIM, Symantec, SAP, Google, AutoDesk, and Microsoft.

Saving Capitalism, a new book by economist Pat Choate, uses data from these corporations’ Security and Exchange filings to document that these 15 companies were defendants in 730 patent infringement cases in the 13-year period of 1996-2008. Those same records reveal that they were also defendants in 641 antitrust cases during the same period.

In that period, these 15 corporations paid out almost $4 billion in infringement settlements, which is half or more of what was paid out for all such U.S. cases in that 13-year period.

The New York Times reported on June 2 that the U.S. Justice Department has begun an investigation into whether the recruiting practices of several of these corporations violate antitrust laws. The Times reported that federal investigators had contacted Google, Apple, Intel, and Microsoft about an agreement they had made not to actively recruit each other’s top talent, which is anti-competitive and illegal. Google confirmed it was cooperating with investigators. Others declined to comment.

ADVERTISEMENT
Activities against competition are not new for large global corporations. Please consider the following examples (there are more):

 • The European Commission (EC) has fined Microsoft almost $2.5 billion for its anti-competitive acts over the past decade.

• In 2004, Microsoft settled a class action lawsuit with the state of California for $1.1 billion, plus $258 million in legal fees, for overcharging customers.

• In 2008, a federal court ruled that Microsoft owed Alcatel-Lucent $512 million for patent infringement.

• The EC fined Intel more than $1.4 billion in 2009 for monopoly abuse, a similar charge Intel settled privately with Japan in 2005.

• South Korea also fined Intel $25 million in 2007 for anti-competitive practices.

These aforementioned 15 corporations, operating as a collective voice under a misleading organizational name, are urging changes to the patent laws that actually strike at the heart of competition and American innovation. A similar action happened a decade ago when the financial industry successfully weakened financial regulation and repealed the Glass-Stegall Act, under the guise of stimulating financial competitiveness. We are living their successes today. I ask you, should Congress let history repeat itself?

By weakening U.S. patent protections, these corporations would weaken the ability of individual inventors, small companies, universities and private research institutes to challenge them in the marketplace. For these so-called “small entity” inventors, patents and the threat of court-ordered damage awards are their only protection from the large corporate infringers. Without the protection of a strong patent, moreover, most cannot raise financing.

ADVERTISEMENT
Keeping these small American innovators active and vibrant is essential in accelerating economic recovery. The Small Business Administration reports that small businesses receive 13 times more patents per employee than the larger enterprises.

 In addition, small businesses created more than half of the most important inventions of the 20th century. Equally significant, small and medium-size businesses produce approximately 75 percent of the U.S. gross national product, making them also America’s major job creators.

Our patent system is the finest in the world. There are patent concerns that Congress can and should address, starting with the high cost of fees for inventors who hold less than three patents. However, this legislation addresses fictions of global corporations and the proposed solutions are special fixes that benefit these few giants at the expense of everyone else.

Congress should not do to American innovation what it did to the American financial industry.

Kaptur is a 14-term representative from Ohio’s 9th district.

More in Overnight Technology

OVERNIGHT TECH: Tech giants help Microsoft in DOJ fight

Read more »