Two More Reasons to Think Twice Before Changing Our Patent System

By Steven Tjoe

Today, misguided fears of an explosion of patent litigation and the specter of the so-called “patent troll” problem continue to influence the popular perception of patent policy.  Over the past year, various organizations have spurred a movement to make significant legislative changes to our patent system, despite calls for caution and further investigation by judges, FTC Commissioners, former USPTO directors, and Congress’ very own Government Accountability Office (GAO).  With the final implementation of the America Invents Act (AIA) now less than a year old, the speed and the magnitude by which the American patent system is being overhauled has wrought uncertainty throughout the innovation economy.  Two pieces published last week show that there is good cause to think twice before making further changes to our patent system.

First, in A Balanced Approach to Patent Reform: Addressing the Patent-Troll Problem Without Stifling Innovation, John Malcolm and Andrew Kloster of The Heritage Foundation debunk the myths underpinning the calls for legislative action on patents.  Regarding the myth of a patent litigation explosion, Malcolm and Kloster observe that contrary to popular belief, the volume of patent lawsuits has remained remarkably stable, with the rate of infringement suits filed at 1.5 percent of the total patents issued by the PTO.  Moreover, the rise in the total number of infringement lawsuits can be attributed to the AIA’s new joinder rules and the fact that the PTO has issued more patents in recent years, a fact that likely reflects an actual increase in patent-worthy innovation.

Malcolm and Kloster also explore the harrowing specter of the so-called “patent troll,” noting that little evidence exists to support allegations of a systemic problem.   After disposing of the oft-cited statistic that patent trolls are costing the American economy $29 billion annually (see here and here), Malcolm and Kolster pinpoint a central pitfall of the legislative reform proposals today: the overly broad definition of a patent troll that “throw[s] the baby out with the bathwater.”  Instead, Malcolm and Kolster recognize that patent aggregators play a fundamental role in the innovation economy: “patent aggregators facilitate an efficient division of labor between inventors and those who wish to use those inventions for the betterment of their fellow man, allowing inventors to spend their time doing what they do best: inventing.”  Recognizing this, Malcom and Kolster conclude:

The proper way . . .  to address patent trolls is by using the same means and methods that would likely work against “ambulance chasers” or other bad actors who exist in other areas of law, such as medical malpractice, securities fraud, and product liability . . .

Indeed, this critical observation that litigation abuse in the patent context is no different than litigation abuse in any other area of law – and can be dealt with in similar fashion –  is sorely lacking in the patent policy discussions today.

Brian O’Shaughnessy cuts to the heart of the issue in his insightful essay, Federal Circuit Takes a Swipe at Baseless Patent Litigation.  The essay reviews the Federal Circuit’s recent decision in Kilopass Technology, Inc. v. Sidense Corp., and demonstrates that the courts are well-equipped and willing to deal with abusive patent litigation on a case-by-case basis.  As O’Shaughnessy succinctly concludes:

Targeted, incremental reform specifically addressing the acts of specific culpable litigants offers an effective fix without compromising, or further complicating, our patent system as a whole.  Our patent system is the most effective economic engine known to man.  Prudence dictates that we tinker with it cautiously.

As the Senate moves ahead to consider various proposals on patent litigation reform, we should exercise an abundance of caution.  There is good cause to pause and think twice before legislating further systemic changes to our patent system that could damage our innovation economy.

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