The Patent Landscape Has Changed, but Targeted Reforms Still Needed | Commentary

Posted January 5, 2015 at 1:05pm

The 114th Congress will soon begin and the newest members of Congress will take their seats. While the 113th Congress was hampered by partisan gridlock, there’s optimism among many that the 114th could be defined by tangible compromise on critical issues facing our nation.

Many expect that patent reform will be one of the top bipartisan issues for the new Congress. In 2013, Congress responded to growing concerns over litigation abuses and moved to address a number of litigation procedures. They weren’t the only ones paying attention to this issue. While reform stalled in Congress, the courts and other government agencies took some meaningful steps. We now have decisions from the Supreme Court on important issues, such as fee-shifting, and actions on bad faith demand letters by the Federal Trade Commission (FTC). In addition, the Patent Trial and Appeal Board (PTAB) has been actively reviewing the validity of newly issued patents that are challenged through post-grant proceedings implemented under the America Invents Act (AIA), and the Judicial Conference is requiring more specificity in patent complaints.

These changes have led to a marked decline in patent litigation in some sectors, especially from NPEs.

So the question at hand for Congress is this — do the patent policy issues that motivated the legislative effort in 2013 still hold in 2015?

The short answer is yes, albeit with a balanced approach informed by what has already been accomplished and the impact it is having. While the judicial and agency actions have been helpful, core policy issues that are deserving of balanced congressional attention remain. Even some of the most ardent supporters of patent reform are recognizing this need for balance. Professor Mark Lemley of Stanford University Law School was recently quoted saying the need for congressional action had declined in the wake of Supreme Court rulings which addressed important patent issues. Professors James Bessen and Michael Meurer of Boston University, who produced frequently cited research on NPEs, recently changed their definition of a patent troll to exclude universities.

The changes in the legal landscape for patent litigation, and shifting perspectives on litigation reform, signal a need for a careful and measured reform approach to a system that is very much in flux. Congress must ensure the IP system, which encourages companies to invest in R&D to develop new products and innovations, strikes the right balance between the interests of inventors and the public. IP-intensive industries generate $5 trillion in economic activity, account for nearly half of private sector output, and support 40 million American jobs.

The best way to strike that balance is to strengthen incentives for innovation and provide certainty and stability for inventors seeking to protect their innovations. We need to improve patent quality by giving examiners the time, resources, and skills to properly evaluate patent applications. Low quality patents are the common denominator of many abusive and unfair practices, empowering bad actors to claim ownership of technologies that are obvious or clearly not novel. Ensuring that low quality patents are not granted protects end users and startups that lack the legal resources to fight back.

In some areas where there has been judicial action there may still be a role for Congress to play in improving certainty and setting clear standards. This could include clarifying the grounds for fee shifting and defining the federal government’s role in demand letter reform to further address abuse.

As Congressional leaders make improvements, they must avoid discriminating against software, a form of innovation that is critical to technological advancement in all industries. The global software industry is valued at $407 billion, is dominated by U.S. companies, and is an indispensable aspect of innovation in every sector of the economy. Limiting patent protection for software would be detrimental to the ability of America to compete in the global market.

Trade secrets are also an important form of intellectual property, accounting for two-thirds of an average U.S. companies’ information value. Yet they are the only form of IP rights for which the protection of a federal private right of action is not available. The U.S. loses over $400 billion in economic activity every year to trade secret theft. Congress should also act to address trade secret misappropriation. Creating a national policy to help curb this loss is a crucial step that stakeholders across the economy agree on.

The 114th Congress has an opportunity to craft a meaningful patent reform proposal that recognizes the significant changes we’ve observed over the past few years and builds incentives that will promote invention and economic growth for decades to come. The Partnership for American Innovation appreciates Congressional efforts to-date, and looks forward to seeing balanced legislation in the coming term aimed at addressing remaining abuses while championing and strengthening the U.S. patent system as the world’s model for powering a 21st Century innovation economy.


David Kappos, the former director of the U.S. Patent and Trademark Office, is a senior adviser for the Partnership for American Innovation.