When the Patent Reform Act of 2007 (S. 1145) soon reaches the
Senate floor, Congress will be presented with a significant
opportunity to affirm the goals the Framers envisioned for the
patent system. Those goals — to spur innovation by rewarding
inventors and to disseminate pioneering knowledge to facilitate and
further expand the marketplace of ideas — have been thwarted in
recent years by a system that has failed to keep pace with the
rapid evolution of the economy and the nature of innovation. This
landmark reform measure will restore the balance the Framers
intended for the patent system.
The bill’s primary sponsors, Senate Judiciary Committee Chairman
Patrick J. Leahy (D-Vt.) and Senator Orrin G. Hatch (R-Utah),
recognize that today’s entrepreneurs face a rising tide of
unnecessary and costly litigation caused in large part by a sharp
increase in the number of low quality patents and legal rules that
have made it easier for plaintiffs to obtain excessive damage
awards. Ironically, the current patent system threatens to
undermine the goals the Framers intended to promote when it was
established.
The under-funded and over-extended United States Patent and
Trademark Office does not have the resources to adequately evaluate
the burgeoning number of applications, and too many low quality
patents are being issued as a result. To paraphrase a recent
Federal Trade Commission study of the patent system, these low
quality patents pose significant competitive concerns.
To compound matters, in the last few years the courts have made
it easier for plaintiffs to obtain large damage awards in excess of
the actual harm caused by the infringement. The possibility of such
enormous damage awards has triggered a dramatic increase in patent
litigation, the cost of which has also grown. This increase in
litigation and its costs have made it tremendously expensive for
inventors to enforce their patents against infringers and to defend
their patents against interloping speculators.
An example of the litigation abuse engendered by the current
system is the rise of “patent trolls,” speculators who acquire and
sue bona fide patentees but neither contribute to or
otherwise expand the marketplace of ideas nor increase or improve
consumers’ choices. These speculators profit at the direct expense
of consumers and risk-taking inventors and investors.
All of these problems threaten the ability of America’s
inventors to innovate and compete in the global economy.
In response, the Supreme Court under Chief Justices Rehnquist
and Roberts has found it necessary to step in and reestablish the
patent system’s constitutionally mandated balance. Piecemeal
review, however, is not a substitute for comprehensive reform. The
systematic fix the patent system needs requires congressional
action.
The reforms proposed by the Patent Reform Act of 2007 are
precisely the type of congressional action needed. The Act will
remove obstacles to growth and restore balance to the patent
system. In particular, the Act will protect inventors’ property
rights and encourage innovation by providing a meaningful
administrative review process to clarify the scope and validity of
patents, and the Act will clarify and modernize the damages rules,
thereby eliminating the perverse incentives that foster
litigation.
The review process will perfect the personal property rights
inherent in a patent by allowing for meaningful challenges to a
patent’s validity short of litigation. This type of a full and fair
review process is necessary to ensure that inventors’ rights are
defined as accurately as possible and that questionable patents do
not block other inventors from innovating.
The Act will promote a more efficient and competitive
marketplace by providing judges and juries with additional guidance
to assist in the extremely complicated calculations necessary to
ensure that damage awards accurately compensate patentees. Current
rules too often lead to overcompensation, which dampens the
incentive to improve upon prior art and encourages wasteful
rent-seeking behavior. Clearer damages rules will promote
risk-taking, investment and innovation, bringing benefits to
businesses, workers, and consumers alike.
The U.S. House of Representatives in September seized the
opportunity to bring the patent system back in line with the policy
goals envisioned by the Framers when it passed H.R. 1908. Like its
Senate counterpart, H.R. 1908 is the product of years of bipartisan
collaboration. And now, by passing S. 1145, the U.S. Senate has a
similar opportunity to restore our patent regime to its rightful
position of protecting inventors’ property rights and spurring
innovation. These are values that all Americans should rally
behind.
