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.