Heritage on how conservatives should approach patent reform
Patent reform bills have cleared markup this session in both the Senate Judiciary Committee (S.1137, the PATENT Act) and the House Judiciary Committee (H.R.9, the Innovation Act). While there are some lingering issues left to resolve, and others that were not tackled in this reform package, chances are high both bills will come to the floor in the coming months.
As the proposals continue to move forward, we’ve seen an uptick in expressions of concern — including, somewhat surprisingly, from conservatives who might normally favor litigation reform in other contexts – that the Innovation Act and the PATENT Act are somehow poised to undermine the U.S. patent system. (The American Conservative Union has characterized the legislation as an Obama-driven initiative to promote “a patent-free society.”)
We view these particular expressions skeptically. In our view, both the House and the Senate measures are aimed at litigation reform that, properly implemented, should lower burdens on both large patent holders and small, and on plaintiffs as well as defendants.
We’ve already debunked the myth that this year’s patent-reform initiatives are a left-wing idea; this particular approach to reform, aimed at simplifying and reducing the costs of what has been a particularly complex and unpredictable type of litigation, has deep roots of support on the right. We also think it’s worth taking a more detailed look at the reforms under consideration.
A good place to start is the Heritage Foundation’s 2014 paper, “A Balanced Approach to Patent Reform,” by John Malcolm and Andrew Kloster. The paper includes many valuable insights for conservatives thinking about how to approach the issue. Some insights we gleaned from Heritage:
There’s no categorical way to define ‘patent troll’
As we’ve long said, anyone can be a bad actor; think of “patent troll” as a verb rather than a noun. It shouldn’t matter if you practice your patents or not. In fact, non-practicing entities can and do play a valued role in creating healthy secondary markets. Thus, as Heritage writes, reforms should apply to everyone:
Judges should be empowered and encouraged to employ sanctions and bond requirements to deter abusive litigants of all types, not based on whether they are plaintiffs or defendants or whether they are patent assertion entities or ‘active users’ of a patent.
Patent litigation reform and tort reform
Conservatives long have sought to implement tort reform and deter trial lawyers. Patent-litigation reform is an extension of this principle. As the Heritage paper puts it:
This similarity between tort reform and patent reform is no accident; the lawsuits called ‘troll’ lawsuits in the patent context are quite often called ‘strike’ suits in other contexts. For many years, leading advocates of tort reform such as the American Tort Reform Association and the U.S. Chamber of Commerce have supported bonding requirements, limitations on discovery, heightened pleading, and loser-pays systems because such reforms deter frivolous lawsuits.
While patent-litigation reform issues can sound like general tort-reform issues, we also should bear in mind that patent litigation is not “typical,” as far as federal litigation goes. Patent pleadings in federal court can lead to difficult, opaque technical filings that even judges who are patent experts can find hard to understand.
For this reason, reformers both in Congress and in the federal courts have moved to create procedures to simplify and clarify patent cases. The goal is to ensure they can be ruled on more quickly in preliminary phases and that the costs of litigation processes like discovery can be contained. The Innovation Act and the PATENT Act are only the latest efforts to make patent cases more easily understandable and more easily handled. We believe this would benefit all parties involved, as well as non-parties looking for patent-law clarity.
Patent reform as a model for broader litigation reform
It’s not just about the patent system. Patent-litigation reform offers a case study for broader limitations on predatory trial lawyers:
As one prominent patent expert has testified, ‘[A] clear consensus exists across the patent community today that meritorious patents should be more easily, inexpensively and predictably enforced—and patents lacking merit should be more easily, inexpensively and predictably eliminated.’ These principles could be applied in any area of civil litigation…’Patent trolls” are not the only trolls out there. America’s judicial system is teeming with all kinds of abusive litigants, including personal injury trolls, class action trolls, and employment lawsuit trolls. Should patent reform be enacted, its effectiveness might well have a bearing on future civil justice reform efforts in other areas.
Fee-shifting is generally a good idea
Reasonable people may disagree about the right balance in shifting litigation fees: that is, whether fee-shifting measures go too far or not far enough. But broadly speaking, conservatives should be on board:
Some proposals involve shifting some or all of the costs of litigation to the loser of the lawsuit. This could include awarding actual attorney’s fees, reasonable attorney’s fees, or reasonable fees and other expenses. Fees could be awarded to all winners or only to winners when a judge finds that the loser’s litigation position was substantially unjustified. Some proposals have permissive joinder rules that allow defendants to add ‘interested parties’ to the litigation in certain circumstances. Such leniency would help to ensure that trolls cannot set up shell companies to litigate and then go belly-up when they lose…This sort of fee-shifting is generally a good idea so long as the court has discretion to require that each side bear its own costs when it determines that the non-prevailing party’s position was ‘substantially justified.’
In criticizing an earlier version of the Innovation Act, Heritage also makes a helpful point that Congress should be careful in defining what is covered under fee-shifting, so as not to leave unintended ambiguities:
The Innovation Act [of 2013] fails to define what “reasonable fees and other expenses … in connection with a civil action” related to patent infringement means. This language therefore might or might not be intended to include expenses related to post-grant review at the PTO…a lack of clarity will only invite costly litigation on these issues.
The ‘Patent and Copyright Clause’ (AKA the ‘Progress Clause’) isn’t just about property rights
America’s Founding Fathers, recognizing the importance of encouraging and fostering innovation, enshrined adequate incentives to do so in the Constitution. Specifically, the Patent and Copyright Clause provides: ‘The Congress shall have Power To…promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.’
As Heritage rightly states, the Progress Clause of the Constitution creates a dual mandate for the patent system, not only that there be strong and clearly defined property rights for innovators, but that they are applied in a way that fuels innovation and economic growth. Decreasing the costs and increasing the efficiencies in early-phase patent litigation – whether defending against or pursuing patent-infringement claims – serves both to strengthen property rights and to promote innovation.
Cato’s Brink Lindsey underscores this point, noting government policies aren’t necessarily free market just because they feature tradable property rights. Just look at taxi medallions.
Pro-innovation means pro-patent-litigation reform
Patent lawsuits have the same pitfalls as other civil lawsuits: Rapacious trial lawyers should be discouraged so that business can innovate without undue fear of court costs.
Nearly anyone who has ever read the technical filings in a patent case can sympathize with ongoing efforts to make the cases easier for judges and other lawyers to understand. We also sympathize with the paired goals of:
- Limiting, as much as possible, the costs of defending meritless patent lawsuits; and
- Protecting the rights of patent-holders, whether they are as big as an international search engine or as small as a single inventor toiling in a garage.
Anyone who holds patent rights could find himself or herself in the role of defending a patent or pursuing a patent-infringement case. The House and the Senate judiciary committees have committed themselves to enabling parties in patent cases to defend themselves or assert their patent claims with as much simplicity and clarity, and at as manageable a cost, as possible.
This year’s patent-litigation reform bills also aim to make the courts that hear patent cases function more efficiently and smoothly. That should empower rights-holders generally, even if it starves the feverishness of high-billing patent litigators, who successfully lobbied then-Senate Majority Leader Harry Reid, D-Nev., to kill off reform efforts in the last Congress.
Reasonable conservatives and libertarians may disagree about the particular details and balances struck by different provisions, but the larger mission of reform represents the general conservative values that should unite us.
