Game of Patent Thrones

Just as in the land of Westeros, there is turmoil and intrigue in our government as to who is to lead the United States Patent & Trademark Office (USPTO).  Indeed, the top position of Under Secretary of Commerce for Intellectual Property and Director of the USPTO has been vacant since the resignation of David Kappos on February 1, 2013.  His deputy, Teresa Stanek Rea, became Acting Director, but she was not elevated to his post.  She resigned on November 21, 2013, which left both positions unfilled.

On January 13, 2014, Michelle Lee, former head of Patent and Patent Strategy at Google, was appointed Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the USPTO, and in the ongoing absence of a Director, she holds the fort as Deputy Director, but with her position in administrative law limbo.  Despite the clear need for leadership at the USPTO, the search for the next Iron Throne holder is mired in ideology and lobbying.

Although the current administration talks the talk of promoting invention and innovation, they are influenced by special interests that have negative views regarding patents and the patent process, particularly in view of the “patent troll problem.”  Unfortunately, it appears that the reason for the long delay in selecting a USPTO head lies almost exclusively with the administration’s and Congress’ views on the patent troll issue, i.e., the head person must be willing to make whatever changes to the patent system to curtail patent trolling, apparently regardless the effect on the patent system as a whole.

The troll issue should be addressed, but by fair means, not by laws that will inadvertently cause unfair burdens to all inventors, result in barriers to innovation, and perhaps seriously damage the U.S. economy by diminishing the value of intellectual property.  American ingenuity and creativity should be encouraged, and only bad actors and bad actions sanctioned.

Patent law has historically been a quiet area of law, with sporadic historical outbursts, such as with Alexander Graham Bell, the Wright Brothers and others who transformed society with their innovations, and others seeking to partake in such successes by challenging them.  Over the last few decades, however, there has been an explosion of many technologies, with modern innovators creating transformative products, e.g., smart phones, biotechnological advancements, software, and other innovations that enrich our lives and promote our success as a nation. There has been much litigation on many of these lucrative technologies.  Everyone wants a piece of the pie, and frankly, when one invention leapfrogs off the back of another, it is sometimes difficult to figure out who should profit.  However without profit as an incentive, neither the poor geek spending nights and weekends in their garage, nor the major corporations, would be motivated to innovate and we’d all suffer.

For many small inventors, e.g., individuals and universities, it is difficult to fully participate in the patent system, and deal with licensing and enforcement, because of growing barriers to entry, such as legal fees. Thus, many small inventors and universities are forced to collaborate with or sell their patented innovations to others, who are better positioned to approach patent infringers.  A small percentage of these helpers are the so-called patent trolls, i.e., those abusing the patent system by improperly asserting patent rights.

Think of it this way.  Most universities and small inventors do not have the ability to manufacture and market their inventions themselves. They don’t have the contacts, nor the startup capital – in fact, another TV program, Shark Tank, makes the difficulties for the small, home-grown inventor clear. These inventors might not have the business acumen, but they do have the ideas and innovations that can improve all of our lives, provide jobs, and contribute to the U.S. economy.  They just can’t do it by themselves.  Under the proposed laws every investor on Shark Tank might be called a troll.

The majority of patent suits do not actually involve “troll” issues, and only a small percentage involve inappropriate actors, i.e., actual trolls acting abusively. The term patent troll, coined by large corporations to denigrate patentees suing them, is now used to designate anyone filing suit on a patent, whether an abuser of the patent system or not.  Indeed, some large tech companies being so sued and the reactive press now attack the entire patent system for the actions of those few improper actors, and have gotten the current administration and Congress involved in the patent process and hysteria for patent reform.

Despite the recent passage of the America Invents Act (AIA) of 2011, the most comprehensive change to the U.S. patent system since 1836, Congress soon acted to pass further legislation.  Indeed, before the ink on the AIA was dry and before full implementation of the Act, significant changes were being proposed to ostensibly address the patent troll problem.  On December 5, 2013, the House of Representatives passed H.R. 3309, the Innovation Act, with various controversial positions, e.g., fee shifting, which would adopt the “English rule” in damages where the loser pays the legal fees of the prevailing party in “unreasonable” patent suits, and make significant changes in notice pleading.  Although some provisions of H.R. 3309 were sensible, little thought went into the impact of these new requirements to the patent system to all patent holders, whether engaging in abusive trolling or not.  Indeed, some of the notice requirements were particularly burdensome to every patent holder and every patent applicant, seriously undermining the entire patent system.

Imagine a rightful patent holder, trying to stop an overt infringer copying his invention, and the infringer, making huge profits on their theft, hires a large law firm, turning on litigation full blast. How could this little guy even contemplate protecting his rights when faced with a Goliath who could turn a small litigation into one costing millions?  How many of these rightful patent holders might be intimidated into not even entering the court system?  Instead, under our current system, a judge has the right to award damages under inequitable circumstances, including fee shifting.  This is vastly different from a proposed system that mandates a winner-take-all philosophy. Similarly, individuals and small companies subject to improperly-asserted patents already have the right to fee shifting or other equity if the judge views the litigation baseless.  There must be some discretion before levying these harsh penalties, and judges should remain in control of the process.

The legislative controversy came to a head in the Senate on May 21, 2014, when the Senate version of the bill, called the Patent Transparency and Improvement Act, was removed from the Senate calendar, enraging the Bill’s sponsor, Senator Leahy, who blamed the trial lawyers.  However, many in the patent community also objected to the Senate Bill, including the biopharmaceutical industry and universities, who noted that both the House and Senate Bills lacked target to the particular problem, bad actions by trolls, and instead adversely affected the entire patent community. For these reasons, the Senate Bill was shelved.  Littlefinger would be proud.

With all this Congressional turmoil, the search for a new USPTO Director continues without success.  A couple of months ago, however, the press was abuzz with Phil Johnson, Senior Vice President for Intellectual Property, at Johnson & Johnson being vetted for the position.  However, despite Mr. Johnson’s extensive expertise in patent law, his candidacy was contested because of some pro-patent positions he took.  Apparently, one needs to toe the party line for such consideration, which does not bode well for the patent system. Shades of the Red Wedding?

Talk now is that Ms. Lee is finally being considered for the Director position.  After leaving the Director position vacant for a year and a half, and passing her and Ms. Rea over, both highly-qualified candidates, will this administration and Congress, like the medieval lords in Game of Thrones, consider a Daenerys Targaryen to ascend the Patent Throne? Sadly, with the powers at work against the patent system, without someone to lead, as they say in Westeros, winter is coming.