Yesterday I moderated a Google Hangout on the topic of patent reform, which was sponsored by the Innovation Alliance’s save the inventor campaign. Joining me for the conversation was United States Senator Chris Coons (D-DE), a member of the Senate Judiciary Committee and the driving force behind the STRONG Patents Act, and Congressman Thomas Massie (R-KY), an inventor and patent owner who is a member of the House Science, Space and Technology Committee. Louis Foreman, the CEO of Edison Nation, also joined the conversation remotely from his office in North Carolina.
The entire video is available below. I also had the discussion transcribed. What follows are some of the highlights of our conversation, which lasted for approximately 40 minutes.
To begin I started with an open ended philosophical question. Patent reform is not a partisan political issue. Whether you are in favor of the current major patent reform proposals, or opposed to additional patent reform largely depends on how you view the role of patents in the innovation ecosystem. I asked Senator Coons and Congressman Massie: “Do you believe patents promote innovation or do you philosophically believe patents inhibit innovation?”
SENATOR COONS: I do think that common across the advocates for a strong patent system in the House and the Senate is a profound belief that this constitutionally created and vital property right has to be defensible. That patent litigation has to remain capable of defending unique inventions, thus the Save the Inventor campaign. And those who are advancing the bills both in the House and the Senate that would change the patent litigation system are gravely concerned about what they view as so-called patent trolls and in the only hearing that we had in the Senate Judiciary Committee to discuss the bill in the current Congress they really focused in on abusive patent litigation practices that do exist and that are a problem, but that I think can be dealt with more narrowly in a more focused and targeted way that just deals with abusive litigation practices and I happen to think that we already see strong movement in that direction, at the Supreme Court, the District Courts, the ITC, the PTO have all taken actions that have begun to reign in some of the abusive patent litigation practices that were identified. I strongly value a strong patent system and I think folks on the other side are focused, perhaps overly focused, on stopping what they see as the predations of so-called patent trolls. My concern, don’t throw the baby out with the bath water; their concern, we absolutely have to act in order to reign in these abusive practices. And we’ve brought together strongly bipartisan teams of folks on both sides. The H. R. 9 and the Patent Reform Bill in the Senate as well have strong bipartisan leadership and the bill that I’ve introduced has strong bipartisan partnership. So you’re right, this really isn’t about party politics; this is about whether or not you think patents are essential and being able to defend those patents are essential to the vibrancy of our innovation system.
GENE QUINN: Congressman, I’d like to ask you sort of that same question. Philosophically, would you say that patents promote innovation or that they inhibit innovation?
CONGRESSMAN MASSIE: Well, you don’t have to believe or not believe, right? We’ve got 250 years of history in this country of innovation and we have the most innovation because we have the strongest patent system. The deal that our founding fathers gave us that was different from all the European models was what you create you own. And the charge that our Founding Fathers gave us in Congress was to promote the useful arts and sciences by granting for a limited period of time the exclusive use of an inventor’s works. So what we have to do is to decide within that charter how do you promote useful arts and sciences and for what period of time? There are some people that believe that zero period of time is the correct period of time. That does not work.
I’m not a lawyer, I’m an engineer. I went to MIT and I studied electrical and mechanical engineering because I love creating and right there in the laboratory and in the labs next to me people were inventing stuff all of the time and the great thing about being there in that hotbed at MIT is everybody wanted to start a company and the way you started a company was you had to go get capital and nobody was going to invest unless you had some intellectual property. So my startup that I spun out of MIT, my wife and I, we started right there in a married student housing dormitory was licensed from MIT from the Technology Licensing Office, then we went out and got venture capital and they believed in us and they knew we had a chance, but we had this limited period of time to get a return on that investment before the invention became public domain. That’s the great thing about patents. The deal you make with society is I’m going to tell you everything about how to copy this idea and when my exclusivity lapses everybody in the world can have it.
Our conversation then turned to the common misperceptions that are encountered when the topic of patents is being discussed.
SENATOR COONS: A concern I have is that lots of folks who are engaged in this debate and this discussion don’t understand the intersection between a strong patent system, being able to defend it effectively in court and the ability to raise capital for a startup, as the Congressman just described. It’s that intersection and the key role that patent litigation plays in it that I worry about. It’s not so much the length of the patent. I mean, it’s a monopoly. That’s what you’re getting is a — is a government-sponsored monopoly but the ability to actually defend that monopoly. If you’ve invented something special and you’re agreeing to share that invention with the world you have to be able to raise money; to raise money to take it to scale you have to be able to defend it. That means patent litigation has to be something you can possibly succeed at.
GENE QUINN: Right.
CONGRESSMAN MASSIE: Here’s a big misperception about patents that I run up against here in Congress. Some people think they’re to protect the big companies and nothing could be further from the truth. I mean, the big companies have the advantage of size, they have the marketing channels, they’ve got the manufacturing, they’ve scaled up. It’s the little guy that patents protect. The garage inventors who come up with things, and this was me in the beginning, and you go to tradeshows and you got a little 4×8 table because that’s all you can afford and you show the world your brand new idea and there’s a buzz at the tradeshow and your product would be copied within six months by all the big companies if you didn’t have a patent. Patents are there to give the little guys a chance in that market.
After this our conversation pivots to discuss the major pending patent reform legislation, namely the Innovation Act (H.R. 9) in the House and the PATENT Act (S. 1137) in the Senate.
GENE QUINN: Congressman, we’ll start with you. How do you see things in the House now? Where do we stand? And if you care to guess, what kind of percentage chance do see reform having this year and maybe during this Congress?
CONGRESSMAN MASSIE: Well, the bill that was brought forward in the House was H. R. 9 and frankly it’s a bad bill. It would have watered down our patent system through making it impossible to defend your patent. And so it would have affected all of the patents across all domains. But that’s the legislation they tried to advance in the House. Last Congress they passed it in the House but it didn’t pass in the Senate. This Congress, when they brought it to the floor, we slowed it down enough that we stopped it before the August recess and frankly I think we’ve stopped it for now in the House but listen, this battle will go on for another 100 years. There will always be some of the big companies that are up here with a lot of money trying to weaken the patent system and somebody’s got to be here. Hopefully when I’m gone there’ll be people elected that will stand up for the little guy who doesn’t have a lobbyist here to protect them and their intellectual property rights. But this battle will go on forever but right now we’ve had a temporary victory in the House where we slowed down the bad patent legislation.
GENE QUINN: I think that’s important because in the patent community you learn about the 1952 Patent Act and how it changed everything and it streamlined everything and maybe once every 50 years or so you get changes to the patent laws, maybe around the edges occasionally, but I think we really are in for a lot of push for reform on a yearly basis. Senator, do you think –
SENATOR COONS: Well, Gene, what I referenced earlier, I’ll just comment on again. There are real changes happening in the courts in patent litigation in the standards of review being applied and the cost and timeliness of discovery, for example, and I am very hopeful that those changes, given time to work, will reduce some of the intense pressure around patent litigation reform. But I would agree with the Congressman, this is going to keep coming back. There are very strong economic interests that are trying to weaken the patent litigation system. They see the economic consequences to them of patent litigation in a series of high tech sectors but it has a very different impact in pharma and bio and materials for universities, for venture capitalists and those folks are opposed to fundamental and sweeping changes in patent litigation. So it’s at an impasse at the moment but it’s on the floor, it’s come out of the committee, it’s primed and ready for action. If several of the big companies that are competing over this come to an agreement it could move to a vote very quickly so –
GENE QUINN: And that’s in the Senate?
SENATOR COONS: That’s in the Senate.
Next, our discussion moved to whether additional patent reform is even necessary.
GENE QUINN: [J]ust listening to you talk it dawned on me, something came to mind that hadn’t really come to mind before, is historically the way that the patent system has evolved and changed over time is giving the courts a generation or two to figure it out since the last change and then Congress getting together and say okay, well, we like this, we don’t like that, and it’s a much more thoughtful, considered approach rather than just a constant reform push.
SENATOR COONS: Right. It’s just a few years since the AIA, which was the single biggest change in patent law in decades and this new post-grant review process is still in its infancy and I do think some reforms will eventually be called for but I think it’s pretty soon after AIA to make sweeping and fundamental reforms to all of patent litigation.
GENE QUINN: And I suspect you agree with that as well?
CONGRESSMAN MASSIE: Yeah, absolutely. I mean, let’s let this perturbation settle out and see what the positive and negative effects were of the American Invents Act and — before we go tweaking the system some more.
It was at this point that I brought Louis Foreman into the discussion to get his perspective as an inventor and entrepreneur. “There would be no incentive for us to take a financial risk if we didn’t have at least a period of time where others cannot make, use or sell what we’ve created,” Foreman explained. “And that’s why a strong patent system is essential to what we do.”
I asked Congressman Massie if he cared to respond to add his experiences as an inventor and entrepreneur. Massie said:
Louis made a good point there about inventors… [O]ne thing that’s wrong with this patent reform legislation, they talk about patent trolls and then they equate anybody who is a non-practicing entity to a patent troll. In other words, if you invent something but you don’t manufacture it there’s an assumption that you’re doing something bad because you’re not making the idea and I say that’s — that notion that you have to, for instance, build the building if you’re the architect or that you have to build a cell phone company if you invent something for cell phones, that’s as ridiculous, that notion, as telling an author he doesn’t have a legitimate career unless he prints books and sells books. I mean, because authors are non-practicing entities too. You don’t call authors trolls, right? But they’re calling inventors trolls if that’s what you want to do for a living. So that’s one thing that troubles me about this legislation, it’s delegitimizing the career that I came from, which is inventing.
On the topic of the narrative that suggests that anyone who owns a patent is a patent troll I commented that I thought this was a very dangerous slippery slope argument because the giant technology firms that are pushing for patent reform do not themselves make any products. Instead, the products are made outside the U.S. by others, making an extremely fine line distinction between what they are doing and what your typical inventor or start-up is doing. Senator Coons responded:
Most of the household name technology companies we know are inventing and then they are licensing or franc- — I mean, they are working in a range of relationships such that other companies are manufacturing, distributing, selling and servicing the things that they’re inventing, yet they’re at the very heart of the attack on the individual inventor as a so-called troll if what they choose to do is invent, license, invent, license, invent, license and finance their ongoing invention through licensing phase. It is — it’s a distinction that’s important to be very careful about and I think the choice of the term patent troll was intention. Was designed to sort of demonize those who are not manufacturing when if you actually understand the field it’s far more complicated than that.
The next substantive patent issue we dealt with related to the provisions of the pending legislation that are most troubling, and what the odds are that the STRONG Patent Act and/or the TROL Act could become a compromise at some point in order for Congress to accomplish something on the issue of patents.
SENATOR COONS: There’s a whole series of changes to the practice of patent litigation, worse in H. R. 9 than in the Senate bill but just broadly speaking there’s a whole series of things that do — that affect discovery, that affect fee shifting, that affect standards of review that I think will make it much harder for the genuine individual inventor to both raise capital and then to be able to succeed in scaling their business. There are alternative bills, the Strong Patent Act, that I’ve introduced that also includes the Troll Act within it that would strengthen the patent system, attacking PTO Feta (ph. sp.) version, for example, that would strengthen the post-grant review proceedings and would also go after abusive demand letters. But it would only make very narrow and targeted changes to patent litigation to go after what is genuinely abusive behavior and then strengthen the patent system as a whole.
GENE QUINN: Yeah. Now before I ask you about the Innovation Act I’d like to — let me follow up there. What are the odds that the Strong Patent Act, which is really in the Troll Act or very, very similar –
SENATOR COONS: Right.
GENE QUINN: — what are the odds that in order to accomplish something that they will at some point during this Congress become the primary vehicle?
SENATOR COONS: I’d be thrilled [but] it hasn’t come through committee, hasn’t gotten a hearing in committee and so just by regular order I think the odds are fairly small. Because it’s a fundamentally different approach to dealing with the problem of abusive demand letters. It’s a much narrower, more targeted approach and it strengthens the patent system as a whole. It would — I think it would be a more measured, balanced and responsible way to deal with what are some challenges in patent litigation in the cost and length of discovery but I think right now the sponsors of the current legislation that’s had a hearing, that’s moved to the floor are pretty dug in, unmoving with their approach.
GENE QUINN: And, Congressman, the Innovation Act, what troubles you?
CONGRESSMAN MASSIE: One thing is it’s going to scare away investment and it’s going to make universities less likely to want to license their ideas and here’s why. This is a bipartisan — there are Democrats and Republicans on both sides of this H. R. 9, the bad legislation. Well, one of the ways it’s been sold to Republicans is this is the tort reform you’re looking for. There’s tort reform in this. But the problem is it’s got loser pays… which sounds good until you realize the little guy has got more to lose than the big guy when you go into that battle. But the other problem is they say well, we’re not just going to go after the loser, we’re going to go after his investors and anybody that stands to make money from this or benefit. Guess what? That includes universities and so now universities patents would become a liability, licensing their ideas would become a liability because they could be subject to being enjoined into a lawsuit and have to pay. So that’s going to scare away not just investors but the universities… [W]hat this bill tries to do, the well-intentioned folks say well, we want to protect the innocent consumer who buys a product at a consumer electronics store, takes it home and then gets a letter that they’re being sued. Well, okay, that’s noble enough but there are other customers, too, you know. A big cell phone company is a customer to a chip manufacturer and so the very provisions they’re putting in there to — ostensibly to protect little guys actually protect the big guys because they’re customers too.
SENATOR COONS: So these are the customer stay provisions.
GENE QUINN: Yeah, that is a very noble thing to try and solve but that that’s not how the legislation is written. It really needs to be a flyswatter, not the elephant shotgun and that seems like the approach that they’ve been taking. Just pull out an elephant shotgun to kill the mosquito.
CONGRESSMAN MASSIE: Or to take a lawnmower to your flowerbeds to cut the weeds.
GENE QUINN: Right.
CONGRESSMAN MASSIE: I mean, you’re going to cut everything down.
There is little doubt that patent reform will hang over the industry indefinitely, and if an opening arises it could move very quickly to a vote in either or both the Senate and the House.