Patent Reform: U.S. Inventor Act goes to Congress

This week US Inventor, an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups, rolled out the U.S. Inventor Act in the House of Representatives. US Inventors have been visiting congressional offices since 2013. Back then, the false patent troll narrative fueled by millions of dollars from the largest multinational corporations on the planet filled the air with smoke. The smoke was intended to cloud what these huge companies really wanted – to destroy the patent system for small inventors and startups so they can perpetuate their monopolistic companies.

But the battle of ideas during the rush to pass the Innovation Act opened the debate up. The good news is that many in Congress took the time to understand and the Innovation Act was stopped on the floor. Congressman Issa (R-CA) and Congressman Goodlatte (R-VA) have attempted to revive it this year, but their cries now fall on educated ears.

Other facts have come to light since last year. Early stage funding for U.S. startups has dropped 62%. We are at a 40 year low in new business formation. What used to be approximately 85% of all venture capital invested in U.S. startups is now about half invested in China’s startups. Not surprisingly, in communist China, the startup market is booming, growing by 23%. As a result, China has taken the lead in swaths of new technologies, including technologies critical to our national security like artificial intelligence (AI). AI runs not only our power grids, but our tanks and ships. We will soon be mired in the swamp of a national security disaster as China moves even further ahead and we are forced to purchase these products from them.

But if you got game, don’t change nothing. It seems every month, China’s government announces a new program or directive intended to further strengthen their patent system. Patent litigation in China is a winner, no doubt. Cases are resolved by the court in about 10 months, and to get through the courts to a final decision, it costs around $500K, both much more favorable than here. Patent holders win in the vast majority of cases. When they win, injunctive relief is almost always awarded.

But there are two important statistics about China that are particularly revealing. The first is that 100% of foreign plaintiffs were awarded injunctive relief last year. This is intentional and is done to attract foreign investment in China’s patent system. The second is disturbing. 35% of the plaintiffs are individuals. China is laying the groundwork to turn 1.3 billion people into an army of individual inventors. Many of those inventors will use their inventions to form startups. We in the U.S. have gone the exact opposite direction – to our own peril.

So, as you can imagine, the news of China has cleared the smoke screen and much has changed on the Hill. We have met with 60 House offices over the last six weeks to talk about the US Inventor Act. Many are aware of the national security threat posed by China rocketing to the lead of so many new technologies. Virtually all of the House offices want to learn more about how our own self-imposed destruction of the U.S. patent system and the corresponding strengthening of China’s patent system has fueled China’s rise.

It’s pretty simple. A U.S. patent is not worth the paper it is printed on. In fact, a patent is a liability. Not only are there maintenance fees and other costs in maintaining a patent, but at any time the patent can be plunged into the corrupt PTAB political courts dumping hundreds of thousands of dollars of costs on whoever owns the patent. The more valuable the invention is, the more likely that it will be challenged at the PTAB, and the more likely it will be invalidated. It’s just a better decision to invest in the company that would steal the technology than to invest in the company that invented it.

The US Inventor Act will turn all this damage around. So the results we are getting on the Hill are not all that surprising. Almost 90% of the offices we met with want to see the US Inventor Act. About half of those said they would take it to their boss. We hope that many of these Members will ultimately sponsor it.

So, without further ado, here are the basic provisions of the US Inventor Act:

1. Restore injunctive relief as the default remedy upon a finding of infringement.
2. Eliminate Patent Trial and Appeal Board (PTAB) authority over all issued patents.
3. Eliminate all judicially created exceptions to patentable subject matter eligibility under 35 USC 101 including the abstract idea exception.
4. Allow venue to be established in the state where the patent holder resides.
5. Reinstate First-to-Invent.
6. Upon a finding of infringement, establish a default finding of willful infringement rebuttable only in cases where the infringer is not an expert in that particular field of technology.
7. Upon a finding of infringement, establish a default damages model of disgorgement of profits or 25% of gross revenue where profits are negligible or not representative of the market effect of the technology.
8. Establish small entity local rules intended to significantly lower the cost of litigation and bring resolution to the case within 18 months. District courts must adopt these rules if either the plaintiff or the defendant qualifies as a small entity and requests that the small entity local rules be adopted.
9. Restrict the Federal Circuit from using Rule 36 when there is a genuine controversy between districts
10. Stabilize the determination of what is or isn’t obvious by codifying the Federal Circuit’s objective “teaching, suggestion or motivation” test, which was eliminated by the Supreme Court in KSR v. Teleflex.
11. Stop fee diversion

For a detailed summary of these provisions please see the US Inventor Act Summary.