Patent Proposal Puts Property and Innovation at Risk

In the intervening years, the Supreme Court and Federal Circuit have changed patent law in several important areas, including standards of patentability, remedies, and venue, all to the benefit of patent users.
Due to a misguided focus on the costs of patent litigation, these proposals overlook the much larger long-term costs that the U.S. would incur if patent rights were fundamentally weakened. At the same time, these bills give short shrift to the real institutional problems within the Patent and Trademark Office (USPTO), such as lack of reliable funding, that jeopardize the quality and efficiency of patent examination.
Strong intellectual property (IP) protections are especially important to economic recovery and growth--a critical consideration, given the current economic climate. Congress should remember that patents are, at base, property, and that moving intellectual property farther from the real property paradigm endangers American innovation.
In Article 1, Section 8 of the U.S. Constitution, the Framers expressly recognized the importance of protecting intellectual property in order to reward original ideas, nourish innovation, incentivize investment, promote a robust economy, and enhance the nation's quality of life.

In The Noblest Triumph: Property and Prosperity Through the Ages, Tom Bethell traces the history of property ownership through Western civilization. From the Roman establishment of monopoly ownership of property rightsthroughthe British establishment of a Rule of Law throughout its Empire to protect those rights, the history of property protection demonstrates that justice, liberty, order, and prosperity are all enhanced in civilizations that have strong legalproperty protections.

Patent protection, just like protection of other property rights, provides owners with predictability and security. Spending enormous time, energy, and resources in developing a productmakes sense only if the inventor is protected from those who would steal the creation. Furthermore, only with the protection offered by patents would a banker lend money to an inventor to refine his or her invention or build a factory to mass-produce it for popular consumption.

Consumers also reap great benefits from the patent system. Beyond simply enabling innovation, patent protection has helped to make important technologies--from seatbelts and penicillin to all manner of labor-saving devices--readily available to the public at large. Mass production of everything from the Model T to laptop computers has driven down prices, increasing prosperity and boosting quality of life.

Significant Shortcomings

The corollary to having a strong intellectual property system that provides such enormous and widespread benefits is that those benefits can be placed at risk when that system is modified. In particular, changes that move patent protection further away from the tangible property paradigm pose the greatest risk.

Particularly troubling are the unnecessary expansion of inter partes reexamination--an administrative proceeding by which any party can challenge the validity of a patent--and the creation of a new post-grant opposition system. When these changes were first proposed, inter partes reexamination was rarely used and thought to be ill-equipped to deal with patent quality issues. Since that time, however, there has been a dramatic increase in inter partes filings, and a high percentage of disputed patents--nearly 75 percent--have been invalidated through reexamination.

If anything, Congress should be working to improve the efficiency of inter partes reexamination and to discourage wasteful and potentially abusive uses of the system
as a tactical weapon.
Parties would be able to file successive attacks on patents, dragging out the process indefinitely and imposing great costs on the patent holder. At the same time, the House bill would broaden the scope of permissible challenges, currently limited to prior art, to include validity challenges on the grounds of prior public use or sale. This is especially problematic because these kinds of challenges are fact-intensive and cannot be fairly resolved without discovery, cross-examination, and the other evidentiary procedures of litigation--none of which are available in the reexamination process. Further, all patents, not just those issued since 1999, as under current law, could be subject to this vague and wide-ranging procedure. Finally, these challenges would have only a limited estoppel effect (a means of blocking repetitive legal actions) allowing a party to file subsequent challenges in court.

Recommendations:
(1)Congress should retain the feature of current law that precludes challenges based on any issue that could have been raised at a inter partes
reexamination requested by the challenger.
(2)Put a time limit on inter partes proceedings.
(3)Block frivolous and abusive challenges.
(4)Maintain the presumptive validity of patents in post-grant opposition proceedings.
One possibility would be to condition implementation of any new or expanded post-grant review procedures on additional funding, thereby ensuring that the USPTO is capable of handling these new responsibilities.
(5)Preserve Prosperity