According to the likes of Microsoft and Intel, the troll has relocated to the high ... complicated and expensive litigation in the Patent Office. If enacted, H.R. 2795 ...
Originally published in LawNotes (Fall 2005). Reprinted from LawNotes with permission from the University of Pittsburgh School of Law.
Slaying the Patent Trolls: Proposed Cure Much Worse Than the Disease By Janice M. Mueller, Professor of Law
Remember the story of the evil troll who lived under the bridge and the three billy goats Gruff who narrowly escaped his wrath? According to the likes of Microsoft and Intel, the troll has relocated to the high technology marketplace. These major corporations are complaining loudly about “patent trolls.” The prototypical patent troll is a holding company that has purchased patents, often in bankruptcy proceedings, for the purpose of asserting them against manufacturers of products that the troll alleges infringe the patents. Patent trolls do not themselves manufacture the products their patents cover, and the patents may be of questionable validity. Nevertheless, the threat of an injunction if patent infringement were to be found helps the trolls coerce their targets into settling the disputes by taking licenses under the patents. Because litigating patent infringement and validity can take years and cost millions of dollars, the target companies often agree to pay licensing fees rather than to fight it out with the patent trolls in court.
Heeding these and other complaints, members of Congress are now convinced that the U.S. patent system is in need of a major overhaul. On June 8, 2005, Congressmen Lamar Smith of Texas and Howard Berman of California introduced H.R. 2795, the “Patent Act of 2005.” Among the more controversial provisions of the bill is one specifically targeted at patent trolls. Section 7 of the bill, if enacted, could lessen the ability of a non-manufacturing patent holder to obtain an injunction against ongoing patent infringement. According to Congressman Berman, courts would specifically consider the patent holder’s “failure to commercialize the patented invention” when deciding whether or not to enjoin an infringer.
Although companies like Microsoft, Intel, and others in the computer and electronics industries strongly support the proposed limitation on injunctive relief, many others disagree. Opponents include firms in the pharmaceutical and biotechnology sectors, as well as universities, small businesses, and individual inventors. Their concerns are legitimate. Patents are intended to spur inventions, not end products. Many inventors outside the corporate framework do not have the
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Electronic copy available at: http://ssrn.com/abstract=1395880
resources to manufacture and market their inventions, and so they contract with other firms to do this work for them. University licensing of inventions made by academic researchers is a prime example. Lessening the ability of non-manufacturing patent owners like universities and independent inventors to obtain injunctions significantly reduces the value of their patents. Patent trolls exist, but the great majority of non-manufacturing patent holders do not abuse the system. Fundamentally altering their patent rights by limiting injunctive relief is a cure much worse than the disease.
Parts of H.R. 2795 make positive improvements to the patent system that are receiving broad-based support. For example, the bill would create a post-grant opposition system under which competitors could more easily challenge the validity of granted patents. The bill would also change the way that patents are awarded when two or more inventors independently create the same invention. Unlike the rest of the world, the U.S. since 1836 has relied on a “first to invent” system that requires complicated and expensive litigation in the Patent Office. If enacted, H.R. 2795 would change U.S. patent law to a more streamlined, administratively efficient “first inventor to file” system.
Yet, while the post-grant opposition system will certainly help weed out bad patents, other provisions of the bill seem destined to reduce rather than enhance the quality of patents. For example, H.R. 2795 would eliminate the long-standing requirement that an inventor disclose in her patent application the “best mode” known to her for carrying out her invention. Repealing the best mode requirement would remove a subjective issue from patent litigation, to be sure, but at what cost to the public? Patent owners could maintain the “crown jewels” of their inventions as trade secrets inaccessible by the public, thereby diminishing the technology dissemination function of patents.
H.R. 2795 does nothing to address one of the major causes of problems with U.S. patents--an underfunded Patent Office. Patent quality depends greatly on the rigor of the examination of patent applications. The Executive Branch has repeatedly diverted the fees paid by patent applicants to other parts of the government, leaving an under-funded and under-staffed Patent Office to face an
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Electronic copy available at: http://ssrn.com/abstract=1395880
ever-increasing onslaught of new filings. Until the Patent Office is allowed to retain all the fees it earns from users, many of the positive improvements proposed in H.R. 2795 such as post-grant opposition cannot realistically be implemented.
Still other issues plaguing the patent system are not addressed in H.R. 2795. Despite the strong recommendation of the National Academies of Science (NAS), the bill does not include a research use exemption to protect scientists from patent infringement liability. Nor does the bill tackle the ambiguous patentability standard of “nonobviousness.”
H.R. 2795 contains much that is good, but the bill also unfortunately ignores a number of pressing problems. In the rush to slay patent trolls, Congress must not fail to consider the larger picture of what is needed to fix our patent system.
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Electronic copy available at: http://ssrn.com/abstract=1395880
