Entrepreneurs need to be aware of a threat to their well-being that is being moved through Congress by Orrin Hatch and Patrick Leahy. A bill has been introduced, at the behest of large technology companies, to limit patent rights. These large companies are afraid of the “disruptive technologies” being spawned by entrepreneurs, and want large company “freedom of action” to clone these technologies and stomp out small pioneering firms. Does this sound familiar from previous cases against Microsoft, IBM and others? Of course. So now these companies are fighting back, in the guise of “patent reform.”
A bit of political history is in order, to provide a sense of the threat this time. Radical “patent reform” can come quickly and dramatically, overturning years of settled law in the courts and in business, through a carefully-crafted new law.
In the case of patent matters, a constitutional amendment is not needed in order to take away rights. A bill passed by Congress and signed by President Bush is all that is required.
Orrin Hatch is experienced in this kind of quick, silent, and radical change. Hatch is notorious for his work passing the 1994 bill that exempted the “nutraceutical” companies from having to gain FDA approval before launching a product.
Now Hatch is working on behalf of Microsoft and other large technology companies. Hatch and his clients seek to RADICALLY change patent law in order to lower big company liability in cases where they are found to have infringed on patents of others.
Microsoft, IBM and other large tech companies have launched a concerted public relations campaign to in support of the arguments in this bill. The large company PR has largely succeeded in redefining “patent reform” to mean weakening patent laws and making them more favorable to large companies who infringe on small companies and individuals (who have been branded in this campaign as “trolls” because they do not have massive businesses like the large companies).
Think tanks normally on the “open” side have been coopted, including EFF and others, and are taking major funding from the large tech companies.
Unfortunately, even normally thoughtful reporters are pilling on, thinking this “reform” is a good idea. I hope others in the blogosphere will bring attention to this slight of hand.
We all should note that Hatch was successful in 1994 in passing a bill that radically weakening FDA oversight of the “nutraceutical” industry. His tactic was to introduce a very radical bill, so radical that it did not raise objection–let it fail, and then at a later date reintroduce it and quickly get it passed.
This may well be his tactic now. He introduced this bill. It failed. It got enough good press to legitimize it, in part looked so dead that its opponents didn’t bother to call the press on the issue.
Now watch, mark my words, this bill will come back quickly and quietly in the next Congressional session, and before you can say “payoff” it will be passed and signed by Bush.
It is vital that innovators and entrepreneurs adn their lawyers rally against what Hatch is doing. Hatch and Leahy, under the guise of “patent reform” have introduced a bill in the Senate and the House to take the teeth out of patent laws against infringers. If this bill passes, it will radically alter the landscape for small companies with valuable intellectual property. It will make it very hard for independent inventors and technology architects to make a living, because their inventions will be subject to easy theft by large companies.
Let me list the most important teeth the Hatch Leahy bill seeks to remove from the patent system.
Their bill makes it very hard for a patent holder who is being infringed to get an injunction against the infringer, even if the infringer is found guilty of infringement.
Hatch sums up the argument on behalf of infringers, big companies, who are concerned about injunctions. What Hatch does not point out is that under CURRENT law a victim of infringement cannot get an injunction unless a judge agrees, and usually cannot get an injunction until after infringement has been proven in court and other remedies have failed. NPT did not get an injunction against RIM (Blackberry) until after almost a decade of success in court and belligerance on the part of the RIM CEO and board.
Here is Hatch’s argument–convincing only if you think injunctions are easy to get.
be granted in a patent infringement case has emerged as perhaps the
most contentious issue in the patent reform debate. Large high-tech
companies, many of which have products covered by thousands of patents,
believe that some change in current law is necessary to prevent what
they consider as something akin to legalized extortion by plaintiffs
who use the threat of an injunction to obtain settlements that are
allegedly disproportionate to the value of the patent that is
infringed.
Because the profitable life of many high-tech
products is relatively short, an injunction that keeps these products
off the market for a year or two can threaten the profitability or even
the viability of a small or mid-sized tech company, which arguably
forces these companies to settle cases for much more than the claims
are actually worth.
Hatch also sums up the objections to his bill:
desire to amend the injunctive relief provisions in current law are the
pharmaceutical and biotech industries, independent inventors, and some
small business interests. Generally, the products patented by the drug
companies and small inventors are discrete inventions covered by
relatively few patents. They rely on the absolute exclusivity of their
patent rights, often enforced by injunctions, to ensure that they are
able to commercialize their inventions and enjoy the fruits of their
innovation. Similarly, small inventors rely on injunctive relief to
equalize the playing field when competing against larger, better-funded
enterprises.
Let us be clear. Hatch is not correct when he says “the high tech sector” is unified behind eliminating injunctive relief. But he is correct that the big companies are mostly on this side–and probably contributing to his campaign and to his other causes–because weakening patent law will let large firms retain their power in a world of vastly many independent engineers and technology architects.
As
Robert Cringely has noted, passing this bill would lower Microsoft’s
potential exposure to damages by many billions of dollars.
impossible to get the treble damages that are at the core of the
contingency lawyer-client relationship. That, alone, drops
Microsoft’s liability by a factor of three, from around $20 billion
down to $7 billion or so from the dozens of patent infringement cases
currently pending against the company.
PBS’ Robert Cringely has commented further on Hatch and Leahy’s bill in a post I have referred to before. Cringely says it well:
companies invent useful stuff that needs protection while smaller
companies and individual inventors use the patent system to suck
revenue out of big companies through frivolous patents and frivolous
lawsuits. Of course, it isn’t at all clear that this assumption is
correct.
