Patent reform is critical to protecting American inventors

Throughout American history, patents have been key to making the United States the world’s leader in innovation. They have spurred the development of the telegraph, the telephone, electrical systems, automobiles, aviation, computers, smartphones, and numerous life-saving drugs.

But recent changes in U.S. patent law threaten to dethrone the United States as the world’s technology leader — and slow American economic growth.

Federal patent law has long granted American inventors a limited time right — currently 20 years from the date a patent application is filed – “to exclude others from making, using offering for sale, or selling” their novel inventions. Subject to certain conditions, the U.S. Patent Office must grant a patent to an applicant who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” This language on its face provides broad authorization for the grant of patents.

{mosads}Over the last decade, however, the U.S. Supreme Court has cut back significantly on what inventions it deems “patent eligible,” particularly in such areas as biotechnology, computer-implemented inventions, and software. Also, in its 2006 eBay decision, the Court made it much harder for patent holders to get an injunction (an order) to block others from using their invention without legal permission.

As a result, today “there are many other parts of the world that have more expansive views of what can be patented, including Europe, Australia, and even China.”

What’s more, the American Invents Act, a 2011 federal law intended to “modernize” the American patent system, created a “Patent and Trademark Appeals Board” (PTAB) within the Patent Office. The PTAB responds to requests by third parties to review recently issued patents. It has invalidated claims in more than four-fifths of the patents it has analyzed – very shortly after those patents had been assessed and deemed valid by other PTO patent experts, the patent examiner corps.

Patent experts (including leading judges, scholars, practitioners, and former PTO heads) have pointed out that PTAB’s record of overturning the vast bulk of patents presented for review is far out of line with historic rates of patent reversals by the courts. That high reversal rate, those experts say, shows that the PTAB process is seriously defective.

PTAB rulings have been a particular blow to small inventors, whose ability to attract seed capital to promote their innovative ventures is being seriously threatened.

Take, for example, Josh Malone, “who developed a new toy that let someone fill dozens of water balloons at once. The device attaches to a hose and includes numerous tubes that connect to the balloons, filling them with water and then sealing them off. Malone launched the product, which he called Bunch O Balloons, in 2014 on the crowdfunding site Kickstarter, raising almost $1 million. The invention received national attention and was featured on television shows like ‘Good Morning America’ and in articles in People and Time magazine.”

Sadly, a PTAB review, instituted by the “copycat” maker of an almost identical water balloon device, invalidated key elements of the Malone patent in January 2017 on grounds of “vagueness.” This not only hurt Malone and his family, but it sent a negative signal to potential funders of creative small business people like him.

Yet another problem has arisen over the last decade. Antitrust law increasingly has been invoked to challenge business arrangements by patent owners that merely seek to maximize returns within the legitimate scope of their patent right. This has spawned increasing legal uncertainty for innovators.

Reflecting this series of developments, a 2017 U.S. Chamber of Commerce ranking of national patent systems found that the United States has slipped to number 10 in the world (tied with Hungary), after having been ranked number one in prior rankings. This is bad not just for innovators but for the American workforce and for key American industries, which depend heavily on strong patent protection. 

Can the problems with the U.S. patent system be fixed? Yes, but legislation and changes in government policy are called for. What needs to be done?

First, at the very least, PTAB procedures and standards that stack the deck against patent holders need to be brought into line with federal court review principles, which are much more respectful of patent rights. Proposed bipartisan legislation, the STRONGER Patent Act of 2017, contains provisions along those lines. (Those provisions may prove unnecessary, if the Supreme Court strikes down PTAB patent review as unconstitutional in a case it will hear in a few months.)

Second, the right of patent holders to obtain an automatic injunction against third parties who violate their patent rights (weakened by the Supreme Court’s eBay holding) should be fully restored. The STRONGER Patent Act contains language that would do just that.

Third, legislation to clear away confusing judicially-made exceptions to patentability could make it easier for important innovations to obtain the patent protection they deserve (particularly in life sciences and computer sciences). In this regard, draft legislative proposals recently advanced by the American Intellectual Property Law Association and the Intellectual Property Owners Association contain helpful language that merits serious consideration.

Fourth, federal government policy needs to be reoriented in a pro-strong-patents direction. The president should appoint senior officials who believe in strong protection for patent rights – both in the Patent Office and in other agencies that interact with the patent system. Furthermore, the administration should make it clear that it assigns a strong priority to combatting foreign governments’ actions that undermine American patent rights. And the new leadership at the federal antitrust agencies, the Justice Department’s Antitrust Division and the Federal Trade Commission, should adopt a policy more favorable to patent rights.

They should clarify that unilateral efforts (not involving anticompetitive agreements with owners of competing technologies) by a patent holder to maximize the value of its patent rights — and, in particular, through patent licensing restrictions — should not give rise to antitrust liability.

Taken together, reforms along these lines can go a long way toward restoring badly eroded patent protection. A stronger patent system will support a more robust and innovative American economy – one that benefits American innovators, businesses, workers, and consumers alike.

Alden Abbott is deputy director of the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.

The views expressed by contributors are their own and are not the views of The Hill.