US patent reform’s international impact

In the past several years, the patent system has gone mainstream. There has been a steady stream of press stories — in The New York Times but also local papers, on NPR and also on the local evening news at 11 p.m. — as Congress continues year three of legislative discussions about the best way to reform the system. It would be easy to see this as a domestic conversation about a problem that exists only in the U.S. But that is incorrect — the rest of the world is watching.

Discussions about patent reform are no longer limited to the green eyeshade sect but are common topics in the boardrooms of national and international companies. Governments around the world envy the success of our system as a stimulant for inventiveness and are watching to see what next steps we take. They are also taking matters into their own hands: The EU is finalizing new rules of procedure for the Unified Patent Court; the State Intellectual Property Office (SIPO) in China just published the latest updates to their patent laws; and Indian Prime Minister Narendra Modi has called on India to update patent laws to boost international competitiveness.

{mosads}The way we frame the problems in the U.S. patent system and the solutions we codify to address them matter a great deal to the future success of the U.S. patent system and our country’s economic competitiveness. The vast majority of stakeholders are collectively motivated to craft solutions that deter abusive behavior by some who have used the threat of litigation to extort payments for vague patents of questionable validity. The costs of the license are often below the likely litigation costs, making it difficult to justify pursuing costly and uncertain litigation instead of just writing a check. There is no doubt that we can do more to curb this “trollish” behavior, no matter who is engaging in it.

In doing so, however, we need to be careful that we don’t also deter legitimate plaintiffs from exercising their rights to benefit from strong patents that resulted from their efforts and creativity. Small businesses especially need the ability to seek redress in court for infringement of their patents. Otherwise, the large multinational corporations will be able to infringe without the threat of ever being held accountable and many small businesses, the drivers of job creation, will perish.

The solutions we develop must also take into account the fact that our economy is global. Every country has its own patent laws enacted to foster economic growth and job creation in their territories. Most countries are signatories to international treaties like the Trade Related-Aspects of Intellectual Property (TRIPs), which sets minimum standards of intellectual property protection. Amongst other provisions, this treaty provides for national treatment, which levels the playing field for citizens of other member countries; most-favored-nation status, which gives other nations those same enhanced benefits; and provisions that prevent discrimination based on patent subject matter.

While international treaties do limit the ability to enact laws that discriminate against outsiders, these provisions are minimum standards, leaving countries with significant flexibility and discretion in designing their domestic intellectual property systems. Given the incentives government officials have to promote their domestic economy (and companies), there is an inherent risk that nations will adopt policies that disadvantage foreign companies. This could include policies that limit the ability for foreign companies to enforce their patents, with the goal of reducing licensing costs to local manufacturers and ensuring that their people get access to the latest gadgets at the lowest costs whenever they can.

It is the continuous task of our international servants to convince foreign officials that the domestic development of intellectual property supports international trade and that economic growth in their countries is stimulated by strong patent protection for all. This message is diluted when we in the United States harm the ability of the legitimate plaintiff to protect their rights or overly restrict the types of invention that can be protected within our borders.

Foreign governments may see the U.S. action as an opportunity to limit the ability of plaintiffs in their countries, many from outside their territory, and thus advantage their domestic industries. Foreign governments already make it difficult for outside companies to prevail in patent matters in their countries, with complicated procedures, aggressive application of competition laws to foreign patent holders, burdensome requirements and delayed or even denied justice. Any limitations or exclusions to patentability or the enforcement of a patent in the U.S. will be magnified in countries around the globe. Foreign governments will continue to seek ways to make the system better for their own people at the cost of everyone else.

We need to assure that the reforms we adopt are crafted in a surgical manner to avoid the unintended consequences of preventing a legitimate patent holder from enforcing her rights or narrowing the technologies where we issue patents. This is very important to patent holders in the U.S., but also critical to the thousands of innovative U.S. companies that rely on patent protection to sell their products in foreign countries. We must always be cognizant that we are in a global economy and what we do here has impacts on our patent holders in every country. The world is watching.

Stoll is a partner and co-chair of the intellectual property group at Drinker Biddle & Reath and a former commissioner for patents at the United States Patent and Trademark Office.