“First do no harm” should be the guiding light of all attempts at patent reform

The IP sub-committee of the US Senate Judiciary Committee finished its hearings on proposals to reform patentable subject matter legislation earlier this week. As my colleague Richard Lloyd has detailed in an excellent series of reports (here and here, for example), the prep work done before the sessions by senators Tillis and Coons, and their staffs, as well as the hearings themselves, demonstrated a depth of engagement and comprehension from legislators that we have rarely seen before on patent-related issues.

Perhaps more importantly, though, lawmakers also showed that they understand just how complex and nuanced patent matters are. There is very rarely black and white - instead, it is all about various shades of grey. For those of us who watched the hearings held around the Innovation Act between 2013 and 2016 - which were so often tilted firmly in favour of those advocating the further weakening of rights - it has all been a breath of fresh air.

Over the past fortnight multiple viewpoints were heard and substantive points raised, while powerful and meaningful exchanges took place. This was a genuine legislative process in full swing, not a point-scoring exercise in propaganda in which the scourge of “patent trolls” was presented as an existential threat to American innovation on the back of dubious testimony and dodgy data.

Back when “trolls” were the dominant theme, one of the most troubling aspects of the legislative debate was the way in which the term was thrown around without any definition ever being provided. Frequently, it was used inter-changeably with NPE. While everyone inside the patent bubble knew just how deceptive such an equivalence was, those who did not know better – legislators, many in the media, even judges – bought it hook, line and sinker. It was, without doubt, hugely damaging – but it would have been a whole lot worse had the Innovation Act become law.

Nuance and complexity should always be the watchwords when NPEs are discussed. It was striking, for example, that when Stanford Law School launched its excellent NPE Litigation Database earlier this year, it identified 13 different categories of NPE – some similar, but others very, very different.

Two of the types that Stanford tracks are university and research institution related.  And the positive impact of these NPEs to the US economy over the last 20 or so years is the subject of a recently released study entitled The Economic Contribution of University/Nonprofit Inventions in the United States: 1996-2017. Co-published by BIO and AUTM, the research finds that:

… estimating the economic impact of academic licensing, assuming no detrimental product substitution effects, and summing that impact over 22 years of available data for academic U.S. AUTM Survey respondents,

• total contribution of these academic licensors to industry gross output ranges from $723 billion to $1.7 trillion, in 2012 U.S. dollars;
• contributions to gross domestic product (GDP) range from $374 billion to $865 billion, in 2012 U.S. dollars; and
• estimates of the total number of person years of employment supported by these academic licensors’ licensed-product sales range from 2.676 million to 5.883 million over the 22-year period.

If the terms troll and NPE really are interchangeable, as so many of those who called for diluted patent rights in the US claimed, then it is pretty clear that trolls deliver huge benefits to the US economy.

Of course, a more honest approach would be to accept that, yes, there are bad faith trolls out there – but that there are also many entities that do not practise on the patents they hold, but which generate huge value not just domestically, but across the world. Making it harder and more expensive to enforce patents harms them just as much as it hurts anyone else.

That is particularly the case when you factor in the vast resources available to some defendants regularly accused of what has become known as efficient infringement.

Just this week, the former general counsel of Apple – a company that has been at the forefront of efforts to reduce the power of patents in the US and elsewhere – was quoted talking about the $1 billion legal budget he oversaw and his mandate from the top to “push the envelope” in defending the company’s interests.

Yet the effect of giving deep pocket defendants multiple ways in which to delay cases, challenge patents and inflict huge costs on entities that accuse them of infringement was never once the subject of a hearing in the three years the Innovation Act was on the legislative table. In any serious, balanced attempt to reform the patent system it would have been.

The question that legislators always need to ask themselves about patent reform is whether the proposals in front of them do more harm than good. The narrative from 2013 to 2016 never came close to addressing that fundamental point. But, it seems, in the subject matter debate of 2019 this is an issue that is front and centre of concerns.  That cannot be anything other than very good news.