As ZTE nails its colours firmly to the pro-US patent reform mast, opponents of major change grow more confident

As ZTE nails its colours firmly to the pro-US patent reform mast, opponents of major change grow more confident

Although foreign entities file around half of all patent applications at the USPTO, up to now the debate about reforming patent litigation has largely been one conducted between US companies and interest groups. There are some exceptions – Germany’s SAP (pro) and Canada-based NPEs Conversant and WiLan (anti) spring to mind – but the general feeling among non-American organisations is that this is something they are best advised to stay out of; not least because taking one side or another could be seized upon by the other side as evidence that “foreign interests” support such and such a line.

Last week, however, one of the world’s biggest filers of patents decided to enter the fray and nail its colours very firmly to the pro-reform mast. But whether ZTE’s decision, announced from Shenzhen on 24th April, to join the likes of Google, Cisco and the National Retail Federation in signing up to the deep pocket United for Patent Reform pressure group will turn out to be positive news for those who favour major change is open to question.  

There is no doubting ZTE’s patenting and innovation credentials, its commitment to R&D and the fact that it pays good salaries to a large American workforce. But the simple fact is that it is a big Chinese company and one that has been identified by the House of Representatives' Intelligence Committee as a security risk.

Once anti-reform lobbyists have done their work, the thought of being seen to support calls from a large Chinese business to reduce domestic patent protection for American companies will surely weigh heavily on at least a few legislators’ minds as they contemplate which way to vote on the Innovation Act. This might especially be so for Republicans, whose rhetoric on China does tend to be much stronger than that which comes from the Democrat side. A vote framed as having been cast in favour of “Chinese IP thieves” at the expense of American innovators looks like the kind of thing that political opponents would make hay with in Congressional elections due to be held next year.

In reality, that would be very unfair on ZTE, which clearly has a significant commitment to the US and is a strong supporter of the patent system in China and elsewhere, but politics is politics. Last year we had the unedifying sight of prominent reform advocates inventing the threat of “foreign patent trolls” to justify their calls for change; and in ZTE’s case there is no way round the fact that the company is Chinese, that members of Congress have previously described it as a security threat and that Chinese businesses generally (and often incorrectly) are seen as stealers of US IP.

Presumably, along with ZTE itself, the very savvy people that run the Coalition for Patent Reform have thought all of the issues through, but I can’t help feeling that the anti-reform camp will be very pleased with this latest turn of events; especially as it comes at a time when the indications are that it is beginning to get some traction on Capitol Hill and perhaps even within the US government.

Also last week, Paul Morinville of an organisation called US Inventor, issued a briefing document in which he claimed that opposition to the Innovation Act in the House of Representatives is growing rapidly:

In the last few weeks, Congressional staffers from both parties are becoming pro-patent activists.  They are forwarding documents between themselves and sharing tactics on how to kill H.R.9 in the Judiciary so that it never hits the floor.  Six Judiciary members are asking for another hearing.  A significant number are putting together fatal amendments if H.R.9 makes it to mark-up.  As more and more Members learn how damaging H.R.9 is to our economy, more and more Members fight against H.R.9 and enlist the help of other Members.  It seems to have taken a life of its own.

Projections, Morinville stated, indicate that “H.R.9 will fail a floor vote by at least 175 to 241”. Talking to others lobbying against the Act, the consensus is that this is way too optimistic a view and that there remains a decent-sized majority in the House for the legislation. However, there is agreement that the anti-side is getting a better hearing than before (largely because it is much better organised) and that it is quite possible fewer Congressmen and women will vote in favour than was the case last time round in 2013.

Furthermore, there is growing confidence that once the focus shifts to the Senate, there is likely to be a significant watering down of many provisions before anything reaches President Obama. Several people close to events that I have spoken to recently also found a lot to like about the testimony Michelle Lee recently gave to the House Judiciary Committee about the USPTO’s stance on HR9: although she indicated broad support, it was not unequivocal and on issues such as joinder it seemed to be pretty hostile.

All in all, I’d characterise the mood among the groups fighting against HR9 as one of cautious optimism that they are being listened to and their concerns are registering – to a degree at least. Right now, there is still a belief that something will pass into law; but that most interests will be able to live with what does eventually emerge. I doubt that ZTE’s entry into the debate will change that outlook very much; in fact, it may even add a spring to the anti-side’s step.

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