Thursday, December 5, 2013

Patent reform and the risk to America's independent inventors

I recently wrote to my congressman about patent reform.  The letter is reproduced below:

I live in your district, and I am writing to you regarding patent reform, and in particular the “Innovation Act,” H.R. 3309.  While I ask that you oppose H.R. 3309, I also want to share my insights as an inventor and make myself available to discuss patent reform with you or your staff at any time.

I am a very prolific inventor, with more than 100 issued United States patents since 2004 (see http://shuster.com/patents).  My patents cover a very broad range of technologies.  I am proud to be an independent inventor, meaning that I develop and patent my technology myself. 

I have been considering hiring some employees in Fresno to help with my patent business, but the current uncertainty over patent reform has made the future of patents and technology such that I cannot figure out whether expansion is prudent.

The primary problem facing independent inventors and small business job creators in the patent field is that patent reform has focused on battles between large corporations and patent enforcement by very well funded patent enforcement entities.  I do not doubt that patent law could be improved (in fact, I advocate significant reform – see http://www.askingwhynot.com/2013/11/trolls-patent-angst-and-inevitable.html).  However, current reform proposals will essentially close the doors of patent office to independent inventors and small businesses, making patents strictly a privilege of large corporations.

The intermittent windshield wiper invention provides a terrific illustration of the perils that patent reform poses to independent inventors – and thanks to the film Flash of Genius, the story behind that invention is easy to watch.  The inventor in that case, Robert Kearns, developed his invention independently, filed for a patent, and then approached Ford Motor Company.  Ford said that it wanted to incorporate his wipers into their vehicles, and the inventor incurred significant costs and effort putting the wipers into production.  Once Ford obtained a prototype, they backed out of the deal and built their own wipers.  

Under existing law, the inventor was able to sue Ford for patent infringement and win.  Unfortunately for independent inventors such as Mr. Kearns (and myself), H.R. 3309 would make a suit against Ford or other big companies so risky as to be a “bet your life” proposition.  One provision alone, the one allowing the prevailing party in litigation to far more easily obtain reimbursement of their attorneys’ fees from the losing party, will silence innumerable independent inventors who have had their ideas stolen.  It is not unusual for attorneys’ fees in patent cases to reach one million dollars, and in very complex cases fees may exceed that amount by an order of magnitude.  In Mr. Kearns’ case, his fees reached $10 million – an amount so high that he controlled his risk by electing to represent himself in his suit against Chrysler. [see http://repository.jmls.edu/cgi/viewcontent.cgi?article=1064&context=ripl, page 196].

If I had a patent that was being infringed by a Fortune 50 corporation, the fees that corporation incurs in seeking a declaratory judgement of invalidity or in defending an infringement action would be so small, relative to their resources, that the fees would not be considered a “material” item that needed to be reported to stockholders.  By contrast, just imagining being on the hook for one million dollars in fees to my own lawyers sends me to nightmares of being unable to feed my children, much less make small business payroll.  At least under current law, I am able to control my risk by doing things like representing myself (as Mr. Kearns did), hiring lawyers who work on a contingent basis, or timing licensing efforts so that my cash flow is adequate.   By contrast, those large corporations typically hire the most expensive attorneys available, incurring fees far in excess of what an independent inventor would ever accede to.

If I have to wonder whether I will be on the hook for a large corporation’s fees every time I seek to license or enforce a patent, I will almost certainly sell every patent I obtain – at a large discount to true value – to patent enforcement entities.  Remarkably, this is precisely the opposite of what H.R. 3309 purports to seek, a reduction in the role of patent enforcement entities.  Congress cannot turn the patent playing field into one where only huge companies can compete and expect independent inventors to do anything other than switch careers or become associated with big companies.  At minimum, it will damage American innovation and eliminate independent inventors.

The heightened pleading requirements also pose an enormous problem for independent inventors.  While large corporations and patent enforcement entities have the resources to hire experts to reverse engineer products they believe infringe a patent, independent inventors do not.  If we are required to identify precisely how a patent is infringed, for many categories of invention we will need to spend hundreds of thousands of dollars hiring experts to take apart devices, decompile software and otherwise reverse engineer a potential infringer's process or device just to answer a question that the infringer already has the answer to.  A heightened pleading provision would essentially force independent inventors to associate with big companies or to sell their inventions to patent enforcement entities.

Patent law is a very complex thing, but one thing we know with certainty is that the United States leads the world in innovation.  I urge you to exercise great caution in supporting legislation that could destroy one of America’s great treasures:  Our global leadership in invention.

1 comment:

Chris Brown said...

Gary

I like your URL - are you possibly interested in selling it?

Chris @ Orlmtgpro dot com