H.R.9, the Innovation Act, is inventor killing legislation moving rapidly through the House of Representatives. It passed out of the House Judiciary Committee and is scheduled for a full floor vote in the next two weeks.
H.R.9 will effectively wipe out patent rights for small entities – independent inventors and small companies. It is being driven through the House with huge money from a consolidated lobby of banks, consumer internet companies, and retailers led by Google. These companies benefit from weak patent rights.
The Google lobby has dumped hundreds of millions of dollars on Washington over the last eight years to buy the legislation and they are within weeks of winning. This is cronyism on a grand scale and must be stopped.
The United Inventors Association, US Inventor and Independent Inventors of America have been in Washington weekly for almost two years going door-to-door in the House and Senate to educate every Congressional office about the damage H.R.9 will bring on inventors, small innovation companies, and the economy overall.
Our combined efforts have shifted the conversation away from the fictional patent troll narrative supported by the anti-inventor Google lobby to the plight of inventors and small companies. However, H.R.9 is still rapidly moving toward passage.
There is some good news. Both the far right and the far left are against it, and the floor vote has been postponed several times. The vote counters are not sure it will pass, but it is very close.
We can stop H.R.9 this week if we all get on the phone and call our House representative. Many are on the fence and want an excuse to vote against it. Not enough have heard from constituents. Even just a few constituent calls will tip the scale and embolden representatives to go against senior leaders in their party. They know H.R.9 is bad legislation – they just need to hear from us.
You can find your representative here: http://www.house.gov/representatives/find/
• H.R.9 creates a loser-pay regime. This means that the loser pays the winner’s legal costs. Patent lawsuits can cost millions of dollars on each side, so losing could add millions on top of the millions already spent defending your patent rights. For the last few years, the courts, Congress and the administration have radically changed the patent defense landscape. The likelihood that you will lose even a meritorious case is very high. Loser-pay will deter virtually all suits.
However H.R.9 loser-pay does not stop there. You have to prove you have the ability to pay the other side’s legal costs at the onset of litigation. For most of us, this means we will have to post bond to just open the courthouse doors. A bond could cost millions of dollars and we will have to pay it up front.
Unbelievably, H.R.9 still does not stop. If someone invests money to help you defend your patents, they will be personally liable to pay the other side’s costs. That means they could lose their house if they help you financially and you lose the case. Keep in mind the odds of losing a patent defense case are the highest ever in the 225 years of our patent system. Not many investors will invest in anything if they risk losing personal assets, so H.R.9 will eliminate financial help if you need to defend your patent rights against a thief.
• H.R.9 inflicts its damage on what is called the secondary market for patent assets. This secondary market encourages capital investment in early stage companies by providing a financial outlet for patent assets. Without the secondary market, inventors cannot attract the investment needed to commercialize inventions.
The secondary market for patents works something like the secondary market for mortgages. When you get a mortgage to buy a house, the bank takes a security interest in your house. If you default, the bank takes control of the house and resells it to return their investment. No bank will loan you money if they are not allowed to resell the house. Investors in startup companies take a similar security interest in a patent. H.R.9 makes it nearly impossible for an investor to sell a patent if the investor ends up owning it. It’s like telling banks they cannot resell houses. Banks won’t write mortgages and investors in early stage companies won’t invest.
• H.R.9 has even more provisions further damaging inventors and small companies. If some big retailer, like J.C. Penny for example, is selling your product and you sue them for patent infringement, the retailer can stop the suit against them and move it to the manufacturer. Unfortunately, many products are manufactured overseas in places like China, which means the you will likely be forced to litigate in multiple jurisdictions some or all of which are overseas. This will radically increase the costs of defending a patent and increase the odds of losing. You can bet that major retailers will find ways to ensure nobody can defend a patent by using this so-called customer stay exception.
• H.R.9 actually extends the reach of post grant opposition (PGO) procedures created in the America Invents Act of 2011. These PGO’s are procedures within the USPTO used to invalidate patents, which are property rights, outside of the courts. Former Chief Judge Rader called them “death squads” for patent rights and they are invalidating around 80% of challenged patents. H.R.9 removes an estoppel allowing one of these PGO procedures to be daisy chained one after another thus an infringer can endlessly challenge the same patent over and over again. You’ll never get your day in court.
• H.R.9 created highly burdensome pleadings requirements and restrictive discovery rules. These provisions act together to make patent defense even more expensive and to restrict information making litigation much more risky for an inventor.
There is next to nothing in H.R.9 that helps inventors. Virtually every provision makes defending your patent against a thief more difficult, more expensive and more risky. If H.R.9 passes, it ensures that small inventors will have no reasonable way to defend their patents.
If you cannot defend a patent against theft, you will not be able to attract investment to commercialize your invention. Why invent anything?
H.R.9 destroys our innovation ecosystem for the short-term gain of large multinationals. It is cronyism of the highest order. We, as inventors, can stop it, but we need to act this week.
Virgil Gleason, Wayland
