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Hostile IP Environment for Inventors Could Hamper US Innovation

Jan. 6, 2023, 9:00 AM

I have never seen an environment in my 30-plus years in the intellectual property arena as hostile to inventors as what has emerged over the past decade.

Three major culprits are responsible for this trend, making it harder for entrepreneurs and researchers to build a brighter future in everything from farming to green tech to health care.

The first is the plague of efficient infringement. Next is the misuse of the 2011 Leahy-Smith America Invents Act. And finally, there is a targeted attack on two critical patent laws.

This all leads to the undermining of innovation. Congress and the president should act now to eliminate these issues to prevent further damage.

It’s Cheaper to Steal

Efficient infringement is essentially IP theft as a business model for large firms.

For example, you are a creative entrepreneur with a fantastic invention. You file an application at the Patent and Trademark Office and celebrate when your patent issues.

Now a large corporation wants to use your invention, which is on public view thanks to the details in your published patent. Now you can negotiate an IP license so that it can use your IP and you get paid, right?

Wrong. Instead, the company steals your idea. It knows that the value your invention adds to its product will more than outweigh any possible legal judgment if you sue and win.

In the meantime, it might take you five years—or more—with the business’s lawyers filing motion after motion to delay your day in court. That’s efficient infringement, and sadly, is getting more common by the day.

Patent Trolls

The second culprit is the abuse of the AIA.

You sue the company for infringement in federal court. The AIA allows the business to employ a scorched earth response and concurrently challenge the validity of your patent at the Patent Trial and Appeal Board, an administrative law body.

The corporation’s goal is to try and bankrupt you or muscle you into accepting a settlement for pennies on the dollar. This is incredibly expensive, if not financially impossible for you, but mere pocket change for firms like this.

To cope with such corporate onslaughts, small inventors and universities sometimes seek out partners with greater financial resources to level the playing field in high-stakes patent litigation.

To discredit this legitimate practice, the corporate world derides these partners as patent trolls or non-practicing entities—though ironically, these companies are trolling the patent literature to find more IP to steal.

Patent office officials have moved in recent years to curb such abuse by declining to hear concurrent challenges at PTAB. Recently, however, some lawmakers introduced legislation that would make it even easier for big companies to continue their efficient infringement practices.

Assault on Patent Laws

The third culprit undermining innovation is a targeted attack on two critical laws—the Bayh-Dole Act of 1980 and 28 US Code Section 1498.

Bayh-Dole contains a provision known as a march-in. Activists say this allows the US government to seize and relicense any patent derived from federally funded research if officials believe that the resulting product is too expensive.

Although Bayh-Dole does permit the government to march in, this authority was intended to be used only in rare instances—for example when a patent licensee fails to make a reasonable attempt to develop a product commercially.

Both Democratic and Republican administrations have long agreed that our government can’t march in just to control prices. In fact, no federal agency has ever exercised its power to march in under Bayh-Dole and relicense patent rights to others.

Section 1498 is a provision whereby the government subjects itself to liability for infringement of patents and must provide the patent holder “reasonable and entire compensation” when it does. Some argue that Section 1498 can be read as establishing a compulsory licensing regime giving the government free rein to infringe patents. That’s well beyond the law’s scope.

The Path Forward

If our government usurps property rights the way activists now want, doing so will send American innovation into a coma. Academic laboratories generally don’t develop and commercialize products themselves. Academic labs are better at conducting basic research, much of which is funded by federal grants.

The private sector, by contrast, pays to license IP from academic institutions, then undertakes considerable risk to develop and commercialize that IP. This often takes years, and millions, if not billions, of dollars in investment.

What rational company would take on the risk and expense of developing and commercializing government-funded university research, knowing that if those efforts result in a successful product, the government could deprive that company of a fair return on its investment? Try raising capital in that kind of environment.

The longer this assault persists, the greater the damage to innovation. President Joe Biden and lawmakers on both sides of the aisle should stand up to eliminate these menaces.

This article is featured in January’s Intellectual Property Practice Spotlight series.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Paul A. Stewart has over 30 years of experience negotiating complex global IP licensing deals. He is an international IP licensing expert and was formerly president and chairman for the non-profit Certified Licensing Professionals organization.