Yes, patents create property rights. That’s settled law. “A patent for an invention is as much property as a patent for land. The right rests on the same foundation, and is surrounded and protected by the same sanctions.” – Consolidated Fruit-Jar Co v. Wright, United States Supreme Court, 94 U.S. 92 (1876)

But that’s just rhetoric. The judge has some important points about the America Invents Act. The America Invents Act (2011) restricted “Covered Business Method” patents, which were defined as relating to financial business methods. Goodlatte’s “Innovation Act” seeks to broaden that, but ambiguously. Which means years of litigation over what a “business method” is. That’s not good for anybody.

HR 3309 is really an “Anti-Innovation Act”, designed to make it more expensive for inventors to enforce their patents by making litigation more expensive and complex. HR 3309, like the previous “SHIELD Act”, is supposed to stop “patent trolls”. But it’s much broader. It makes “loser pays winner’s legal costs” the standard. For a small entity to sue a big company with expensive lawyers becomes financial suicide. The SHIELD act had something similar, but it exempted the original patent holder, someone manufacturing the invention, and universities. HR 3309 doesn’t do any of that. It allows big infringers to crush small companies and inventors beneath their boots.

Who’s behind this? The American Association of Advertising Agencies and the Direct Marketing Association (the junk-mail lobby). There are four patents related to targeted advertising which cause advertising agencies problems. To get rid of those patents, the advertising industry has convinced other ad-supported companies to support a huge change in patent law.

The A4s (what the American Association of Advertising Agencies calls itself) has a list on their web site of patents they are concerned about:

6,628,314 and 6,771,290 (relates to targeted advertising),
5,251,294 (“Accessing, assembling, and using bodies of information” – rather vague),
5,930,474 (store locators)

That’s the source of the push behind this bill. Other companies have signed on, but the ones behind it are all involved heavily in online and mobile advertising.

This bill isn’t about “bad patents”. There’s nothing in this bill about increasing patent quality by raising the “obviousness” bar. That’s because of opposition from the pharmaceutical industry, where many drugs are “me-too” drugs, very similar to existing drugs. (Ref: http://community.seattletimes.nwsource.com/archive/?date=20020416&slug=clarinex16) As the A4s wrote in their letter to the FTC (http://www.ftc.gov/os/comments/pae/pae-0035.pdf)

“What seems like a bizarre and wasteful tactic in the high-tech industry can be a basic good practice in the pharmaceutical industry.”

That’s part of why we have a “bad patent” problem. Nobody wants to take on Big Pharma.

As for the “patent troll” industry, it’s a recent phenomenon. But why? Patents have been around for centuries, after all. Patent trolls exist because, in the last decade, it’s become much tougher for inventors to enforce patent rights. Four changes in law did this:

(2006) “eBay v. MercExchange ” The patent holder can’t get an injunction against infringement any more, except in extreme cases. This destroyed the concept of a patent as property that only the patent holder could use.

(2007) “In re Seagate” The patent holder can’t get triple damages unless there is “reckless infringement”, which means the worst that can happen to an infringer is that they have to pay a royalty, the same royalty they might have negotiated. So infringement by a big company is risk-free.

(2007) MedImmune, Inc. v. Genentech, Inc. If a patent holder writes to an infringer asking them to pay royalties, they can be sued for a judgement that the patent is invalid, in a court of the infringer’s choosing. So, as a patent holder, you have to file suit before you can negotiate. This is why “patent trolling” became necessary.

(2011) The “America Invents Act” The AIA added “post-grant opposition” proceedings, so now infringers can harass patent owners and stall infringement claims in multiple forums. Note that one of the “features” of HR 3309 is to limit estoppel so that similar issues can be raised once in a post-grant opposition and then re-raised in an infringement case. This makes it clear it’s all about raising the cost of enforcing a patent by wearing down the patent holder.

Because of those changes, enforcing a single patent is no longer financially feasible in most cases. A big patent portfolio is needed. You either have to be a big patent holder like IBM or Google, or you have to deal with a company that aggregates patents to monetize them.

So that’s why we have “patent trolls”. The harder it becomes for inventors to enforce their own patents, the more we’ll see companies that do nothing but litigate.

HR 3309 is a bad bill. Many people and organizations saw the words “patent troll” and signed on to support it. The A4s pushed hard for that – advertising agencies are good at getting people to buy things without checking them out. Now that there’s been a chance to take a close look at the bill, it’s not looking so good. David Kappos, the head of the USPTO until a few months ago, testified that it’s a drastic change to the patent system that needs to be examined more closely. Cong. John Conyers, the senior Democrat on the House committee looking at this bill, urges caution. (Goodlatte (R-VA) introduced this bill without telling the Democrats on the committee.)

Patents should be hard to get, but easy to enforce. This bill doesn’t do that. What we really need is cheaper patent litigation for small patent cases. The USPTO has proposed a “small claims” patent court which would help. More on that later.