From the Alliance

VIDEO and TRANSCRIPT: Save the Inventor Patents Matter Google Hangout

QUINN: Hello everyone, and thank you for joining us here today for this important discussion in this Google Hangout regarding patents and the patent legislation that’s currently pending before Congress. My name is Gene Quinn and I am the founder and editor of IPWatchdog.com. And before we get going I’d like to thank the Innovation Alliance and their Save the Inventor campaign for putting this together, providing the technology and doing all of the logistics so we can have this important discussion. 

We have about 45 minutes here today to have this discussion and I have a number of questions that I’m gonna be asking and we also would like to invite you all to ask questions as well. So what we have done is we’ve got a Twitter conversation going. You can reach us with your questions, just hashtag them #patentsmatter. Again, that’s #patentsmatter and we’ll be having time for those Twitter questions that we get during this broadcast.
So without further ado let me introduce our distinguished guests here today. To my left is Senator Chris Coons, who is a sponsor of some patent legislation that I suspect we’ll get into talking about. And to his left is Congressman Tom Massie who is an inventor and also very familiar and active in the legislation that’s going on in the House. Not here today but joining the conversation remotely is Louis Foreman who is the CEO of Enventys and the CEO of Edison Nation and he is an acclaimed inventor himself, entrepreneur as well, so he’ll be giving us that perspective here today.
So with that introduction let’s just jump right to it since we don’t have a whole lot of time and my first question will be for you, Senator. It seems to me that when we’re having this patent discussion, that this is one of maybe the only remaining bipartisan issues and politics, in a strange way, doesn’t seem to filter into the discussion so much. It’s not an R versus a D. What it seems to me is it’s more of a philosophical matter. Do you believe patents promote innovation or do you philosophically believe patents inhibit innovation? That seems to be the line. So I thought maybe we could start off with that philosophical and I think I know what you’ll say but I’m really curious. When that comes up, what do you tell people? Do you think it — pro or is it an inhibitor?

COONS: Well, Gene, you’re right, this is one of the relatively few areas where there’s not just strong bipartisan engagement but very broad ranges. When you said that the Congressman is to my left, he’s actually not to my left, he’s to my right.

QUINN: Yeah. Yeah.

COONS: And if you look at who the co-sponsors are of the Strong Patent Act that I introduced in the Senate, Senator Vitter and Senator Cotton, for example, are not senators with whom I’m co-sponsoring a lot of other legislation.

QUINN: Right.

COONS: I do think that common across the advocates for a strong patent system in the House and the Senate is a profound belief that this constitutionally created and vital property right has to be defensible. That patent litigation has to remain capable of defending unique inventions, thus the Save the Inventor campaign. And those who are advancing the bills both in the House and the Senate that would change the patent litigation system are gravely concerned about what they view as so-called patent trolls. And in the only hearing that we had in the Senate Judiciary Committee to discuss the bill in the current Congress they really focused in on abusive patent litigation practices that do exist and that are a problem, but that I think can be dealt with more narrowly in a more focused and targeted way that just deals with abusive litigation practices. And I happen to think that we already see strong movement in that direction, at the Supreme Court, the District Courts, the ITC, the PTO have all taken actions that have begun to reign in some of the abusive patent litigation practices that were identified. I strongly value a strong patent system and I think folks on the other side are focused, perhaps overly focused, on stopping what they see as the predations of so-called patent trolls. My concern, don’t throw the baby out with the bath water; their concern, we absolutely have to act in order to reign in these abusive practices. And we’ve brought together strongly bipartisan teams of folks on both sides. The H. R. 9 and the Patent Reform Bill in the Senate as well have strong bipartisan leadership and the bill that I’ve introduced has strong bipartisan partnership. So you’re right, this really isn’t about party politics; this is about whether or not you think patents are essential and being able to defend those patents are essential to the vibrancy of our innovation system.

QUINN: Congressman, I’d like to ask you sort of that same question. Philosophically, would you say that patents promote innovation or that they inhibit innovation?

MASSIE: Well, you don’t have to believe or not believe, right? We’ve got 250 years of history in this country of innovation and we have the most innovation because we have the strongest patent system. The deal that our founding fathers gave us that was different from all the European models was what you create you own, right? And the charge that our founding fathers gave us in Congress was to promote the useful arts and sciences by granting for a limited period of time the exclusive use of an inventor’s works. So what we have to do is to decide within that charter how do you promote useful arts and sciences and for what period of time? There are some people that believe that zero period of time is the correct period of time. That does not work, you know. I’m not a lawyer, I’m an engineer. I went to MIT and I studied electrical and mechanical engineering because I love creating. And right there in the laboratory and in the labs next to me people were inventing stuff all of the time. And the great thing about being there in that hotbed at MIT is everybody wanted to start a company and the way you started a company was you had to go get capital and nobody was gonna invest in you if — unless you had some intellectual property. So, you know, my startup that I spun out of MIT, my wife and I, we started right there in a married student housing dormitory was licensed from MIT from the Technology Licensing Office, then we went out and got venture capital and they believed in us and they knew we had a chance but we had this limited period of time to get a return on that investment before the invention became public domain. That’s the great thing about patents. The deal you make with society is I’m gonna tell you everything about how to copy this idea and when my exclusivity lapses everybody in the world can have it.

QUINN: Yeah. And it’s interesting that you say that because one of the things I think that’s really misunderstood is just how long patents actually last. People — when you say limited time I can just hear the people, the critics, saying but, you know, it’s 20 years, it’s a generation, and when, in fact, most patents last about four years or eight years because of the maintenance fees. So I wonder how that influences — I mean, do either of you have any thoughts on that? How does that dynamic — is part of what we’re dealing with maybe people just don’t really understand the patent system as much as I’d like them to?

COONS: I do think broadly — a concern I have is that lots of folks who are engaged in this debate and this discussion don’t understand the intersection between a strong patent system, being able to defend it effectively in court and the ability to raise capital for a startup, as the Congressman just described. It’s that intersection and the key role that patent litigation plays in it that I worry about. It’s not so much the length of the patent. I mean, it’s a monopoly. That’s what you’re getting is a — is a government-sponsored monopoly but the ability to actually defend that monopoly. If you’ve invented something special and you’re agreeing to share that invention with the world you have to be able to raise money; to raise money to take it to scale you have to be able to defend it. That means patent litigation has to be something you can possibly succeed at.

QUINN: Right.

MASSIE: Here’s a big misperception about patents that I run up against here in Congress. Some people think they’re to protect the big companies and nothing could be further from the truth. I mean, the big companies have the advantage of size, they have the marketing channels, they’ve got the manufacturing, they’ve scaled up. It’s the little guy that patents protect. The garage inventors who come up with things, and this was me in the beginning, and you go to tradeshows and you got a little 4×8 table because that’s all you can afford and you show the world your brand new idea and there’s a buzz at the tradeshow and your product would be copied within six months by all the big companies if you didn’t have a patent. Patents are there to give the little guys a chance in that market.

QUINN: Yeah. Okay, what I’d like to do is if we could just maybe pivot now from maybe the philosophical to maybe some more of the practical. There’s pending reform in the House, there’s pending reform in the Senate. Depending upon who you listen to you get all kinds of different handicap odds on the various pieces of legislation. So maybe, Congressman, we’ll start with you. How do you see things in the House now? Where do we stand? And if you care to, you know, guess what kind of percentage chance to do see reform having this year and maybe during this Congress?

MASSIE: Well, the bill that was brought forward in the House was H. R. 9 and frankly it’s a bad bill. It would have watered down our patent system through making it impossible to defend your patent. And so it would have affected all of the patents across all domains. But that’s the legislation they tried to advance in the House. Last Congress they passed it in the House but it didn’t pass in the Senate. This Congress, when they brought it to the floor, we slowed it down enough that we stopped it before the August recess and frankly I think we’ve stopped it for now in the House but listen, this battle will go on for another 100 years. There will always be some of the big companies that are up here with a lot of money trying to weaken the patent system and somebody’s got to be here. Hopefully when I’m gone there’ll be people elected that will stand up for the little guy who doesn’t have a lobbyist here to protect them and their intellectual property rights. But this battle will go on forever but right now we’ve had a temporary victory in the House where we slowed down the bad patent legislation.

QUINN: Yeah, I think that’s important because in the patent community you learn about the 1952 Patent Act and how it changed everything and it streamlined everything and maybe once every 50 years or so you get changes to the patent laws, maybe around the edges occasionally. But I think we really are in for a lot of push for reform on a yearly basis. Would you — Senator, do you think —

COONS: Well, Gene, what I referenced earlier, I’ll just comment on again. There are real changes happening in the courts in patent litigation in the standards of review being applied and the cost and timeliness of discovery, for example, and I am very hopeful that those changes, given time to work, will reduce some of the intense pressure around patent litigation reform. But I would agree with the Congressman, this is gonna keep coming back. There are very strong economic interests that are trying to weaken the patent litigation system. They see the economic consequences to them of patent litigation in a series of high tech sectors but it has a very different impact in pharma and bio and materials for universities, for venture capitalists and those folks are opposed to fundamental and sweeping changes in patent litigation. So it’s at an impasse at the moment but it was, I mean, it’s on the floor, it’s come out of the committee, it’s primed and ready for action. If several of the big companies that are competing over this come to an agreement it could move to a vote very quickly so —

QUINN: And that’s in the Senate?

COONS: That’s in the Senate. So my concern is that folks need to continue to invest time in outreach and education to Senate offices. I think as senators are hearing from their home state concerns many of them are becoming more cautious about the balance that’s struck in the bill. The sponsors are well-intentioned. They are trying to make what they view as a positive change but I think once members take the time to really listen to the whole universe of folks whose lives are impacted, whose companies are affected by property rights — by intellectual property rights — they become less certain that this — moving forward this soon after the AIA when the whole post-grant review process is still relatively young, when there are steps being taken by courts to deal with some of these issues, they’re less enthusiastic about racing ahead.

QUINN: Yeah, and it’s interesting, just listening to you talk it dawned on me, something came to mind that hadn’t really come to mind before, is historically the way that the patent system has evolved and changed over time is giving the courts a generation or two to figure it out since the last change and then Congress getting together and say okay, well, we like this, we don’t like that, and it’s a much more thoughtful, considered approach rather than just a constant reform push.

COONS: Right. It’s just a few years since the AIA, which was the single biggest change in patent law in decades and this new post-grant review process is still in its infancy and I do think some reforms will eventually be called for, but I think it’s pretty soon after AIA to make sweeping and fundamental reforms to all of patent litigation.

QUINN: And I suspect you agree with that as well?

MASSIE: Yeah, absolutely. I mean, let’s let this perturbation settle out and see what the positive and negative effects were of the American Invents Act and — before we go tweaking the system some more.

QUINN: Right. Right. Okay, this may be a good time to bring Louis into the conversation. Louis, can you hear me?

FOREMAN: I can hear you, Gene, thank you.

QUINN: And I suspect you’ve been listening to the conversation and what I’d like to bring you in on specifically is two things. One, the idea of raising capital and this idea that patents are not really for the big guy as much as they are for the little guy. I know you have been that little guy, you’ve been that startup and now you have spent much of your career working with those kinds of startups. So I’d like your perspective on that. And then the other thing is from your businessman/entrepreneur perspective what concerns you about this patent reform?

FOREMAN: Well, thank you, Gene, and Congressman Massie and Senator Coons. Just hearing you speak about how important it is to protect the rights of independent inventors is very comforting. Having a voice in this discussion is very important. The independent inventor feels left out of the process. This is a battle of big companies trying to weaken the patent system and make it easier for them to just infringe on the rights of independent inventors, when the reality is that many of these companies started with a patent. They were a startup. They came up with a great idea, they raised capital to fund that great idea and now that they’re at the top of the mountain, they want to pull the ladder up so no one can compete with them. You know I have been a serial entrepreneur since my college days and all I’ve ever done is start businesses. I create jobs. I create jobs around intellectual property. Our company here in Charlotte , we employ over 70 people who are inventing every single day and those inventions are licensed to companies who then manufacture the products and distribute the products and create even more jobs. So what incentivizes or what encourages us every day to go out there and do what we do is the ability to protect our inventions. There would be no incentive for us to take a financial risk if we didn’t have at least a period of time where others cannot make, use or sell what we’ve created. And that’s why a strong patent system is essential to what we do. Edison Nation is the largest community of inventors in the U.S., over 150,000 independent inventors who have great ideas and need help bringing those ideas to market. And it’s disheartening when we hear that Congress is thinking about making it harder to enforce those patents. Because many of these inventors don’t want to be entrepreneurs, they just want to try to license their inventions through other companies and be able to create some sort of monetary gain for their inventions. So when we go out and start businesses and we work with dozens and dozens of companies come to us to start businesses the first question that any investor asks is what kind of intellectual property do you have? And without having a patent, you lose that core asset that an investor is really willing to invest in.

QUINN: Okay. Thanks, Louis. And, you know, I think we probably — we all know that patents are important to raise money and those of us in the industry, I know that there are people who are skeptical of that on the outside looking in, the critics, but, I mean, first, before I go on to any further questions do you either of you have a reaction to what Louis has said? Congressman?

MASSIE: I do. Louis made a good point there about inventors. You know, I’m an inventor. In my case I did start a company but what I advise most inventors is find somebody who already produces something like your idea and see if you can get them to manufacture it and sell it and then you can go invent the next thing because that’s what you’re good at and what’s wrong with. One thing that’s wrong with this patent reform legislation, they talk about patent trolls and then they equate anybody who is a non-practicing entity to a patent troll. In other words, if you invent something but you don’t manufacture it there’s an assumption that you’re doing something bad because you’re not making the idea and I say that’s — that notion that you have to, for instance, build the building if you’re the architect or that you have to build a cell phone company if you invent something for cell phones, that’s as ridiculous, that notion, as telling an author he doesn’t have a legitimate career unless he prints books and sells books. I mean, because authors are non-practicing entities too. You don’t call authors trolls, right? But they’re calling inventors trolls if you — if that’s what you want to do for a living. So that’s one thing that troubles me about this legislation, it’s delegitimizing the career that I came from, which is inventing.

QUINN: And that’s a very dangerous hair to be splitting because most of the major tech corporations in the United States, the ones who are these giant patent holders, they don’t make anything either. I mean, what they make, you know, in certain situations and they sell is all made overseas. It’s not made here in America.

COONS: By contract manufacturers, not by them directly.

QUINN: Correct. Right.

COONS: Most of the household name technology companies we know are inventing and then they are licensing or franc- — I mean, they are working in a range of relationships such that other companies are manufacturing, distributing, selling and servicing the things that they’re inventing, yet they’re at the very heart of the attack on the individual inventor as a so-called troll if what they choose to do is invent, license, invent, license, invent, license and finance their ongoing invention through licensing phase. It is — it’s a distinction that’s important to be very careful about and I think the choice of the term patent troll was intention. Was designed to sort of demonize those who are not manufacturing when if you actually understand the field it’s far more complicated than that.

QUINN: Yeah. And people always tell me stop using the term patent troll for that very reason and I say absolutely not, I’m gonna use the term patent troll as often as I possibly can because I want you to think of the most hideous creature about ready to mug you from underneath this bridge and then ask yourself was that Thomas Edison? Are those the Hall of Fame inventors that the Patent Office inducts into the Hall of Fame every year? Are those the people who are the entrepreneurs that are creating jobs and growing the economy? And are the universities? And most people would look at all those people and say no, that’s what we want.

MASSIE: I asked my colleagues what about the patent hobbits because I’m a patent hobbit, right? And you want to burn the force down to go after the trolls. The hobbits are worried.

QUINN: Oh, I like that. Now I do have — before we get too far and we start to run out of time and we start taking Twitter questions I have a political question for you two and hopefully you’ll be able to answer this. I don’t think it’s a loaded question. I’m not gonna ask you about the other issues. But the one thing that worries me or I don’t know if worry is the right way to say it but I wonder about is I know both of you are very passionate on this issue.

COONS: Um-hmm (yes).

QUINN: Patents I’ve always described it is it’s not an issue that is gonna drive people to the ballot box on Election Day so I wonder —

COONS: Sadly no.

QUINN: What’s that?

COONS: Sadly you’re right.

QUINN: Yeah. So I wonder if when you go back to your districts and you have your town hall meetings and you meet with people or they come and visit you and they ask you why are you spending so much time on this? Why does this matter to me? What do you tell them?

MASSIE: Well — go ahead, Senator.

COONS: Two things. I’m from Delaware so we have a remarkable concentration of patent holders and inventors and entrepreneurs and so forth.

QUINN: So they get it.

COONS: Some. Not everybody.

QUINN: Okay.

COONS: But the neighborhood I grew up in I think 10 out of 14 heads of household were DuPont engineers and several of them were patent holders. My Boy Scout troop leader, my, you know, next door neighbor were inventors and patent holders but I agree with you that broadly it’s an uncommon concept. I must say Everyday Edison has done a great job of helping people understand it. Shark Tank has helped people understand it. Popularizing the idea of, you know, the importance of having a patent in order to attract capital. What I tend to say to folks is, is there any one in your family or anyone who you care about who’s currently suffering from and list a whole series of disease things whether it’s Alzheimer’s or ALS, whether it’s diabetes or it’s Parkinson’s disease and say I have met with the CEOs of small early stage startup bio and pharma companies who are investing huge amounts of money in bringing to market cures or treatments or medical devices that are going to help with those conditions. And without their ability to defend the patents that they’ve invested so much in developing they’re not gonna be able to bring that to market. These things don’t happen magically, they happen —

QUINN: Or even —

COONS: — from private innovation and invention.

QUINN: Or even worse, in some of these cases they may be able to still take it to market but they’re not gonna disclose that information.

COONS: Right.

QUINN: So they’re gonna keep it as a trade secret and really prevent the next generation of giants from standing on the shoulders of the giants who’ve come before them and that worries me.

MASSIE: Well, you know, when I go back to my district I see a lot of kids and a lot of parents involved in these STEM programs like the America First program or the Lego Robotics programs and they’re all competing and parents would like for their kids — a lot of parents would like for their kids to grow up to be engineers and I say look, if we take away the measures of achievement, you know, patents are like Heisman trophies or whatever, you know, for nerds of us, okay?

QUINN: Um-hmm (yes).

MASSIE: They’re measures of personal accomplishment in your field. If you take those away and then you deprive the heroes in that field of an income why should you expect your children to pursue that study? So I relate this back to STEM and so much, you know, so much effort has been spent on trying to revitalize our country and our education system on STEM and I say, look, let’s don’t disincentivize our children from becoming inventors and that’s what we would do if we passed bad patent legislation.

QUINN: Yeah. With that segue let me ask you, we talked in generalities a lot so far but what are the things that most concern you? Because it seems that — well, maybe I should ask you first. Would you both agree that it’s the Innovation Act H. R. 9 in the House and the Patent Act, I think it’s Senate 1137, those are the two primary bills at the moment?

MASSIE: Um-hmm (yes).

COONS: That’s right.

QUINN: Okay. In those pieces of legislation what are the issues that worry you the most? Senator?

COONS: There’s a whole series of changes to the practice of patent litigation, worse in H. R. 9 than in the Senate bill but just broadly speaking there’s a whole series of things that do — that affect discovery, that affect fee shifting, that affect standards of review that I think will make it much harder for the genuine individual inventor to both raise capital and then to be able to succeed in scaling their business. There are alternative bills, the Strong Patent Act, that I’ve introduced that also includes the Troll Act within it that would strengthen the patent system, attacking PTO fee diversion, for example, that would strengthen the post-grant review proceedings and would also go after abusive demand letters. But it would only make very narrow and targeted changes to patent litigation to go after what is genuinely abusive behavior and then strengthen the patent system as a whole.

QUINN: Yeah. Now before I ask you about the innovation I’d like to — let me follow up there. What are the odds that the Strong Patent Act, which is really in the Troll Act or very, very similar —

COONS: Right.

QUINN: — what are the odds that in order to accomplish something that they will at some point during this Congress become the primary vehicle?

COONS: I’d be thrilled. I think the odds that that will sort of leapfrog the alternative, it hasn’t come through committee, hasn’t gotten a hearing in committee and so just by regular order I think the odds are fairly small. Because it’s a fundamentally different approach to —

QUINN: It is.

COONS: — dealing with the problem of abusive demand letters. It’s a much narrower, more targeted approach and it strengthens the patent system as a whole. It would — I think it would be a more measured, balanced and responsible way to deal with what are some challenges in patent litigation in the cost and length of discovery but I think right now the sponsors of the current legislation that’s had a hearing, that’s moved to the floor are pretty dug in, unmoving with their approach.

QUINN: Yeah. Okay. And, Congressman, the Innovation Act, what troubles you?

MASSIE: One thing is it’s gonna scare away investment and it’s gonna make universities less likely to want to license their ideas and here’s why. This is a bipartisan — there are Democrats and Republicans on both sides of this H. R. 9, the bad legislation. Well, one of the ways it’s been sold to Republicans is hey, this is the tort reform you’re looking for. There’s tort reform in this. But the problem is there’s — and it’s got loser pays and, you know, if you go into a patent battle, which sounds good until you realize the little guy has got more to lose than the big guy when you go into that battle. But the other problem is they say well, we’re not just gonna go after the loser, we’re gonna go after his investors and anybody that stands to make money from this or benefit. Guess what? That includes universities and so now universities would — patents would become a liability, licensing their ideas would become a liability because they could be subject to being enjoined into a lawsuit and have to pay. So that’s gonna scare away not just investors but the universities.
Now Louis said something too a while ago that a patent is a right to make, use or sell, okay? Those three things, if you’re, you know, to exclude something from doing that. You — it doesn’t — until you start thinking about patents you don’t realize why you have to cover all three bases: make, use and sell, right? But what this bill tries to do, the well-intentioned folks say well, we want to protect the innocent consumer who buys a product at, you know, at a consumer electronics store, takes it home and then gets a letter that they’re being sued. Well, okay, that’s noble enough but there are other customers, too, you know. A big cell phone company is a customer to a chip manufacturer and so the very provisions they’re putting in there to — ostensibly to protect little guys actually protect the big guys because they’re customers too.

QUINN: Yeah.

COONS: It is the customer stay provisions.

QUINN: Yeah, and it strikes me that — that is a very noble thing to try and solve but that that’s not how the legislation is written. It really needs a flyswatter, not the elephant shotgun and that seems like the approach that they’ve been taking is just to pull out an elephant shotgun to kill the mosquito.

MASSIE: Or taking a lawnmower to your flowerbeds to cut the weeds.

QUINN: Right.

MASSIE: I mean, you’re gonna cut everything down.

QUINN: Yeah, I like that one. Now, Louis, I’d like to get you back in on this here. On the heels of this — and if you want to comment on the legislation specifics that would be great but I specifically — before we turn to the Twitter questions I want to ask you what has the patent system meant for you?

FOREMAN: Well, personally, Gene, the patent system has meant jobs and opportunity. Not only for us, but for the inventors we come across every single day. Congressman Massie brought up a great point about the customer stay provisions. Many of the products that we get involved in are consumer products that can be knocked off overseas very easily. Trying to shut down a Chinese factory that is infringing on your patent is tough. And if you weaken the patent to make it harder with the customer stay provision, it would be impossible. Because even if you could target that one infringing factory, they’ll just move to another factory and then the process begins over and over again. Anything that makes it harder for an inventor to have certainty to his property right is gonna reduce the incentive for inventing in the first place. Everyone has great ideas, but only about 13 percent of the U.S. working population are entrepreneurs. That means 87 percent are risk averse. And those are the inventors who come up with great ideas, that they want to license to someone else. If you make it difficult to license by labeling those inventors as patent trolls, then you deprive society of those amazing inventions.

QUINN: And that is a perfect segue here. I don’t know whether you’re reading the Twitter questions but we have some Twitter questions about patent trolls. One that I’d like to get to first on the heels of what you just said, Louis, is what reforms would you support that could discourage the trolls but would not amount to carpet bombing all patents? That’s from Twitter. Senator?

COONS: Well, there’s a number of provisions in the Strong Patent Act that are similar to what’s in the Troll Act. You know, first is raising the standard of pleading, which I believe is on target now to happen. There are rule changes that have been adopted by the Federal Judicial Conference so getting rid of the form pleading standard is something that is already under way that makes it — that has historically made it just too easy to file quickly without having to plead in specificity.
Second, there’s ways to go after — using the ITC to go after demand letters and to go after folks who are — the Trade Commission, excuse me.

QUINN: Uh-huh (yes).

COONS: To go after folks who are practicing abusive practices. And there are some other provisions, both in my bill and in the Troll Act that I think would make significant progress. The larger point I want to make in this, I’ll borrow the metaphor of not using the lawnmower to cut down the —

QUINN: Yeah, I’m gonna —

COONS: — wildflowers to go after the weeds.

QUINN: I’m gonna misappropriate that one myself.

COONS: Is that the fundamental changes to patent litigation that are in the Patent Act apply to all patent litigation.

QUINN: Yeah.

COONS: There’s no sort of gate that narrows it only to those who have pursued litigation more than 25 times or where that patent has never been practiced or where there’s some other indicia that it’s an actual practicing company of any kind. In the markup on the Patent Act in the Senate Judiciary Committee I offered a half dozen amendments that would have narrowed its impact and they were all rejected by pretty broad margins showing that I don’t think that was the narrow or targeted approach that they were going after at all.

QUINN: Yeah. Yeah. Well, another question that we have from Twitter is — and I think this goes to the Strong Patent Act — what can we do about fixing the different invalidity standards between IPR and District Court litigation? Because it seems to me that that really bothers a lot of people.

COONS: Well, it depends.

QUINN: Well, based on who you are, I suppose.

COONS: Right. It bothers you if you have a company that depends upon strong patents.

QUINN: Um-hmm (yes).

COONS: To now have a process that has a very high kill rate where three-quarters of the patents that are being challenged are being invalidated and where the standard of review is significantly lower than it is in the District Court. It is achieving, I think, the objective of reviewing a patent quickly and at relatively low cost compared to District Court litigation but it isn’t giving this vested property right an appropriate standard of review. So — and I think the clear and convincing evidence standard in the District Court ought to be the same that’s being used in post-grant review, because you’re taking away a vested property right.

QUINN: Um-hmm (yes). Yeah. And that worries me a lot because it seems, I mean, anytime you have different standards I think it leads to the possibility of gaming the system which I thought we were trying to get away from —

COONS: That’s right.

QUINN: — in this situation. We have another question here on Twitter that I’d like to get to and, Louis, I’m gonna ask you to maybe follow up on this one as well. How can we protect small companies that cannot afford to defend the patents that they’ve received? Is there any way — because the patent system is supposed to incentivize people to take risk and right now it seems through some judicial decisions and legislation and the constant drum beat of reform the incentive structure is on the brink of collapse, that’s my opinion.

COONS: I mean, I think moving to a loser pay system there are recent Supreme Court decisions that strengthen the standards by which a District Court can award fees to a successful litigant. One of the key features of H. R. 9 the Congressman talked about is a loser pays approach that I think is very detrimental to helping a small startup company attract and retain the capital to expand but I’d be interested in what Louis has to say.

QUINN: Yeah. Yeah, Louis, what — as a startup entrepreneur and inventor would you like to see happen? Is there any way that the system could help you guys?

FOREMAN: Sure. I think, Gene, if you have a strong patent and if it’s universally known that patents are a strong property right, that’s an asset and that asset you can borrow against, you can raise capital against that asset and it gives you the motivation and the incentive to take risks and build a company around it. When there’s uncertainty as to the ownership or the value or the defendability of that core asset that’s when you run into problems. And so if you have a strong patent and everyone knows you have a strong patent then defending that strong patent, you’ve done everything that you’ve got to defend it because you know that deep down you own that property right. But if you erode the value of a patent and make it harder to enforce, it makes it really difficult to make that decision if you’re gonna spend money to defend it.

QUINN: Yeah. Okay. Well, let’s see if we can get to one more Twitter question in the time that we have here. And it’s a basic question and we could probably write a thesis on this if we had to but I think it’s a good question is what’s wrong with the existing laws and why do we really need to be doing anything at this point?

COONS: Well, I don’t think we need to change the laws that govern the current patent litigation system. As I’ve said before, I think the Federal Trade Commission, the FTC, can and should be strengthened to take action against those who are genuinely engaging in abusive practices. I think that the pleading standards can be raised and that’s under way. That’s something that’s being done judicially. The District Court of Delaware, which is one of the busiest in patent litigation in the country, the judges have taken notice of real concern over the cost and length of discovery in patent cases so they’re taking action around it. Supreme Court cases have moved towards a more balanced approach to the risks undertaken in patent litigation. All of those are, I think, moving in the right direction to deal with what have been some genuine concerns about abusive litigation practices. Changing the rest of the structure of how patents are awarded and how patents are litigated I think is just overreach, frankly, and so I don’t think there is — I think when we — if we — if we could look back at today from five years from now we would not see a compelling case for the Patent Act or for H. R. 9 because I think the trajectory in terms of dealing with these issues is already well under way.

QUINN: Yeah, and I would agree with that and one of the things I think that fundamentally we have to always remember is we’re dealing with a one size fits all patent system. There’s not a patent system for bio-pharma where they absolutely need strong rights on a very limited number of innovations and the tech industry. It’s gonna apply across the board and my sense of the fee shifting rules in the various bills that are pending is they are quite different from the Supreme Court rule.

COONS: They’re much more aggressive.

QUINN: They’re much more aggressive and it’s much aimed towards the defendant, not towards the patent owner whereas the Supreme Court’s decisions would really apply across the board. If you engaged in certain activity that was inappropriate during litigation and you lost you would have to pay, whereas, the legislation really is patent owner centric.

COONS: Right.

QUINN: Which doesn’t strike me as very fair. Louis, do you have a feeling on that?

FOREMAN: Yeah, I would agree with you Gene. When you go to a fee shifting model, it really allows the other side to game the system. If you’re a small independent inventor going up against a really large corporation they can intimidate you by saying look, we’ll spend 10 times what you’re gonna spend to beat you and we’ll find a way to beat you and you’re gonna be on the hook for not only your attorney’s fees but also for ours. That intimidation could cause the inventor to settle at a much lower rate or drop the litigation all together and not be able to defend their patent rights.

QUINN: Okay.

FOREMAN: So I think it’s just a bad system for small inventors.

QUINN: Yeah. I agree. Now we are — spent this 45 minutes, it went quick, but I’d like to ask you, Senator, if you have any thoughts, if there’s one thing that you would like people to remember from this conversation what would that be?

COONS: It’s that the whole system of invention and innovation that has been fundamental to America’s economic strength and vibrancy is at risk if we move forward with overbroad, ill-considered legislation that would change the rules. It wouldn’t just go after so-called patent trolls; it would go after a very wide range of industrial sectors and it would have very harmful impacts on folks like Congressman Massie who is himself a successful patent holder — inventor, patent holder and entrepreneur, like the folks that Louis works so closely with. If the folks who are watching or who’ve participated haven’t studied these bills closely they need to realize there’s a real chance they’ll move forward and if they move forward they’ll do lasting harm to our whole national system of innovation.

QUINN: Okay. Well, thank you. Thank you. And for those of you who are watching at Hangout I just want to let you know we haven’t ignored Congressman Massie here. He was called away a few minutes ago on other business. So we appreciate him taking the time to join us today. Senator, thank you so much for joining us.

COONS: Thank you.

QUINN: Louis, thank you for joining us remotely. We really appreciate that. We appreciate all of you joining the conversation as well. This video Hangout is gonna become available at the Save the Inventor website, that’s www.savetheinventor.com and I encourage everybody to watch that, disseminate it, please tweet about it. The conversation will continue after this on Twitter with the hashtag #patentsmatter. Again, thank you very much for joining us and I appreciate your time, Senator.

COONS: Thank you, Gene. Great to be with you. Thank you, Louis.

QUINN: Thanks, Louis.

FOREMAN: Thank you.

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