Patent News

Feb. 13, 2015

Forbes: Patent Law Gone Awry: How Bob Goodlatte’s Bill Combines Useless Rigidity With Dangerous Discretion, by Richard Epstein

This article originally appeared in Forbes on February 13, 2015.

On February 5, 2015, Republican Bob Goodlatte introduced his so-called “Innovation Act” for patent reform on behalf of a bipartisan coalition of House members. The Act is a replica of the 2013 bill that passed the House but did not make it into law. This new proposed legislation comes hard on the heels of the passage of the 2011 American Invents Act (AIA), itself barely three years old. In an earlier Forbes essay, I explained why I thought that Goodlatte’s proposed 2013 bill could easily smother further technological innovation. In the two years that have passed, the basic landscape remains unchanged. The bipartisan support for the legislation regrettably offers no evidence of the bill’s soundness. It only offers evidence that strong populist pressures from small businesses, some of whom may well have been subject to abusive litigation, continue to exert powerful influence over the political process. So strong, in fact, that a strongly worded letter of January 20, 2015 from the various heads of the Big Ten universities expressing their immediate concerns with the impact of this legislation on the technology transfer process continues to go unheeded. It is indeed a sad commentary on the political process that there have been no modifications in the basis text of Goodlatte’s patent litigation bill in the over one-year hiatus between the first and second iterations.

The situation is dangerous because Goodlatte’s bill violates three fundamental rules of legislative reform. It moves too quickly. It develops a set of unneeded ad hoc rules for patent litigation. And it has a multitude of costly but unnecessary procedural innovations. Viewed as a whole, the Goodlatte bill combines dangerous rigidity with excessive discretion. The story plays out as follows.

Premature Reform

The first of these dangers is that lawmakers should not introduce a second round of legal reform until the previous reforms have run through at least one complete cycle of implementation. Patent litigation always takes a long time to run through its initial cycle. The AIA only applies to patents issued after its application. Disputes over these patents take a long time to work their way through the legal system so that there is little systematic data on how the law works on the ground, and even less opportunity to fit that data into some coherent evaluation, either quantitative or qualitative, of the overall effect on technological innovation and patenting behavior.

These issues are not easy to sort out. The Innovation Alliance reported in October 2014 that the amount of new patent litigation filings are down by 40 percent between September 2013 and September 2014, which makes it premature to introduce another set of reforms intended to curb litigation. The immediate underlying risk here is that additional expense will introduce a second transitional regime with its added uncertainty. It is usually easy to quantify the cost of implementing legislative change. It is far harder to quantify the benefits stemming from any such legislation. Indeed, it is often difficult to determine whether there are any benefits at all. The 40 percent decline in enforcement activity over the past year, for example, should not be naively interpreted as a sign that the patent situation has somehow gotten better under the 2011 AIA. It is equally consistent that the decline in enforcement actions could harbinger a system-wide trend of weaker patent enforcement that could in turn lead to a slowdown in the overall level of licensing activity. After all, a high level of licensing activity should be expected to generate a higher level of enforcement activities. There is no reason to think that these two move in lockstep progression, for it is also possible that strong licensing protections can lead to lower levels of litigation. Until these connections are sorted out, why start another round of innovation whose actual effects will take some years to determine?