EFF: The “Inventor Rights Act” is an Attack on True Invention

The “Inventor Rights Act” is an Attack on True Invention

Certain patent owners just can’t get enough of the monopoly power patents bestow. That’s why they keep trying to make it easier to get and sue over patents, despite Supreme Court rulings that point in the opposite direction.

Their latest effort, the misleadingly-named “Inventors Rights Act,” also known as H.R. 5478, hijacks the positive associations many of us have with “inventors” to radically tilt the patent system in favor of patent owners, including patent trolls.

Patent trolls make money by threatening people over everyday activities, not by inventing, building, or selling anything of value. At EFF, we’ve been tracking and fighting them for years. Over the past two decades, the Patent Office has allowed tens of thousands of vaguely-worded software patents to proliferate. Patent trolls can use those patents for up to twenty years to sue regular people who use software for everyday activities—like making a picture menu, running an online contest, teaching a foreign language, or tracking packages.

Advocates for more patent powers insist—despite nearly two decades of litigation records, studies, and other published evidence—that patent trolls are an overblown problem. We published a deep dive on this issue earlier today, discussing what we mean at EFF when we talk about patent trolls and abuses of the patent system.

H.R. 5478 will give enormous new litigation powers to a select group of patent owners, which will include many patent trolls. The bill will re-classify them as “inventors” and then grant them new powers. In particular, the bill will throw out the checks against extreme and extortionate patent litigation that have been put in place over the years by the Supreme Court.

Throwing Out The Balance

The Inventors Rights Act would roll back three major areas of law that keep the patent system balanced. The bill pays lip service to “inventors,” but the changes it proposes are seriously harmful—whether they’re limited to certain types of entities or not. Practically speaking, these giveaways will go to dozens, or possibly even hundreds, of litigation-prone limited liability companies, not hardworking individuals.

First, H.R. 5478 would go back to a system of near-automatic injunctions for patent cases. That would give patent owners the power to shut down other companies’ operations (or threaten to do so) regardless of the harm that might cause the public. This change would essentially undo the 2006 landmark patent case, eBay v. MercExchange. That’s the case where the Supreme Court said that patent owners have to prove an injunction is necessary to avoid irreparable harm before they can get one. That rule hurts patent trolls because they don’t participate in product markets, and therefore are extremely unlikely to suffer the kind of harm that money could not compensate. If Congress dismantles eBay, do-nothing companies will again be able to use software patents to extort massive settlements and distort competitive markets. The classic example: the notorious NTP v. RIM case, in which the then-ubiquitous Blackberry phone network was nearly shut down, until a $612 million settlement was paid to a patent troll called NTP.

Second, H.R. 5478 would undo critical venue reform based on a Supreme Court decision in TC Heartland. Before TC Heartland, patent trolls could sue anybody just about anywhere they wanted—and they often chose the Eastern District of Texas. After TC Heartland, patent owners can only sue defendants where they are incorporated or where they have committed supposedly infringing acts and have a regular and established place of business. This bill’s proponents want to go back to the worst days of forum-shopping, where patent owners could manipulate the system by filing only in faraway venues that were friendly to them.

Third, H.R. 5478 puts a stop to a critical patent review process called inter partes review, or IPR. The IPR process was created by Congress in 2012 and has been successful in getting the patent office to overturn more than 1,500 wrongly granted patents. We know how important the IPR process is: EFF used it to challenge the so-called “podcasting” patent owned by Personal Audio LLC, which was using to harass and threaten podcasters. If H.R. 5478 had been the law at that time, EFF wouldn’t have even been able to file the case. In all likelihood, Personal Audio LLC would have been exempt from the IPR process, since the original patent owner claimed to be the founder and owner of the company.

That means if Personal Audio had access to the legal loopholes granted by the “Inventors Rights Act,” it could still be using its patent to threaten podcasters into paying legal settlements.

The abuses of modern patent trolling have gone on for more than 20 years now. In that time, a significant group of people have spent their careers making money off patent lawsuits and litigation threats. When they go to lobby Congress seeking extra privileges to extend their abuses of the legal system, it’s convenient to wear the mantle of “inventors’ rights.” But make no mistake—this bill will give super-powers to some of the worst patent trolls. The lawsuits these trolls produce are already a major headache for small companies, which produce most of our nation’s real inventions. U.S. small businesses shouldn’t be subjected to a law like H.R. 5478, which will roll back some of the few good defenses against patent trolls.