Patent Reform

Problems with Current Patent System

• Many patents are approved because examiners don’t have time or resources to search all the relevant references
• “The past three decades of wanton patent-granting have created a disastrous environment for innovation. Today it’s practically impossible to build anything without violating a patent of some kind—and risking a multimillion-dollar lawsuit for your troubles.” (Wired)
• Technology industry has too many overly broad patents, leading to incredibly silly patent litigation cases
  • Amazon “owns” the process that allows people to buy things with a single click.
  • Apple now claims the exclusive right to sell rounded-edged, rectangular-shaped communication devices on which icons are arranged in a grid with a row of persistent icons at the bottom
  • A small company in Tyler, Texas, once demanded more than $600 million from Google because of the design of the borders around its display ads.
• ‘’’Patent Trolls’’’ are nonpracticing entities that don’t make products but exist solely on the revenue of its patents
  • Costs a few thousand dollars to secure a patent, which can bring in millions through litigation
  • It is usually more expensive to win a case against a troll than to just settle
• Last year, for the first time, spending by Apple and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products, according to public filings. (NYT-PW)
• Me-too drugs: a drug that is approved after a pioneering drug and is the 'same'; it is not clinically superior to the original drug (WHO)

Current Reform

Legislation

Innovation Act

PATENT Act

TROL Act

STRONG Patents Act

H.R.1896: Demand Letter Transparency Act of 2015 (Congress)

• If an entity sends more than 20 demand letters to the USPTO within a year, each demand letter must follow certain rules and requirements
  • Must include disclosure with specific details regarding the case, such as exactly what patents have been infringed upon, the related parties, etc
• Permits a recipient of a demand letter to file a petition with the USPTO if it believes that disclosure or patent letter information requirements have not been met
  • USPTO will notify the patent owner that the patent will be voided unless a fee is paid

S.1137: Protecting American Talent and Entrepreneurship (PATENT) Act (2015) (Congress)

• Pleading and early disclosure: must identify each claim of each patent allegedly infringed and which products or processes are infringing
• Discovery limits: requires a court to stay expensive discovery pending resolution of preliminary motions
• Fees and recovery: provides that reasonable attorney fees will be awarded if the court finds that the non-prevailing party was not objectively reasonable
• Disclosure of patent ownership: requires patent holders to disclose to the PTO whenever there is an assignment of interest in the patent that results in a change of ultimate parent entity
• Small business provisions: directs PTO to develop educational resources for businesses targeted by patent suits and to create a list of pending patent cases on its website

H.R.2045: Targeting Rogue and Opaque Letters (TROL) Act (2015) (Congress)

• Requires demand letters to include specific details about the person with the rights of the patent, parent companies, contact information, and information on how the recipient is infringing the patent
• Establishes that sending demand letters that misrepresent patent rights is an unfair or deceptive act or practice under the FTC Act and allows the FTC and State Attorneys General to fine violators

S.632: Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act (2015) (Congress)

H.R.1249: Leahy Smith America Invents Act (2011) [1]

• A derivation proceeding is established to replace the interference proceeding currently employed by the USPTO
  • The purpose is to determine whether a claimed invention in an earlier filed application was derived from the later filed application
• Transitions from First to Invent patent system to system where priority is given to first inventor to file a patent application
• Patent Office itself can rule on egregious claims, throwing them out before defendants are forced to go through the pain and expense of a full trial [2]

Failed Legislation

H.R.845: The Shield (Saving High-Tech Innovators From Egregious Legal Disputes) Act [3]

• Introduced in 2013, but was not enacted
• Requires an unsuccessful plaintiff in an infringement suit to pay the defendant’s legal fees
• Effort to dissuade frivolous patent lawsuits

Drafts of Future Legislation

Innovation Promotion Act

Prize System for Inventions

The current patent system allows companies to file for the right to exclude if they have a novel, non-obvious invention. The right to exclude creates a temporary monopoly for a certain product, which leads to higher product costs for the consumer. One example of a patent leading to exorbitantly high prices would be Daraprim, a drug produced by Turing Pharmaceuticals. Martin Shkreli, the CEO of Turing Pharmaceuticals, led the charge to increase the price of Daraprim from $13.50 to $750 per pill. [4]

Because of such abuses of patent protections, economists and legislators have advocated for a prize system instead of a patent system for pharmaceutical drugs.[5] Under this system, companies that invent a new drug will receive a lump sum prize. The rights to the drug will then be placed in the public domain, creating generic drugs.