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Patent law changes could stack the deck for big business

By   /   March 21, 2016  /   News  /   No Comments

Intellectual property law changes pursued in the name of fighting “patent trolls” could make it easier for large companies to steamroll small inventors.

Separation Design Group, a research lab with eight employees in Waynesburg, Pennsylvania, worries that’s exactly what will happen if reforms supported by President Barack Obama and tech giants like Google are implemented.

“People are saying litigation stifles big business. In our case, it’s pretty much the opposite,” SDGroup CEO Doug Galbraith told Watchdog.org. “If people are talking about tightening up the rules about how you litigate those situations, what’s the alternative for a company like ours?”

“I’m sure it’s inconvenient for a big company to get sued for patent infringement, but it’s much more inconvenient for a small company to have their intellectual property taken after they’ve gone through all the work of developing it and creating it,” Galbraith said.

Photo credit: StockvaultFrom Galbraith’s perspective, sweeping changes to favor defendants in patent infringement cases could have the unintended consequence of making it harder for small companies to protect their intellectual property.

“Maybe the solution is to move things along quickly enough that you get the cases that have no merit out of the way, so the people defending don’t have to spend a huge amount of money if it is frivolous,” he said.

“What the larger tech companies are proposing and pushing for is veiled behind the attack against what are known as patent trolls,” Bob Rauker, a patent attorney representing companies like SDGroup and other inventors, told Watchdog.org.

But Rauker said it’s inaccurate to paint all non-practicing entities — businesses that hold patents for technology they aren’t currently licensing or developing — as trolls, although some are bad actors “trying to extort money from somebody.”

“The deck is starting to get stacked against smaller companies,” Rauker said. He suggested instead of putting more hurdles in front of inventors filing patent complaints, the U.S. Patent and Trademark Office should set clear standards and grant sound patents, and judges should be relied upon to decide when a plaintiff is acting in bad faith.

“If you’ve got a patent on something and the Patent Office issued it and you did everything you’re supposed to do, disclosing what you were required to disclose and following the proper processes – if they did a bad job, why are you suddenly not a legitimate patent holder?”

The two major pieces of legislation on Capitol Hill, the PATENT Act and the Innovation Act, are being sold by their sponsors as a way to crack down on frivolous patent complaints. But weakening patent protection would not help small inventors like SDGroup — the company recently filed a complaint against a larger competitor alleging patent infringement — if it made defending their intellectual property more difficult.

“It’s kind of like the Post Office losing your mail and saying, ‘Well you should have used UPS or FedEx,'” Rauker said.

Consistency from USPTO will “make life a lot easier for everybody, so that you have something to start with,” he explained, “and the court system shouldn’t be afraid to penalize both sides for bad behavior.”

With regard to software patents, in particular, Rauker said USTPO and Congress should focus on providing better definitions of what can and cannot be patented instead of “using a sledgehammer to kill a fly” by dramatically changing the infringement complaint process.

At least several members of Congress are sympathetic to small inventors’ position. Sen. Kelly Ayotte, a New Hampshire Republican, has voiced concern about the Obama administration’s attempts to stop patent trolls by making it more expensive to file patent infringement complaints.

“We’re blessed to have many great innovators,” Ayotte said at a November 2013 hearing. “How do we make sure we’re not harming legitimate innovators?”

Rauker said the priorities of huge tech companies should be considered alongside input from businesses of varied sizes in varied industries, because issues surrounding intellectual property rights are not uniform across the economy.

Like Galbraith, Rauker worries that stifling innovation from small businesses could be an unintended consequence of laws meant to stop patent trolls from stifling innovation at larger corporations.

Making it too expensive to protect intellectual property would reduce incentives for inventors to develop — and for investors to support — the sort of technologies the Googles of the world have acquired from small companies over the years, he warned.

“You’re going to see less funding going to a lot of these things,” Rauker concluded. “I think people will still continue to invent, but I think it will slow that down.”

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Jason is an Ohio-based reporter covering labor issues for Watchdog.org, with a focus on right-to-work, public employee unions and Obamacare. Before joining Watchdog, Jason was communications director for Media Trackers Ohio. His work has been featured at FoxNews.com, Hot Air, The Daily Signal, RedState, Townhall and elsewhere. His investigations into labor union spending and Obamacare's Medicaid expansion have been cited by national commentators including Jim Geraghty, Michelle Malkin, Erick Erickson, Dana Loesch and Mark Levin. Jason can be reached on Twitter at @jasonahart and by email at jhart@watchdog.org