Point of View

True antagonists in North Carolina's patent 'troll' tale are big corporations

June 3, 2014 

bill purporting to curb abuses by “patent trolls” is racing through the North Carolina legislature unopposed, if you believe recent news articles. “I don’t think that patent trolls really have a lobbyist, “ Rep. Tom Murry says.

Murry is right. The lobbyists are all on the side of the big corporations that are paying them to push the legislation. But lack of a well-funded lobby is not the same thing as lack of opposition. It’s just that the opposition consists of small innovative companies and independent inventors like me who will be hurt by this power play.

The authors of our Constitution created unique rights available in no other country at that time. In England, you had to practice an invention – make a product – in order to get a patent. Only large businesses owned patents. Our founders deliberately gave everyone the right to apply, obtain and enforce a patent they didn’t practice. This made inventing accessible to everyone regardless of their economic standing in society. Our country has been the primary engine of innovation in the world since the time of our Constitution.

The proposed legislation targets nonpracticing entities, individuals and companies that own patents but don’t practice them by making products. NPEs, snidely known as patent trolls, license their patents to companies that use their inventions.

Typically large companies refuse to pay individuals and small companies for using their inventions, effectively saying “sue me.” Unable to pay the cost of a lawsuit, some patent owners sell their patent rights to patent-holding companies that can afford to pay for litigation. The proposed bill would require an NPE that loses a “frivolous” patent infringement suit that was filed in “bad faith” to pay its opponent’s attorney fees and treble damages.

Is anyone against curbing bad faith and abusive behavior? It occurs in every sector of our economy and in all types of civil litigation. So why single out NPEs? Why not go to a “loser pays” system for all bad faith and abusive business behavior? The reason is that it is impossible to do so without stomping on the rights of many acting in good faith.

“Bad faith” is always a subjective determination – just like the term “patent troll.” What’s bad faith to one jury or judge may not be to another. This uncertainty aids those who infringe the patent rights of others by increasing the risks to the patent owner. That’s why our state universities – which are major NPEs, patenting and licensing their inventions but not making products – opposed early drafts of this bill and successfully lobbied for an exemption.

Increased risk devalues a patent. This risk exists even for those who believe they have legitimate claims and are acting in good faith. If the proposed legislation becomes law, patent owners who cannot absorb the cost of the increased risk will effectively lose their patent rights. Meanwhile, the large companies lobbying for this legislation will be able to take the risk of acting as NPEs when they assert patents that they do not practice – and they do!

Our country does not have a “loser pays” legal system as in Europe for a reason. Lower risk encourages economic activity. Is the “bad faith” and “abuse” related to patents so terrible that it needs to be singled out from other areas of litigation? A recent study by the Congressional Budget Office says that it is not and that NPEs play a useful role in making a market for and enforcing the patents of small companies and independent inventors.

The authors of the Constitution deliberately rejected the British system of the 18th century, which protected the corporations in power. Clearly the United States now has large businesses that want favorable treatment. Some developing nations are already following the path set out by our founders to take the lead in innovation while we pursue this return to the 18th century.

It seems we’ve forgotten how we became a great economic power. Let’s not ignore our own Constitution or the wisdom of our Founding Fathers. Innovation should be open to all, not just to those with the financial resources to build products.

Paul Morris is an independent inventor

in Raleigh.

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