America’s IP System Must Protect Inventors, Not Patent Pirates

It is no question that America’s inventors and entrepreneurs take risks. Our nation’s knowledge economy is built by those willing to pursue new discoveries and advancements. This often means costly and risky research and development in the face of looming adversity.

Strong intellectual property protections provide the incentives necessary to allow entrepreneurs to recoup on their investment and assurance their innovation won’t be stolen by imitators and copycats. IP is vital to job growth and economic competitiveness, with the most recent report by the U.S. Department of Commerce finding that IP intensive industries account for a total of 45.5 million jobs or 30 percent of all jobs in the economy. Year after year, the U.S. Chamber of Commerce’s Global IP Center’s IP Index ranks the United States as the strongest IP regime in the world.

However, strong statistics don’t discount the need to stay vigilant to protect America’s IP exceptionalism. Our ability to remain a world leader in creativity and innovation depends on preventing assaults on IP both at home and abroad. State-sanctioned IP theft from China (which currently costs between $225 billion and $600 billion annually) continues to act as the centerpiece of the Trump administration’s ongoing trade dispute with China.

Domestically, we have seen the proliferation of anti-IP policies spawned from Silicon Valley’s tightened grip of influence in Washington. There is no better example of this than the creation of the Patent Trial & Appeal Board through passage of the America Invents Act of 2012. PTAB operates out of the United States Patent and Trademark Office as an unrestrained tribunal who hears petitions challenging already issued patents. Here’s the kicker: Anyone can file a petition to have a patent declared invalid. PTAB systematically invalidates up to staggering 90 percent of issued patents. Instead of ensuring validity, PTAB has given patent pirates with deep pockets the power to trample on the property rights of American inventors.

Luckily, USPTO Director Andrei Iancu has taken the first steps to restore balance by requiring PTAB to use the same standard for considering patent claims as is currently used in federal courts. This improvement is reflected in the IP Index as our patent system has jumped from 12th to 2nd place in the past year.

How do we restore our patent protections as the gold standard? The only way to encourage innovation is to reward and protect it through injunctive relief operating on the presumption of validity for patent holders. IP needs to be treated like any other property as originally enshrined in the Constitution by our Founding Fathers. Federal court procedures have historically provided a fair and balanced venue for inventors and creators who are victims of infringement to seek the justice they deserve. Recent cases demonstrate an attack against that core principle and tradition, and this impacts not only big brand name industries, but companies large and small alike. One such example is Bunch O’Balloons.

Josh Malone, the inventor of Bunch O’Balloons, a popular water balloon device, knows all too well that defending your patent can be a lengthy and costly process. Shortly after being issued a patent for his novel invention in 2015, Malone was besieged by copycat products created by a company called Telebrands. When faced with Malone’s allegations of infringement, Telebrands brought their case before PTAB, who in 2015 declared Malone’s patents were invalid. $20 million in court fees later, Malone took the fight to Telebrands and PTAB through litigation proceedings in district court and before the federal circuit. The district court found Malone’s original patents to be valid and was awarded $12.25 million in lost profits in 2017. However, it wasn’t until after the Federal Circuit Court of Appeals threw out PTAB’s original invalidation ruling that Malone received his payout from Telebrands.

Another example that is currently moving through the courts is a case focused on the protection of patents of the aerial imagery company, EagleView. When faced with similar allegations of blatant infringement, data analytics firm Verisk Inc. administered countless petitions to invalidate over 150 of EagleView’s patented technologies and deployed numerous counterclaims to sidestep the trial. PTAB gamesmanship at its finest.

It is essential that our courts provide appropriate penalties to those skirting justice in order to serve as an example to deter future bad actors. If not, rogue companies will continue to weaponize PTAB at the expense of the inventor.

Innovation, just like the industries and economic growth it supports, cannot prosper in an environment of uncertainty. There would be no medical innovations, smartphones or strong property rights secured by patents and other intellectual property if our patent protection system erodes. While Congress looks for solutions to improve the predictability and certainty for inventors our courts should ensure justice is administered to patent pirates who game the system and use get-out-of jail free PTAB proceedings. America’s future innovators cooking up the next big breakthroughs in their garages, laboratories, and studios are counting on you.

Dee Stewart is president of the Center for Innovation and Free Enterprise.

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