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December 2, 2015Published Article

Gollwitzer: Texas Patent Law Landscape is Changing

My Statesman

The following op-ed was published in Austin American-Statesman and cited by Patently-O.

Patent-reform demands bring to mind the warning about throwing out the “baby with the bathwater.” Though a patent might only exist in the mind, it is still the property of its creator. And so-called patent-reform bills that limit a person’s right to protect that property devalues property rights — a fundamental sin to most Texans.

Commerce Department data suggests that intellectual property contributes as much as 35 percent to our nation’s gross domestic product. For some companies — especially start-up companies that contribute so much to the Austin economy — these patent rights are the most valuable things they own.

A recent commentary on these pages made strong points about patent-system weaknesses and frivolous patent lawsuits. But in devising solutions to these ills, we must avoid sweeping reform with unintended consequences. If we want to reform patent litigation, we must be careful not to close the courthouse doors to small companies and inventors, who have no other means to protect their innovative ideas — their valuable property — from poaching by larger competitors.

Consider “reforms” already enacted. In 2011, the America Invents Act became law. The act created a faster, cheaper process for reviewing patent validity. These procedures take only 18 months and cost less than 20 percent of the average patent suit. But the impact of these procedures is even more profound, as more than 75 percent of patent claims have been declared invalid. So now the concern is that the pendulum has swung too far via the cancellation of valid and valuable patents, wiping out millions of dollars of intellectual property rights.

Next, in 2013-2014, the Supreme Court issued more patent opinions than at any time in history. Strikingly, the Court’s decisions were unanimous and largely favored defendants. To take a few examples, the court made it easier to invalidate some patents — especially so-called “business method” patents — and made it easier to collect attorneys’ fees in frivolous cases.

Thus, before we enact new “reforms,” we need to asses these recent, significant changes. Otherwise, we risk precluding small companies and entrepreneurs from defending their legitimate inventions — their property. When proposals require a patent holder to spend five figures on investigating alleged infringement prior to filing a lawsuit — as well as restrict discovery or require the losing side to pay attorneys’ fees — they will face the unintended consequence of closing the courthouse doors to the start-up companies we are aiming to protect.

No doubt, the current system has problems. For example, more than 20 percent of all patent suits are filed in Marshall. As a result, a limited set of lawyers and judges are creating precedent and setting the price of settlement for everyone from start-up companies in Austin to major technology firms in Silicon Valley. While courts across the country are granting more than 70 percent of all motions to dismiss abstract, business-method patents based on one recent Supreme Court decision, the court in Marshall is granting only about 25 percent of such motions. When all of the courts are applying the same patent laws, that disparity is notable.

But this imbalance can be overcome without “comprehensive reform.” Indeed, our patent system — or even so-called “patent trolls” — are not the problem. The problem lies in patents that should not have been issued in the first place being asserted in lawsuits seeking nuisance settlements — and in courts that are reluctant to stop such cases at the earliest possible stage.

These problems, however, can be fixed without major legislation. For example, we can limit patent trolls’ ability to file their cases in the most favorable forums. That is, make them file suit where the defendant has its principle place of business or where the inventors actually live — not based on a shell company occupying an office in Plano.

In addition, it is fair to criticize the thousands of patents allowed by the Patent Office covering nothing more than methods of clicking on hyperlinks to online shopping carts or handling data without any technical details. The Patent Office has not handled the dot.com era well. But the Office appears to be learning from the Supreme Court’s guidance. And courageous defendants and judges can handle the bad patents already issued. The America Invents Act and the Supreme Court’s recent decisions give small businesses the tools to defend themselves so long as courts are willing to enforce those new laws and dismiss frivolous cases at the earliest possible stage.

To read the op-ed on the Austin American-Statesman site, click here.

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