Washington, D.C. economist, policymaker seeks to slow ‘patent troll’ legislation

As the so-called “patent troll” issue comes into the spotlight, a Washington, D.C.-based economist and inventor believes that Congress needs to take a careful approach in coming up with legislation to update the nation’s patent and trademark laws.

Charlie Sauer, founder of U.S. Inventor, recently told Talk Business & Politics that pending legislation in Congress to target patent trolls could thwart innovation and prevent small business owners and entrepreneurs and affect a patent owner’s ability to protect the financial value of his ideas.

Sauer and other critics of the so-called House and Senate versions of the Innovation Act (H.R. 9) and the PATENT Act (S. 1137) say they mostly address tort reform rather than improving the nation’s complex U.S. patent and trademark system that has fostered some of the greatest inventions and ideas in history.

“The reason why America is so great is because we have incentivized people to say ‘no, not everything has been invented,’” Sauer said. “But that’s what these bills take away.”

PATENT TROLLS & NIGERIAN EMAIL SCAMS

In explaining the current debate in Congress, Sauer said that one part of the system that needs to looked is the frequently talked about schemes by patent trolls that are similar to the Nigeria email scam, when an unknown swindler promises victims a significant share of a large sum of money if they send an upfront fee. In the end, the victim is taken advantage of and the fraudster disappears.

Similarly, Sauer said, fraudulent players and their lawyers in the patent technology arena are exploiting the legal system by sending small business owners and entrepreneurs threatening demand letters to pay a fee for infringing on their invention.

One of the most highly cited cases cited by patent troll legislation supporters is the case of MPHJ Technology Investments, a company run by a former con artist who sent out nearly 17,000 demand letters to small business owners demanding a licensee fee of $1,000 or more per worker. About a year ago, the Federal Trade Commission reached a settlement with MPHJ over its sales claims and phone legal threats.

“I would just throw it away, or get your lawyer to look at it,” Sauer advised of the demand letters and emails that patent spammers send to entrepreneurs and small businesses requesting them to pay a licensing fee.

But, the second area of patent legislation before Congress that Sauer sees as more troublesome is the regulation to prevent entrepreneurs, startups, small businesses or universities from protecting themselves from larger companies like Samsung, Google, or Apple from stealing their ideas.

“These bills would do nothing but harm innovation,” Sauer said. “I don’t see anything wrong with protecting these because it keeps some of the bigger companies from stealing my ideas. This happens all the time and the (current) bills would make it harder to protect your rights.”

Under the proposed legislation, Sauer and other critics said some of America’s most well-known inventors – including Thomas Edison — would be called “patent trolls” because they sought to protect their ideas from rivals and larger companies.

SEN. COTTON PROPOSES LEGISLATION TO STRENGTHEN U.S. PATENT SYSTEM

Sauer said the current Senate legislation should encourage patent reform that swings an appropriate-sized stick while still protecting American innovators. A bill they would support if it gained momentum is the STRONG Patents Act, a bill introduced by a Sen. Chris Coons, a Delaware Democrat.

Arkansas Sen. Tom Cotton, and Sen David Vitter, R-La, are also co-sponsors of Coon’s bill along with Senate Democrats Sen. Mazie Hirono of Hawaii and Sen. Dick Durbin of Illinois.

“Fostering innovation is a principle enshrined in our Constitution and is an essential element of America’s economic edge. That’s why we need prudent and common sense legislation to strengthen our patent system and ensure that ingenuity is rewarded,” Cotton said earlier this summer when the Senate Judiciary Committee took on the patent debate. “The STRONG Patents Act includes sensible changes that will eliminate recognized hurdles to innovation, and both America’s inventors and our economy will be better for it.”

Sauer also pointed to a recent PricewaterhouseCoopers study as another reason why Congress should consider pausing before approving the current congressional bills that have moved out of committee, but have not yet reached the House and Senate floors.

According to the PWC study, the number of patent lawsuits filed in 2014 decreased by almost 13%. This decline in cases, the first year-over-year drop since 2009, is a dramatic shift from recent years which saw an annual growth in patent cases of between 20% and 30%.

The 28-page PWC report largely credits the U.S. Supreme Court’s June 2014 decision in Alice Corp. v. CLS Bank, which raised the bar for software patentees to prove their claimed inventions were patentable subject matter. Still, the United States Patent and Trademark Office (USPTO) has recently taken steps to handle the rapid growth in patent applications and grants that have spiked at an annual rate of 10.3% since 2008. In 2014, patent approvals jumped another 14%, something that Sauer’s sees as great for American innovation.

USPTO RELEASES ANNUAL REPORT, SEEKS TO IMPROVE APPLICATION PROCESS

The USPTO released its annual performance and accountability report in mid-December saying that it is moving toward meeting its strategic plan of “optimizing patent quality and timeliness; optimizing trademark quality and timeliness; and providing domestic and global leadership to improve intellectual property policy, protection, and enforcement worldwide.”

In addition, the USPTO officially opened its new West Coast Regional Office in Silicon Valley on Oct. 15 and the Texas Regional Office in Dallas on Nov. 9 that will handle patent applications and patent outreach for inventors, entrepreneurs, startups, researchers and others from Arkansas and seven other states in the region. USPTO now has six regional offices across the U.S.

Sauer added that the major problem in the patent system today is not “trolls,” but a shortage of funding for the USPTO and the federal patent system that is struggling to handle the volume of patent and trademark applications as the U.S. embraces a new wave of innovation and entrepreneurship.

Sauer said past legislation to fund the USPTO and target patent spammers has failed to move in Congress, just as the pending bills have yet to make it to the House and Senate floors after emerging from committee earlier this year.

“If something does move, we hope it doesn’t crush the small inventor market,” he said.

Meanwhile, Sauer condemns the notion by some intellectuals that the USPTO at some point will no longer be needed because all the good ideas or inventions have been thought of or built.

“I am dreaming every day and coming up with new ideas,” said Sauer, who has patented a novel humidor device. “If we look at some of the things that are coming out in the past few years, things that were once science fiction are now coming closer to reality.”

He added: “The ability that we can wake up every day and know that we can change the world or think that we can change the world is an important driver in what has made America great. The small innovator is who is creating new jobs in the USA.”