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Making the world safer for Washington innovators

High-tech innovators in Washington State have made our region a world leader in creating important new technologies.  Supporting these innovators was one of my major goals during the years I spent in Congress, and it still is today as I work with entrepreneurs, mostly based in our state, to create, fund, and develop new businesses.

But innovation doesn’t happen by itself.  Among other things, it requires a fair system for protecting intellectual property, especially patents, so that innovators can get the benefit of their inventions and are encouraged to keep on innovating.

Unfortunately, the U.S. patent protection system hasn’t always been able to keep up with the pace of innovation, and several ways of abusing the system have come up in recent years.  Rep. Suzan DelBene (D-WA-1) deserves credit for working with bipartisan cosponsors in the House to introduce a bill that would prevent some of the worst tactics by those who would manipulate our intellectual property systems.

A critical problem is that some bad actors are using their patent portfolios, not for the purpose of making new products, but to make money through litigation.  These groups, often based overseas and referred to as “patent trolls,” sue companies for patent infringement, even though the companies may not be using patented technology. Given the complexity and expense of patent litigation, many companies are forced to pay large settlements to resolve seemingly frivolous claims, even when those targeted are confident they are not infringing the patent or patents at issue.

Of course, not every owner of a patent portfolio is a patent troll. For example, universities often own many patents and other intellectual property.  But using aggressive litigation tactics to monetize patent portfolios by seeking payments from people who haven’t infringed any patent is an abuse of the system that needs to be corrected.

This is a national problem, but it has a particularly big impact in our region.  The tech industry, which makes devices that can include tens-of-thousands of patentable components and technologies, is a prime target for patent abusers.  Amazon, Microsoft, and many other Northwest companies have been frequent defendants in these lawsuits.  The money these companies waste on frivolous patent claims cannot be invested into new products, new employees, and local economies and communities.

Recently, the problem has gotten even worse.  Instead of filing patent lawsuits in federal court as provided in the U. S. Constitution, many patent abusers have begun focusing on the U.S. International Trade Commission (ITC), which can have jurisdiction over many international patent issues.

The ITC can only get involved if the complainant demonstrates that they are active in a U.S. industry, but patent trolls have circumvented this requirement with a procedural device known as “domestic industry by subpoena.”  This device allows them to establish jurisdiction in the ITC by filing subpoenas against U.S. companies, even if those who are subpoenaed have not suffered harm and even if they don’t agree with the complaint.  Neodron, Ltd., based in Ireland, recently used that loophole in filing ITC complaints against a large number of companies, including Apple and several Northwest companies.

If plaintiffs like Neodron are successful in their “industry by subpoena” approach, they can request the ITC to issue an exclusion order, which prohibits companies from bringing any device using the technology into the United States.  This is a risk most companies cannot afford to take, so they are essentially coerced into often-large settlements whether or not they are infringing any patent.

Forcing U.S. companies to pay unwarranted settlements is bad enough, but imposing exclusion orders also inflicts major harm on the U.S economy.  An exclusion order would prohibit many important consumer and business products, including touchscreen devices, tablets, smartphones, and computers, from entering the United States, causing shortages, higher prices, and significant economic disruption. Ironically, this is exactly the opposite of the mission the ITC was designed to fulfill.

Recognizing that things have gone much too far, Rep. DelBene, along with Rep. David Schweikert (R-AZ-6), introduced the Advancing America’s Interest Act (H.R. 8037), a bipartisan bill that would address many of these problems. The bill eliminates the “domestic industry by subpoena” device, and reiterates that the ITC’s mission is to focus on the interests of American industries and consumers, not foreign patent entities.

As Rep. DelBene put it, “the ITC was established to protect U.S. companies and consumers from unfair foreign competition, but in recent years, patent licensing entities have abused the ITC process for financial gain.” Rep. Schweikert referred to the legislation as an important step to help “ensure that American businesses have equitable access to protection for their ideas.”

Patent reform is not a partisan issue, and it’s good to see Rep. DelBene working with a bipartisan group to address a growing problem with such high stakes for our innovation economy.

When I held the District 1 seat in Congress that Rep. DelBene holds today, we faced many new issues raised by the technology revolution and the Internet.  I founded the Congressional Internet Caucus for the express purpose of educating Congress on these issues, and we made lots of decisions at that time on legislation dealing with new technology.  Most of those decisions have worked out, but some haven’t, and Reps. DelBene and Schweikert deserve our support for recognizing a problem and forming a bipartisan coalition to fix it.

Rick White, a former U.S. Congressman (R-Wash), founded the Internet Caucus in Congress and is CEO of the Woodbay Group, a consulting firm for high tech and start-up companies.

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