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Like A Horror Movie Villain, The STRONGER Patents Act Returns

Zombie silhouette

Since the STRONGER Patents Act was introduced last year, it’s basically been a dead topic.  Maybe that’s because the bill would gut the extremely successful inter partes review procedure and overturn more than a decade of Supreme Court precedent, crippling the ability of small and medium enterprises to develop products without fear.  It would even make it legally beneficial to develop products anywhere other than the United States – a sort of R&D inversion scheme, enshrined in statute.

So, given that the STRONGER Patents Act will harm innovators and drive R&D overseas, why are Reps. Stivers (R-OH) and Foster (D-IL) planning to bring the STRONGER Patents Act back and introduce it in the House on Tuesday?

Hold Up—The Return Of Inequitable Injunctions

Over a decade ago, the Supreme Court decided the eBay case, holding that—just like in every other kind of case, including copyright cases—when a patent owner asks for an injunction, the traditional equitable principles apply.  The court looks at:

(1) whether the patent owner has suffered an irreparable injury;

(2) whether remedies available at law, such as monetary damages, are inadequate to compensate for that injury;

(3) whether, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and

(4) whether the public interest would be disserved by a permanent injunction.

Courts don’t automatically grant an injunction for copyright infringement. They don’t automatically grant injunctions to prevent dropping explosives into the sea, drilling for oil on protected lands, or discharging sewage onto a pasture.  

But if STRONGER Patents passes?  A patent on a cupholder could be used to prevent the sale of a car.  A patent on a screw could be used to prevent the sale of a smartphone.  And a patent on aluminum siding could be used to prevent the sale of a house.  

That leads to “hold up”—situations where a non-practicing entity uses a minor patent to force a manufacturer to pay more than the patent is worth because they can bar the sale of the entire product.  And it leads to innovative companies settling patent litigation not because of the merits of the patent, but simply because the risk to their business from an automatic injunction is too high to tolerate.

Sending R&D To The Upside Down

Having companies like Mylan shift their incorporation overseas to save on taxes is bad enough.  But STRONGER Patents would make it desirable not just to incorporate overseas, but to actually move all your research, development, and manufacturing as well.  

Overturning Microsoft v. AT&T, as done by the STRONGER Patents Act, would mean that developing and manufacturing a product or service in the United States subjects you to liability for infringement anywhere in the world.  But if you develop or manufacture overseas? You only have to worry about U.S. sales and uses of your product.

Passing the STRONGER Patents Act would be a great way to try to make sure that the next advances in curing cancer, autonomous driving, faster computers—and everything else too—aren’t created in the United States.

You Can Kill A Bad Patent, But It’ll Just Come Back

The STRONGER Patents Act also creates a procedure to take patents out of inter partes review (IPR) and send them into examination, where there’s no real ability for anyone else to oppose the patent.  Which means that the patent can come back out with trivial changes and be asserted all over again. Under STRONGER Patents, there’s no point in an IPR—the patent owner can make sure you never get a chance to have an impact on the patent’s validity by repeatedly taking it out of IPR.

Patent owners complain that sometimes IPR petitioners will file a second petition because they should only get “one bite at the apple.”

They shouldn’t get ten shots at resurrecting their patent.

Who Greenlighted This Sequel, Anyway?

So who’s supporting this bill, despite the harm to American innovation?

PhRMA, the pharmaceutical industry lobby.  BIO, the biotech version of PhRMA. MDMA, the medical device version of PhRMA.  I can’t imagine why they want to make it harder to invalidate the patents they use to keep generic companies off the market.

The Qualcomm-funded Innovation Alliance?  InterDigital? Companies that make their money by licensing patents under threat of litigation?  I’m sure Qualcomm and InterDigital would be unhappy if they could bar sales of iPhones entirely based on a patent related to a small part of a component that costs $20.

And there’s one other party lurking in the background—litigation finance.  Third-party financial companies that underwrite patent litigation on spec, hoping to share in any damages awarded.  Stivers and Foster aren’t on the Judiciary Committee, the House committee with jurisdiction over patent issues. They’re on House Financial Services.  

And litigation finance companies making money by betting on patent litigation would like to make their business a less risky bet by making it harder to challenge patents and easier to extract royalties that exceed the value of the patent using the threat of injunctions.

A bill that will keep drug prices high by sending research overseas and increase everyone’s prices to reward financial speculators?  

That’s a real-life horror story.

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