The “right to useful inventions … belong[s]to the inventors.” James Madison articulated this core principle in the Federalist Papers and embedded it into our Constitution over two centuries ago. In the years since, the U.S. patent system has been a driving force behind continued economic growth and innovation.
Today, however, that system is under threat. Fortunately, Congress is responding with a bipartisan bill aimed at restoring that right — and boosting our economy in the process.
The essence of James Madison’s idea was that if someone uses a patented invention without permission, they should have to stop. This principle guided patent law for most of American history. But in 2006, following the Supreme Court’s decision in eBay v. MercExchange, that began to change this dramatically.
After eBay, lower courts focused on a three-paragraph concurrence by then-Justice Kennedy, which suggested that monetary compensation should suffice for many patent holders. As a result, even when a patent holder proves infringement and successfully defends the validity of their patent in court, the infringer is often allowed to continue utilizing the patented invention, with only a “reasonable” payment ordered.
The result has been the rise of “efficient infringement,” where infringers see no downside to infringing and no upside to negotiating a license with the patent holder.
A simple analogy illustrates the problem: Imagine a hotel owner discovers someone occupying one of their rooms without checking in or paying. In a normal situation, the court would promptly evict the squatter. But if eviction isn’t an option, the squatter gets to stay, and the court — not the hotel — decides what a “reasonable” price is for the room.
If this were how the law worked for hotels, trespassers would get a free room if they could avoid detection. Even if caught, they might get a better deal than if they had paid at the front desk.
A similar dynamic is plaguing America’s technology economy. Large tech companies may see this as an opportunity to ignore the patent rights of smaller inventors. If they are never sued for infringement, the large company could continue illegally using their rival’s invention for free. But even if they are sued, it may not be much of a problem. If the legal costs don’t drive the patent owner out of business or the courtroom, the infringer will likely only have to pay a “reasonable” price to its exhausted adversary.
The eBay decision contributed to the decades-long dominance of a few tech giants. A “reasonable” payment cannot account for the full extent of the profits a company will earn on an infringed technology. And when small companies and startups struggle to protect their innovations against infringement by larger, better-resourced companies, they will find it difficult to carve a place in the market.
Fortunately, members of Congress just proposed a timely solution. A bipartisan group of legislators led by Senators Chris Coons (D-DE) and Tom Cotton (R-AR) recently introduced a new bill called the RESTORE Patent Rights Act, which would reestablish injunctive relief as the default remedy for patent infringement. If this bill becomes law, inventors will once again have full ownership of their creations, and patent infringers will no longer be able to steal technology with impunity.
Congress should pass the RESTORE Act to deliver justice to inventors and reinvigorate American innovation.
Nick Matich, a patent litigator in private practice, served as acting General Counsel at the U.S. Patent and Trademark Office. This piece originally ran in The Hill.
The above article was prepared by the author in his/her own personal capacity. The opinions expressed in the article are the author’s own and do not necessarily reflect the views of Cascade Business News or of Cascade Publications Inc.
