Universities refuse to back Innovation Act, argue legislative efforts need to be more ‘narrowly tailored’

By Jessica M. Karmasek | Apr 16, 2015

WASHINGTON (Legal Newsline) - Two coalitions of universities say they will not back a piece of House-introduced legislation aimed at targeting so-called “patent trolls.”

WASHINGTON (Legal Newsline) - Two coalitions of universities say they will not back a piece of House-introduced legislation aimed at targeting so-called “patent trolls.”


The Association of Public and Land-grant Universities and the Association of American Universities sent their response to the president and CEO of the Consumer Electronics Association ahead of this week’s House committee hearing on the Innovation Act.


Earlier this month, Gary Shapiro sent a letter to 145 universities asking them to remove their names from a February letter in opposition to H.R. 9. The CEA is a trade body with more than 2,000 members, including tech giants Apple and Google.


The APLU and the AAU, on behalf of the universities, rejected CEA’s request in an April 8 letter.


“As the 145 leading U.S. research universities asserted in no uncertain terms in their letter of Feb. 24 to leaders of the House and Senate Judiciary committees, the higher education community stands united in opposition to the abusive practices of patent trolls,” APLU President Peter McPherson and AAU President Hunter Rawlings wrote in their three-page response.


“We strongly agree that Congress should address the bad actors in the patent system. But we remain equally firm in our view that legislative efforts to curtail troll abuses should be narrowly tailored to address the abuses of this small minority of patent holders without substantially weakening the U.S. patent system as a whole.


“After careful and extensive study, and with the advice of patent legal counsel and a number of experts at our universities, we strongly believe H.R. 9 fails this test.”


The universities say they are concerned about the potential direct liability of their institutions and about how the legislation would broadly impact the “innovation ecosystem.”


“All entities without extensive litigation budgets, including non-profit universities, startups, small companies, and individual inventors, are ill-equipped to operate in the environment that would be created under H.R. 9,” McPherson and Rawlings wrote.

“Patent holders’ lack of substantial litigation resources to enforce their patent rights surely would not go unnoticed by those determining the risk of infringing on those entities’ patents. If a patent cannot be enforced, it is of no value. Licensees have scant incentive to work with entities that are unable to protect their intellectual property rights.


“For universities in particular, a loss of confidence in the willingness and/or ability of universities to protect their intellectual property rights would seriously undermine the universities’ capacity to transfer their research discoveries from campus to the private sector for society’s benefit.”


The universities say they support a more targeted approach that “combats the abusive practices of a small number of parasitic patent holders while preserving the overall health of our patent system.”


On Tuesday, the full House Judiciary Committee heard from various witnesses regarding the Innovation Act.


Witnesses included Michelle Lee, the director of the U.S. Patent and Trademark Office; Kevin Kramer, vice president and deputy general counsel for intellectual property at Yahoo!; Robert Armitage, former executive vice president and general counsel at Eli Lilly & Co.; David Simon, senior vice president of intellectual property at Salesforce.com; and Hans Sauer, deputy general counsel for intellectual property for the Biotechnology Industry Organization.


Lee, in her testimony, agreed that the bill needs tweaking to avoid limiting investment in start-ups.


“The limited liability of corporate employees and shareholders is a long-established feature of American law. Overriding it may serve as a substantial deterrent to investment in new enterprises and potentially job creation, particularly a number of high-growth sectors,” she told lawmakers.


“Individual investors, for example, may not be willing to invest in a start-up company if the risks of doing so included not just the loss of their initial investment, but also personal liability to the investor for the company’s subsequent patent litigation decisions.


“Legislation should be narrowly drawn with clear boundaries.”


Lee said it would be “helpful” to clarify the definition of the entities that are subject to joinder -- those with “no substantial interest in the subject matter at issue other than asserting such patent claim in litigation.”


“It is unclear, for example, whether the named inventor would have a ‘substantial interest’ in the subject matter simply because she invented the subject matter,” she explained.


“In addition, to help ensure that the prospect of joinder does not chill investment in new companies, § 3(c) should include some kind of clear exemption for passive investors -- those who lack the ability to direct or control a company’s litigation. Such an exemption would better allow an investor to know whether investing in a company may subject her to personal liability.”


The Commerce, Manufacturing and Trade Subcommittee of the House Energy and Commerce Committee planned to hold a separate hearing on the Targeting Rogue and Opaque Letters Act, or TROL Act, Thursday.


The TROL Act, which was introduced last Congress, aims to protect businesses while preserving the ability of patent holders to legitimately protect their intellectual property by increasing transparency and accountability in demand letters. It also would give the Federal Trade Commission the authority to levy fines on fraudulent practices.


The TROL Act, much like the STRONG Patent Act, which was introduced last month, has been called a more “targeted” approach than the Innovation Act.


From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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