Heartland Institute Policy Brief Endorses Patent Reform

Patent reform is necessary, especially for software, because “juries and courts often fail to distinguish between patented code" and the end function of a software product, Heartland Institute Policy Adviser Steven Titch wrote in a Feb. 5 policy brief that was released Tuesday. “Frivolous patent litigation costs U.S. businesses $29 billion a year in direct costs and $80 billion in indirect costs,” Titch told us. Titch’s comments echoed President Barack Obama's 2014 State of the Union address, in which he encouraged Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.” Congress should confirm Michelle Lee as director of the Patent Office, and the FCC should “avoid heavy reliance on patented technology,” the paper said. In the past several years, there has been an increase in “patent stockpiling” or “aggregation” as an increasing number of companies and individuals file frivolous or “mostly” baseless lawsuits, it said. Especially in today’s high-tech environment, where one personal computer, smartphone, gaming console or TV can “incorporate dozens or even hundreds of patented products or processes,” patent reform needs to occur, the paper said. These patent assertion entities (PAEs) or “patent trolls” such as Soverain Software, exploit weaknesses in the patent system, such as when Soverain claimed that any website shopping cart function was an infringement of its patent, it said. Soverain had a $40 million settlement with Amazon and a multimillion-dollar settlement with both Avon and Victoria’s Secret, the paper said. Due to the profitability of patent trolling, companies such as Nokia are now using patent litigation to earn revenue, which Titch said has made companies more reluctant when it comes to innovation. U.S. patent laws aren't broken, but “need to be reformed to better recognize the way innovation happens in the twenty-first century,” the paper said. "Enterprises should be using the marketplace, not the courtroom, to evaluate investment and return opportunities,” Titch said. “Patent reform can help by changing the cost-benefit ratios of litigation so frivolous patents are deterred but plaintiffs with legitimate cases are still able to bring a case." Soverain had no immediate comment.