Reining in foreign government-backed patent trolls - American Commitment

By Phil Kerpen
Washington Examiner
Patent reform is a hot topic in Washington, and increasingly one that splits business and ideological groups over the issue of whether reforms to curb abusive litigation might go too far and chill legitimate patent rights.
But that disagreement should not prevent us from unifying on a specific type of patent troll that can and should be stopped: patent trolls sponsored by foreign governments.
Patent trolls – parties that acquire intellectual property rights with the intention of using them strictly for litigation rather than production – have been the subject of significant focus in the halls of Congress. According to a 2013 White House study, lawsuits filed by patent trolls, or non-practicing entities, tripled in just two years, and there is growing momentum for a set of procedural reforms to deter frivolous litigation.
The challenge for policymakers is that proposed solutions also carry a risk of chilling legitimate patent claims. Crafting the right compromise will be challenging and efforts collapsed in the last Congress.
But there should be no controversy when our foreign trade partners are using the power of governments to make aggressive patent claims, often while also being in a position to rule on their merits.
These entities serve as an extension of their governments, often engaging in mercantilism by selectively targeting foreign competitors to benefit their own companies and bolster their country’s economic interests. And because they are state-funded, their scope is much broader and they are better-equipped than any private individual or organization.
With negotiations underway for a major new trade agreement with the European Union, Transatlantic Trade and Investment Partnership (TTIP), we have an opportunity to take decisive action on the issue. TTIP, if negotiated successfully, will expand trade with some of our most important allies and reaffirm America’s commitment to a region of the world that has experienced a much sharper recession and weaker recovery than we’ve had in the United States.
The TTIP negotiations are a critical forum to raise the issue of government-sponsored patent trolls because France – though it has received less attention than China and Taiwan – is a major offender, pouring €100 million into an entity called France Brevets.
This French government entity has become one of the world’s most aggressive patent trolls, mostly targeting high-tech companies, one of the most dynamic sectors of the U.S. economy.
In the high-stakes world of patent litigation, it is completely unreasonable for U.S. companies to face not only their competitors but also litigious foreign government entities with political motivations, effectively unlimited budgets and the ability to collaborate improperly with both the enforcement arms of their own governments and their own domestic companies.
Not only are entities like France Brevets unfair and damaging to U.S. economic interests, but there is also a strong argument that they are illegal under existing World Trade Organization agreements. By channeling litigation awards to their own domestic companies, these entities appropriate financial and competitive advantages that may be actionable under the Subsidies and Countervailing Measures Agreement. By targeting foreign competitors in patent suits, these countries violate requirements that imported products be treated equally to domestic products.
Our trade officials should negotiate accordingly, demanding that government-sponsored patent trolls be dismantled or fully privatized.
As a world leader in intellectual property standards, the United States should make clear to the global community that we will not accept the proliferation of this new form of government market intervention. The issue is too important to be left on the TTIP cutting room floor. And it is one action on patent reform upon which we should all be able to agree.
Phil Kerpen is president of American Commitment.