A Patent Example of Big Money Influencing Politics: Why I Joined American Promise

People join American Promise and the movement to get big money out of politics for a variety of reasons. For Ron Epstein, years as a patent attorney opened his eyes to the world of Capitol Hill lobbying by corporations looking to pursue the newest technologies and increase profits. He provides a look at that experience and how it ultimately led him to join the work to advance the 28th Amendment.

My journey to American Promise started with my nearly 30-year career working with patent holders and companies to negotiate patent licenses. After a lengthy career representing technology companies in these negotiations, I switched “sides” in 2003 and started representing patent holders. The reaction of these technology companies to increasingly being held to account for their use of other people’s inventions gave me my first introduction to how politics really works and opened my eyes to the distorting effects of money.

There once was a saying that if you could build a better mousetrap, the world would beat a path to your door. It used to be that holding a patent on an important invention was a ticket to success in the United States. But that is less true today at the height of the innovation economy than ever in U.S. history.

Why?

Because a handful of technology companies, enraged by patent holders demanding a fair price for their inventions, have used their extreme wealth to “buy” politicians and convince them to change the law. These changes, fueled by professional lobbyists, have made it harder for inventors to get a fair price for their innovations and easier for these companies to use third-party innovations without paying for them. By technology companies, I mean companies in the computing, communications and related industries (as opposed to biotech and medical devices).

Some background:

  • First, a patent is a property right that allows an inventor to charge royalties to those who want to use the patented invention.
  • Second, patents must be enforced in court. You can’t call the sheriff to remove a patent infringer like you can to remove a tenant who is not paying their rent.
  • And third, about half of all U.S. patents are held by individual inventors and small entities. In my experience selling and licensing patents, I found that the patents held by these small parties tended to be more valuable than patents held by large corporations. The reason for that is straightforward: A patent can cost $20,000 to $50,000 or even more, a big investment for an individual but a rounding error to a large corporation.  

Driven By Innovation

Technology companies are ferocious consumers of innovations. To keep consumers buying new products, they need to provide new features in each product generation to lure consumers into upgrading. Some of the innovations come from each company’s internal research. Many more of these new features are the result of “innovation by observation”—that is, they see what other people are doing and copy them. The amount spent by one company on research in a field—say, mobile phone tech—will always be a small fraction of the total money spent by the rest of the world.

Obviously, getting these innovations for free is a lot better for the bottom line than paying for them.

Some of these observed innovations come from competitors, suppliers and customers. With few exceptions, technology companies do not enforce their patents against each other, even competitors. However, every individual inventor who files a patent does so with the expectation that if their invention is adopted by industry, they will get paid handsomely for their innovation.

By the late 1990s, the level of this invention plagiarism, and small patent holders’ pursuit of fair compensation from the invention plagiarists by enforcement through the courts, had reached the point where it began to represent a meaningful cost to these companies. The cost was the fair value of the use of these patented innovations, but these companies were accustomed to using them for free.

Faced with growing liability, the companies sought to change the law to reduce or eliminate their liability to pay royalties. The lobbying effort they pursued was breathtaking in its sophistication and scope. The goal: to influence Congress to change laws so it would be more expensive and more difficult for patent holders to enforce their patent rights.

America Invents Act: A Hard-Fought Battle

The first effort at patent reform in the last decade was the America Invents Act, passed in 2011. There was general agreement on all sides that the U.S. patent system could be improved, and there was a hard-fought battle between those representing patent holders and those representing the technology industry in pursuing reform that improved the patent system while avoiding making patent enforcement so difficult that it would become impractical to hold infringers to account. Many of the most aggressive provisions suggested by the technology industry were not included in the final version of the act.

However, several technology companies, including most notably Google and Cisco, were not happy that the act did not go far enough in delivering their desired result of avoiding liability for use of patented inventions. They consulted with the best lobbyists in Washington and concluded that a professionally led and well-funded lobbying effort with targeted contributions to the right politicians could get their desired legislation passed in the next term.

Typically, Congress reviews the laws of a specific field, such as tax law or patent law, once every decade or so. So once the battle over the America Invents Act ended, no one who was or worked with individual and small patent holders expected new legislation to be introduced in the foreseeable future. But led by the best lobbying professionals and armed with a lobbying budget estimated to be in the several tens of millions of dollars, these technology companies quietly laid the groundwork for new legislation to finish the job.

Legislative Surprises on Capitol Hill

In October 2013, Congressman Bob Goodlatte (R-Virginia), chairman of the House Judiciary Committee, introduced a new patent reform bill that read as a wish list from the technology company agenda. Surprisingly, the committee vote on that bill was scheduled just days later, with the expectation of a vote on the House floor before Thanksgiving. Further surprises included the rules associated with the bill that limited any debate or amendment on the bill before the House vote, and that the same bill was to be taken up by the Senate Judiciary after Thanksgiving with expected quick passage so the approved legislation could be on the president’s desk for signing before the end of the year.

Among the anti-democratic aspects of this process were:

  • The bill was written before anyone not associated with the team working for its passage saw it.
  • Members of the committee who were not part of the effort to draft and pass the bill did not see or even hear of the bill until hours before the committee vote.
  • The surprise introduction and fast schedule for this legislation were architected to prevent the opportunity for the public to weigh in and for those against the bill to marshal their efforts to provide evidence of the harm the bill would do to the U.S. patent system and innovation leadership.

The first I and others in the patent holder community knew that the technology industry was trying to further change the law was an alert from a colleague that a new patent reform bill had been introduced to Congress and was in the process of being passed out of committee in record time.

One story demonstrates how breathtaking the effort by the technology industry really was. One Senator, aligned with patent owners, related to me the following (paraphrased):

He was in a meeting with the chief lobbyist for his state’s association of realtors, a regular contributor. After the lobbyist finished his list of issues that were generally of concern to the home sale industry, the Senator remembers the lobbyist saying, “Oh, and there was one other issue … uh … oh yeah, there is a bill about limiting patents before the judicial committee and we hope for your support on passage of that bill.” As I recall, the Senator felt the lobbyist wasn’t that familiar with the particulars of the bill, just remembered that he was to pass on the message that the industry favors patent reform. Then Senator then asked me, “What do you know when you see a turtle on a fence post? Well, it sure didn’t get there by itself.” His point: Turtles can’t crawl to the top of a fence post, and lobbyists for real estate agents don’t keep track of patent legislation. In each case, there is someone somewhere making those things happen.

The technology companies also lobbied the executive branch to make it harder to enforce patents. One result of this lobbying was that President Barack Obama named Google’s head of patents, Michelle Lee, as director of the Patent and Trademark Office. Under Lee’s leadership, the patent office had an unprecedented record of overturning patents at the request of accused patent infringers. Another was the appointment as White House intellectual property “czar” a law professor from Santa Clara University who worked extensively with companies in Silicon Valley seeking limitations to the patent law. She was responsible for coordinating White House efforts in support of patent reform legislation discussed above.

What You Can See—And What You Can’t

We cannot truly calculate the sums spent on this effort by Google, Cisco and the companies they recruited into this effort.

What you could see was with that money they got access to the President and his staff as well as congressional leadership and other influential members of the House and Senate.

What you could see was that a small number of companies could make what to them was a modest investment of a few tens of millions of dollars to achieve many hundreds of millions of dollars a year in direct economic benefit by not having to pay patent holders for the use of their inventions.

And what you could see was that they wanted to achieve this result without putting the question of whether their proposals were good for the U.S. as a whole to the test of open and public debate—and thus used their wealth to obtain an unprecedented legislative schedule calculated to prevent public debate.

I do not believe that the technology companies had any evil intent behind their actions, and I do not fault these companies for pursuing their self-interest. My objections to wealth providing greater political influence in general, and corporations spending their wealth to influence the political process in particular, are twofold.

  • First, there is no reason to believe that wealth is correlated with having the best ideas or the best interests of the public and country in mind. So the wealthy should have the same, equal limitations to use money as a replacement for speech as the average citizen.
  • Second, for corporations and individuals of means, their interest in influencing the political process often has a direct, measurable and immediate economic return that not only justifies the spending of the necessary money to achieve their ends but provides a very real direct economic return (additional wealth) that is simply not available to the average citizen.

And then I found American Promise.

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