Even in the earliest days of our nation, the Founding Fathers recognized the importance of promoting innovation and included it in the Constitution: Congress would promote advances in technology by granting for limited times to inventors the exclusive right to their discoveries.
And so the U.S. patent was born.
In our high-tech economy, promoting knowledge and invention is even more important today than it was when our country began. Congress' laws governing patent enforcement, however, have not kept up with the fast-paced and highly complex advances in technology that have emerged in the past 10 years. As a result, the system that governs how the courts oversee patents has been thrown out of balance.
To take advantage of this imbalance, new companies are dedicating themselves not to creating new products, but exclusively to suing other companies. They sue, not because they have legitimate patent claims, but because they are confident they can settle with defendants who would rather not spend time, money and manpower mounting a legal defense only to lose big on an uneven playing field.
And these abusive patent lawsuits impose a cost on more than just the companies that are sued. Litigation costs impose an "innovation tax" on companies that are eventually passed on to consumers.
Fortunately, Congress is ready to take action. Sen. Orrin Hatch has recently introduced legislation, S.3818, the Patent Reform Act of 2006, which will restore balance to the patent system in four important ways.
Today's computers, cell phones, video games and other high-tech equipment are made up of hundreds of components, each with its own separate patent. Yet in a patent lawsuit, rather than awarding damages based on the value of the patented component, an award is often based on the value of the entire product into which that component is placed before it finds its way to an end user.
Imagine if you invented an improvement for a windshield wiper but were able to sue for the value of the entire car. Hatch's legislation forces courts to focus on the value of the specific component.
In addition, the rules are tilted so that it is easy for a plaintiff to allege that a patent was infringed "willfully," which often results in a tripling of the amount of money awarded in damages.
Hatch's legislation will restore common sense by allowing reasonable royalties only for the improvement at issue and assessing willfulness only when there has been egregious conduct.
Under current law, companies can be liable in U.S. courts for sales of product that occurred in other countries if the product design was done in the United States. The Patent Reform Act would repeal this loophole in U.S. law and eliminate the perverse incentive for companies to offshore their research and development programs overseas solely for the purpose of avoiding liability.
And finally, the Patent Reform Act also curbs "forum shopping" where lawsuits are filed in jurisdictions based on how favorably the judge is likely to rule, without regard to the connection parties involved in the case have to the jurisdiction.
Sen. Hatch has crafted bipartisan legislation that will reform and modernize the patent litigation system to stop the abuses that are hurting consumers, businesses, and small and large users of our patent system alike. For that, he deserves our gratitude.
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* STEVEN R. APPLETON is the chairman, CEO and president of Micron Technology, Inc.
