Another Bail-out for the Big Banks

Remember the big banks? You remember, the ones that took huge risks that went sour, and then used their undue influence with the Treasury Department and the Federal Reserve to frighten Congress into bailing them out and in the process put the country further into debt? And then didn’t lend out the money?

Well, they’re at it again, this time using their lobbying influence to insert a provision into much-needed patent reform legislation that essentially lets them violate patents with impunity.

It’s an example of one of the more offensive things that happens in our political system: Some interest with big money can’t get what it wants through the legitimate process, then loses repeatedly in court, so finally turns to its friends in Congress for a “favor.”

In this case, a number of small inventors were granted patents on various processes that turn out to be very important to the financial services industry.

Now, as a reminder, this is part of the genius of our innovation system. Small inventors come up with some ingenious invention that turns out to be enormously useful, and they get rich in the process by licensing the technology to those who value it. This is not some distortion of the patent system–it’s the intention of the patent system. And don’t forget that property rights–including intellectual property rights–are specifically designed to protect the little guy against the big guy. Big guys have lots of assets and weapons at their disposal, and tend to run over little guys to get what they want, but a just system respects the property rights of little guys such that big guys can’t just run over them.

The big banks decided that, because they were big and powerful and important, they didn’t need to respect the patents of the little guys. So they challenged the patents at the US Patent and Trademark Office–and lost. The Patent Office reviewed the patents and upheld them.

Then the banks challenged the patents in court–and lost. Repeatedly. But that didn’t stop them.

In 2007, they tried to slip a provision into a late-session appropriations bill to grant them an exemption from the patents, but fortunately this cynical ploy was exposed in time and removed.

In 2008, they paid former Undersecretary of Homeland Security Asa Hutchinson to argue that exemption from these patents was necessary to protect–wait for it–national security. That’s right–they argued that if they had to license these patents, the terrorists win. But this laughable argument was immediately recognized and dismissed.

They still haven’t given up. Today, they have persuaded legislators to insert into pending patent reform legislation a carve-out that protects them against having to license these patents. It’s a specific carve-out designed to favor a single industry, which is in itself a sign of bad law. Its impact would be retroactive, which is another sign of bad law.

And it’s not for Congress to decide whether a specific patent is legitimate or not. This is venue shopping of the worst kind. We have the Patent Office and, most importantly, the courts to determine patent legitimacy. If Congress starts stepping in and deciding the legitimacy of specific patents, retroactively, the entire system will break down because the grant of a patent will still carry the risk and uncertainty of wondering whether that patent will become the target of a future Congress.

Our economy today is dependent on our ability to invent, to innovate, to create, and to commercialize the products of our innovation. Updating and modernizing our patent system is critical, and is one of the most important steps Congress could take this year to encourage the long-term growth and global competitiveness of our economy. It would be a tragedy if the greed of the big banks and their willing accomplices in Congress use this important legislation to trample the rights of legitimate patent holders and in the process weaken the integrity of our patent system.

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