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Spokane, Washington  Est. May 19, 1883


Editorial: Misnamed Innovation Act would suppress economic growth

One of the wellsprings of American prosperity is under attack; by the Congress, no less.

The insidiously named “Innovation Act,” H.R. 9, would quash innovation by exposing inventors to the theft of their ideas, and crushing litigation costs should they try to seek compensation.

The victims would be small business, investors, even America’s universities, which in 2013 alone received 5,200 patents, which led to the founding of more than 800 start-up companies.

And, no, this is not about fighting so-called patent trolls who try to leverage patents of marginal or non-existent value into legal settlements against companies with more valid intellectual property rights. Regulatory action and two 2014 U.S. Supreme Court rulings that allowed the shifting of all legal costs onto the loser if their complaint was ruled frivolous sent a lot of trolls packing.

The Innovation Act originated in 2013, before those rulings. It passed hastily and overwhelmingly in the House. The bill died in the Senate.

But H.R. 9 backers resurrected the legislation earlier this year, with the expectation of another overwhelming House vote. That was before powerful conservative organizations like the Club for Growth stepped in.

“This legislation is anti-growth and stifles innovation” said club President David McIntosh. “The American people did not give the GOP a majority in both Houses of Congress in 2014 so they could pass laws that harm American ingenuity and economic growth.”

That got the attention of Republicans, but setting aside the ideological spin, the dangers are real.

Getting a patent is expensive, and H.R. 9 would make it more so. If a big company chooses to infringe on a patent, or challenge its validity, the owner of the new patent can either divert funds intended for further research into its legal defense, or seek help from “funders” who will advance the money in exchange for royalties or other payback.

But if innovating companies lose, H.R. 9 would expose them and their backers to payment of the legal costs for both sides. If a company had licensed a university patent, the universities would be exposed.

Supporters of the Washington State University’s Elson S. Floyd School of Medicine are counting on innovations to be spun off by its researchers to create new companies and jobs. H.R. 9 will make that tougher.

A strong patent law spurs innovation and economic growth, as the authors of the U.S. Constitution recognized. By increasing the risks of obtaining and defending a patent, H.R. 9 not only discourages new ideas, it encourages the taking of intellectual property by companies and nations — China, for example — that know they could well get away with it.

There is other legislation that takes a more targeted approach to patent abuse, but the Innovation Act looked like the best bet on its second go-round. Big companies with deep pockets and big legal staffs like their odds under the proposed law.

But for the small businesses and universities that generate the most new jobs and ideas, H.R. 9 is patently bad.

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