DOUG COLLINS: Restore the American Dream for Georgia’s inventors and their businesses

Imagine you’re an inventor. After investing your life savings, and spending countless late nights refining your product, you’ve managed to turn your good idea into a thriving small business.

But then, a bigger company comes along, copies your design, and starts selling its own version of your product at a lower price. Your sales collapse. Venture capital firms that were previously interested in helping you scale your company now refuse to answer your calls. It looks like you may soon have no choice but to lay off employees who’ve become like family.

In desperation, you turn to the courts — and your lawyers are able to convince a court that the larger corporation has indeed infringed your patent. Finally, justice is served, right?

Unfortunately, probably not. Because of disastrous court precedent, there’s a good chance the judge will allow the corporation to continue pirating your patented design, so long as it pays you some monetary damages. Now, your dream of turning your product into a household name will likely be impossible.

This isn’t fair; it isn’t right — you started your company to sell products, not to collect royalty checks. It’s time for Congress to stand up for inventors here in Georgia and across the nation by setting the law straight.

The precedent in question started with a Supreme Court ruling in eBay Inc. v. MercExchange LLC. The case concerned injunctions, which are court orders that compel a patent infringer to stop its infringing activities.

Prior to 2006, injunctions were the American legal system’s default response to patent infringement. If Company A violated Company B’s patents, courts would generally order Company A to stop.

That changed after the Supreme Court issued its ruling in Ebay. The justices determined that injunctions were no longer the default solution to patent infringement, and that judges ought to have leeway to grant other remedies.

In the wake of Ebay, many judges turned to awarding monetary damages to patent owners, rather than imposing injunctions on patent infringers. These damages are usually based on what an infringing company would have paid had they licensed the patent from the patent owner.

While some payment is better than nothing, monetary damages frequently do not approximate the true value to a patent owner from commercializing, producing, and selling products that incorporate their hard-earned intellectual property. One reason is that large companies often resort to a strategy of attrition, purposely dragging out legal proceedings to bully their smaller rivals into accepting lower payouts.

Perhaps more problematic, the usual royalty based on the cost of a license provides no incentive to infringers to take licenses proactively or to otherwise respect others’ patents without forcing infringement fights. To the infringer, why take a license in advance if the worst outcome from infringement is taking a license at the same cost years down the road — if you are caught and if the patent owner has the financial means to pursue a patent infringement lawsuit? It is truly a case of might-makes-right, and the bully wins.

Not every innovator wishes to create tangible products from their patents, of course. Some inventors choose to license their intellectual property to established companies, who in turn agree to pay ongoing royalties to the patent holder.

The problem is that the Ebay decision and lower court decisions following it have taken this choice out of inventors’ hands, establishing a system of forced patent licensing. And in deciding that injunctions are no longer the default response to patent infringement, the Supreme Court has actually made patent infringement more attractive to many large corporations.

This dynamic has upended the delicate balance that underpins our patent system. An innovator can spend thousands of hours and millions of dollars to develop and patent a new invention, then a large corporation can swoop in and pilfer the hard-won innovation. This leaves little incentive for the start-up to invent in the first place.

The world’s other leading economies have recognized this fact. Courts in Europe, Canada, Japan, Brazil and even China are far more likely to grant injunctive relief against patent violators than their American counterparts. How can communist China provide better protections for inventors than our own constitutional democracy?

Georgia inventors and their businesses are suffering under this distortion of our constitutional patent system. Congress must act to right this wrong and restore injunctive relief as the presumptive solution to patent infringement.