Capitol Hill Heuristics

Every day, Hill Members and staff are assailed by lobbyists they know and like whose interests and arguments are opposed. To get to the truth many use Hill heuristics or “rules of thumb” to help them decide which side’s argument to believe. For example, they prefer arguments based on actual narratives to manipulatable numbers. Constituent experiences with an issue in conflict are easy to understand and recall and of course are politically relevant. Recent Hill appearances by inventors already harmed by AIA also have been persuasive. Sometimes it helps to “follow the money”. Which side has the most to gain or lose can provide independent understanding regarding what is really going on. Mr. Issa’s public characterization of university opposition to HR 9 (see earlier post) not only confirms the persuasive power of past direct constituent congressional contact, it can provide valuable insight into the true motivation driving his attachment to the issue.

There is no compelling reason for Mr. Issa to worry about mythical patent trolls, but his mega-tech supporters’ need for insurance against the potential damages consequences of their efficient infringement, well that is another matter.

Another heuristic source of credibility sometimes emerges from positions taken by separate but different interests who, if an argument is true, should be voicing similar concerns. Universities have said HR 9 patent reform deterred commercialization investment. Their concerns are existential. Logically, their concerns should be echoed by the financial concerns of venture capitalists, universities’ private sector commercialization partners. After all, if after its completed costly development, a product’s patent is nullified by PTAB, venture capitalist investment in the commercialization process is significantly devalued or even wasted.

Venture capitalists are represented on the Hill by the National Venture Capital Association (NVCA). Many avid proponents of patent reform are prominent venture capitalists and also are members of NVCA. As can be seen below, NVCA’s views on HR 9 are echoed in the independently expressed views of the university trade associations.  Moreover, despite internal internecine conflict, the fact that NVCA’s openly opposes patent reform makes their position even more compelling… Here is what NVCA website says about the Patent reform issue.

NVCA’s Position

Significant venture capital investment is based on the existence of patents to protect an emerging company’s innovative idea and deter competitors from stealing their idea. If this investment is not protected through a strong patent system that acts as a deterrent on infringement, further investment in patent-reliant technology will decline.

NVCA supports patent reform legislation that will target abusive behavior, but is concerned that current legislative proposals under consideration will create unintended consequences that will discourage investment in startups working on breakthrough technologies and lifesaving cures.

H.R. 9, the Innovation Act of 2015, and S. 1137, the Protecting American Talent and Entrepreneurship (PATENT) Act of 2015, contain provisions that will raise the cost and risk of patent litigation for all companies, making it harder for startups to enforce their patent rights against entrenched competitors or to defend themselves in patent cases brought by those competitors or even by larger Non-Practicing Entities (NPEs).

Specifically, NVCA is concerned with three specific areas:

  • Fee Shifting – Both bills will increase the risk of patent litigation for startups by creating an overly broad fee shifting standard that gives a significant advantage to large incumbent companies and even large patent trolls that have the financial resources to engage in litigation in ways startups simply can’t match.
  • Joinder – Setting a disturbing precedent, H.R. 9 provides not only that startups would be on the hook for legal fees if they lose in patent litigation, but so too would their venture capital investors if the portfolio company goes bankrupt.
  • Discovery & Pleadings – Further stacking the deck against small startups, both bills will increase the cost of patent litigation by creating unnecessary requirements in pleadings and opportunities for expensive delays during the discovery process.

A patent is only as strong as the owner’s ability to enforce it and the awareness of others of that ability.  NVCA believes that current patent reform efforts run the risk of impairing both parameters, making it more difficult to invest in patent-reliant startups.  NVCA stands ready to work with all stakeholders to solve the issue of patent trolls and other abusive patent litigation practices, but we must be mindful not to create unintended consequences that would pose a threat of the entrepreneurial ecosystem. (Issue Overview).

Accordingly, when communicating with staff and Members, chances are they have heard the same arguments from NVCA.  NVCA works hard and is well-respected on the Hill especially because its members are a significant source of jobs and campaign funding. Reminding them of NVCA’s similar position strengthens our side because it is a credible heuristic.