Freedom Line Blog

As reported by Bloomberg yesterday, the PROMESA bailout bill for Puerto Rico includes a provision that would allow members of the control board to “accept, use, and dispose of gifts, bequests, or devises of services or property, both real and personal” for the purpose of “aiding or facilitating” the board’s work.

If that wasn’t bad enough, the House Natural Resources Committee claimed that such language is “fairly commonplace in ensuring statutory objectives are met in circumstances where non-federal sources of funding will be necessary.” Accordingly, the rationalization for the provision in this case is that the board will be able to “fulfill its purpose” in the event that Puerto Rico’s government can’t (or rather chooses not to) provide “sufficient funding” for it.

Will the Puerto Rican government actually fund the control board knowing its existence is widely opposed by the Puerto Rican people?  And, of course, there’s the little matter of Puerto Rico allegedly being “out of money,” as their governor has so stridently claimed for months. According to the CBO, the board will cost $370 million over its lifetime.  So it appears that these gifts will come in handy.

So who will be in the giving spirit?

The provision is crafted in such a way that any stakeholder looking to buy influence on the board will be able to do so.  Perhaps labor unions (SEIU, in particular), which already have generously given their time and resources to help Puerto Rico’s government produce a report claiming that billions of dollars of its debt is invalid, will take center stage in the gift-giving war, hoping to ensure that the Commonwealth’s underfunded public pension system is provided preference over bondholders.  Or what about certain hedge funds looking to convince the board that their claims should be prioritized over the claims of other bondholders, including those afforded first priority in Puerto Rico’s Constitution?

Indeed, rather than actually weighing Puerto Rico’s competing claims, and clarifying where they stand in the context of Puerto Rico’s Constitution, some in Congress have decided to invite a contest between who can out-bribe the others.  When people say that Washington is broken, revelations like this help explain why.

Last week, ahead of this week’s vote on the PROMESA bailout legislation for Puerto Rico in the U.S. House of Representatives, a commission appointed by Puerto Rico’s government released a preliminary report charging that the Commonwealth violated its Constitution in issuing billions of dollars of its $72 billion debt.  If the bonds were in fact sold illegally, the report insinuates, then the government shouldn’t have to pay them back.

In other words, they would punish lenders for the Puerto Rican government’s own mistakes.

So not only would Puerto Rico’s government get a free pass from its obligations after illegally issuing some of its debt, it would effectively be allowed to stiff good faith bondholders.

It’s worth emphasizing that the legislative body that created this commission, whose membership includes Puerto Rico legislators with obvious conflicts of interest, authorized the very same bond sales that it now seeks to repudiate.

That is morally and logically backward, and sounds like a plot characteristic of a lawless dictatorship.  And for very good reason:  Shenanigans like this are a tried and true tactic of leftist Latin American countries, rooted in the rhetoric of Cuban Dictator Fidel Castro from 30 years ago.  It has been attempted with varying degrees of success by governments or factions in Brazil, Argentina and Ecuador.  More recently over in Europe, a similar government-appointed commission made nearly identical claims in Greece.

Conspicuously, Puerto Rico’s government has not directed any funding toward this commission that it created a year ago.  So that raises an obvious question:  Who is behind this report?

Well, we already know that SEIU was heavily involved in the drafting process, and was one of a number of “stakeholders” to provide “in-kind labor contributions.”  The SEIU, of course, has a vested interest in ensuring that its members receive preferential treatment over good faith bondholders in Puerto Rico, even if Congress has to rewrite the rules to make that possible.

It also has been reported that SEIU has deep ties to consulting firms retained by the Garcia Padilla Administration.  It also is tied directly to the Administration through former president Dennis Rivera, who came under fire earlier this year for running a questionable non-profit in Puerto Rico whose only paid employee is the governor’s brother.

What about those “other stakeholders” who contributed?

We can’t know for sure, but there are commonalties between Puerto Rico and other governments that have attempted similar tactics.  For example, they all had a common ally in Jubilee, the leftist religious organization that has fought to wipe out bondholders in debt disputes across the world, and which has been a staunch advocate before Congress of doing the same to the American savers who lent money to Puerto Rico.

Ecuador, Argentina and Greece also all at one point retained the same counsel as Puerto Rico, which has built a reputation helping leftist governments to avoid repaying the money that they’ve borrowed.

One thing is clear:  The Commission’s report amounts to a political and negotiating ploy.  It’s designed to give Puerto Rico enormous leverage over the innocent people from whom it borrowed, threatening them with the prospect of the all-powerful PROMESA control board invalidating 100% of their debt.

Members of Congress should, at the very least, understand the lengths to which Puerto Rico’s government is going to escape its obligations.

While Congress debates a bailout for Puerto Rico, a different – but related – debate rages among legislators in the Commonwealth over Governor Garcia Padilla’s final budget proposal for the Puerto Rican Government.

The proposal has been met with justified criticism, as noted in part by Puerto Rican publication El Vocero, that should come as no surprise. The Governor’s proposal, which includes nearly $1 billion in increased expenditures for a Commonwealth that otherwise claims it “cannot pay” its debts, is a veritable goodie basket for Garcia Padilla allies.

Of the $973 million in increased expenditures, some $522 million would be diverted into the Garcia Padilla Administration’s new slush fund, something called the Financial Advisory Authority and Fiscal Agent of Puerto Rico (FAAFA). FAAFA will assume the role of the Governor’s old slush fund, the long-unregulated and now insolvent Government Development Bank.

Also included in the budget is $91 million for an unprecedented discretionary fund, an extra $215 million to bail out bankrupt municipalities, and an increase of $69 million for the “professional services” of the very expensive consultants and lobbyists.

All of this spending comes despite the fact that, for the first time, the budget makes no appropriation for the payment of principal and interest on payments to general obligation debt.  That’s a clear violation of Puerto Rico’s Constitution, which affords explicit priority over all other government expenses to the savers who invested in those bonds.

We’ve long warned that, given the cover of the legal stay and cramdown mechanisms included in the Congressional PROMESA legislation, it’s inevitable that Puerto Rico would default on the money it owes to bondholders, walk away from negotiations, and begin to frantically divert its resources to friends and allies on the island.

Now, in plain terms, the Governor has promised to do precisely that.  While the Governor fills the coffers of his new slush fund and lines the pockets of his army of consultants and Big Labor cronies, the Puerto Rican people, the municipal lending market and America’s seniors and savers will pay the price.

The question is whether Congressional conservatives are watching and ready to act accordingly.

In the Mario Lopez interview immediately below and a recent Liberty Update piece noting a welcome federal court victory, CFIF continues to emphasize and oppose ongoing official governmental efforts to intimidate and silence conservative donors:

[P]ublic officials and vindictive private citizens persist in demanding access to membership records and donor lists of conservative and libertarian organizations whose missions they deem unacceptable.  Anyone requiring confirmation need only look to Internal Revenue Service (IRS) harassment of pro-Israel and conservative nonprofit groups, or California citizens driven from their jobs simply for advocating a position on marriage that even a majority of state voters at the ballot box.

A recent federal court ruling in California vindicates donor privacy and the logic underlying [the Supreme Court ruling in] NAACP v. Alabama.”

On the same note, it’s worth highlighting Congressional legislation led primarily by Ways and Means Oversight Subcommittee Chairman Peter Roskam (R – Illinois) targeting Internal Revenue Service (IRS) abuses that deserves our support.  Specifically, the House of Representatives recently passed a set of reforms to stop IRS abuses, improve protections for everyday American taxpayers and finally hold IRS officials accountable for official misconduct.  Here’s what the package of reforms would accomplish:

1. Force the IRS to implement the Taxpayer Bill of Rights;
2. Prevent the IRS from targeting donors to nonprofit organizations;
3. Prohibit IRS officials from using private email accounts to conduct official government business;
4. End IRS abuses of taxpayer privacy protections;
5. Allow social welfare nonprofit organizations to self-declare their tax-exempt status rather than subject themselves to politicized IRS stalling tactics;
6. Allow organizations to appeal IRS denials of their tax-exempt status applications;  and
7. Immediately terminate IRS employees found guilty of targeting Americans on the basis of political bias.

It’s a good sign that IRS abuses and other governmental efforts at the federal, state and local levels targeting Americans – especially conservative and libertarian Americans – who simply wish to exercise their First Amendment rights have been exposed.

But that’s not enough.  We can’t let the opportunity to actually change the atmosphere in which these abuses occurred, and prevent similar abuses going forward.  Americans of every political persuasion should therefore contact their elected representatives and the White House to demand their support for these common-sense reforms.

So there are these folks in Wisconsin who run a version of “Politifact,” complete with a “Truthometer.”  Problem is, theirs needs to be recalibrated.

They subjected one of CFIF’s ads to their Truthometer. They decided we told a half-truth in calling the bailout for Puerto Rico a bailout, because no taxpayer funds would be used, which we never said, even though some of their “experts” experted that the negative effects on individual bondholders would, in fact, be pretty much what we said. Go figure.

If they had started by fact-checking themselves, they’d have been on more credible footing, since they identify CFIF several times as a “Super PAC” and once as a “political action committee.”  CFIF is not now, nor has it ever been a Super PAC, ditto political action committee. The Truthometer’s worst designation – “Pants on Fire” – is too silly for grown-ups to use, so we’ll give them a big fat zero for that one.

The bill currently before Congress, H.R. 4900 or PROMESA, would bail out Puerto Rico. It would do so by empowering a financial oversight board to force “Super Chapter 9 bankruptcy” restructuring of Puerto Rico’s debt, which means that Puerto Rico could renege on paying its creditors all it owes them, even though a great deal of that debt is protected and prioritized by Puerto Rico’s constitution, which is how the bonds were sold as being really, really safe.

Since a large portion of that debt is held by individuals, they involuntarily will be paying for Puerto Rico’s bailout. Thus, what we actually said:  “Retirement accounts crushed. A bailout on the backs of savers and seniors.”  Or, as the so-called fact-checkers in Wisconsin put it:  “And Duffy’s bill, experts tell us, almost certainly would mean lower returns for perhaps hundreds of thousands of Americans who invested in what long had been regarded as safe Puerto Rican bonds.”

Ultimately, our “sin” is adjudged as taking “things out of context.”  Precisely how do we take “things out of context” when we specify the exact context we use?

After attacking CFIF, they attempt to defend the restructuring by writing: “With an Oversight Board managing a debt restructuring, savers likely will get a lower return than they expected. But without such a board, creditors would be fighting in court and the returns for individuals (sic) investors would likely be lower still.”

In actuality, creditors are already fighting in court, and given that one class of Puerto Rican bonds was issued under the “full faith and credit” of Puerto Rico’s constitution, the law is on their side. One reason for the urgency of restructuring (and along with the bill forcing a retroactive moratorium on litigation) is the fear that courts will indeed rule for the creditors.

One final note: The Wisconsin piece accuses CFIF of throwing around the word “bailout.”  Here’s a term we will throw around: journalistically challenged. Fact check that.

———————————————————————–

Thomas Humber is founder of CFIF, and has been a recovering journalist for forty years.

Please join CFIF in celebrating World IP Day!

Over more than two centuries, the U.S. has become the most innovative, prosperous and powerful nation in human history, without even remote competition.  What nation in all of recorded history rivals our array of patented advancements, from the light bulb to powered flight to computer technology to lifesaving pharmaceutical and medical advancements?  What nation has so dominated the world in terms of copyrighted content, from blockbuster films to popular music to literature to television entertainment?  What nation has ever maintained such disproportionately high levels of valuable trademarks recognized instantaneously throughout the world, from soft drink logos to technological products that have revolutionized our lives?

The simple answer is that no society rivals the U.S. in any one of those categories, let alone all of them simultaneously.

And that is the direct result of America’s tradition of strong IP protections, as the U.S. Chamber of Commerce’s annual International IP Index makes clear.  Our Founding Fathers specifically protected IP rights in the text of the Constitution, and the U.S. has consistently led the world in protecting IP rights.  The relationship between America’s IP protections and our unrivaled innovation and prosperity therefore isn’t coincidental, it’s causal.

So today let us celebrate IP, which accounts for over 40 million American jobs, rewards innovation, incentivizes inventiveness and helps ensure safe and genuine products for consumers.

President Obama officially nominated DC Circuit Chief Judge Merrick Garland to fill Justice Antonin Scalia’s seat on the U.S. Supreme Court.  The president dedicated a considerable amount of time during his announcement speech to make the case that Judge Garland is a “consensus” nominee.

But who is Judge Garland and how does he view the U.S. Constitution?

While much will be written and analyzed about Judge Garland and his judicial record in the coming days and weeks, Carrie Severino, a former clerk to Supreme Court Justice Clarence Thomas and Chief Counsel and Policy Director at the Judicial Crisis Network, provides some insight to help answer that question.  In a piece for National Review’s Bench Memos titled “The ‘Moderates’ Are Not So Moderate: Merrick Garland,” Severino wrote last week:

Garland has a long record, and, among other things, it leads to the conclusion that he would vote to reverse one of Justice Scalia’s most important opinions, D.C. vs. Heller, which affirmed that the Second Amendment confers an individual right to keep and bear arms.

Back in 2007, Judge Garland voted to undo a D.C. Circuit court decision striking down one of the most restrictive gun laws in the nation. The liberal District of Columbia government had passed a ban on individual handgun possession, which even prohibited guns kept in one’s own house for self-defense. A three-judge panel struck down the ban, but Judge Garland wanted to reconsider that ruling. He voted with Judge David Tatel, one of the most liberal judges on that court. As Dave Kopel observed at the time, the “[t]he Tatel and Garland votes were no surprise, since they had earlier signaled their strong hostility to gun owner rights” in a previous case. Had Garland and Tatel won that vote, there’s a good chance that the Supreme Court wouldn’t have had a chance to protect the individual right to bear arms for several more years.

Consensus nominee?  You decide.

In the accelerating debate over patent litigation reform legislation, opponents continue to mischaracterize it as “patent reform,” as if the bill would somehow reorder the system by which patents are granted, the duration of protection and so on.

Whether deliberate or simply careless, that’s simply untrue.

Patent litigation reform legislation, including the Innovation Act that we at CFIF most strongly favor, would reform how patents are litigated, not our patent system itself.  And as Dana Rao, Vice President and Associate General Counsel of Intellectual Property and Litigation at Adobe Systems, details in The Hill, patent litigation abuse remains a serious problem:

The numbers are in.  And they aren’t good.  Patent trolls filed 3,604 suits in 2015, making it the second busiest year on record for abusive patent litigation.  And if anyone had any doubt about the merit of those suits, the busiest filing day last year, by far, came one day before a court rule permitting vague complaints was set to expire.  A record 212 patent infringement lawsuits were filed on November 30.  That is nearly 18 times as many as a normal day.  What kind of patent holder would scramble to file a suit to take advantage of this rule?  A patent holder who knew their suit had no merit.  These recent numbers reveal that court decisions and rule changes do not discourage abuse of our patent system.  In the current system, trolls continue to bring frivolous suits in sympathetic courtrooms around the country.  Only legislation will change these dynamics.”

The Innovation Act addresses that critical need for reform.

The Innovation Act targets patent litigation abuse by:  (1)  Forcing frivolous litigants who can’t demonstrate to the court that their “position and conduct … were reasonably justified in law and fact, or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust”;  (2)  Changing pleading standards so that parties must state their allegations with greater clarity and specificity, instead of relying upon vague and summary allegations that offer little insight into the nature of their claims;  (3)  Reforming the pretrial discovery process (witness depositions, document requests, etc.) in order to reduce the oppressive burdens currently imposed on parties, often as a tactic to drive innocent parties to settle rather than vindicate their rights;  and (4)  Bringing greater transparency regarding true ownership of disputed patents.

Notice what the Innovation Act does not do:  overhaul the patent system itself.  Which is one reason why the bill passed by an overwhelming and bipartisan 325-91 vote in the last Congress.

So why do opponents continue to mischaracterize it as “patent reform?”  Only they possess the certainty of their own minds to explain, but one suspects that it’s a ploy to frighten those of us who support strong intellectual property (IP) protections.  But CFIF takes a backseat to no one in advocating strong IP protections, and we would not support any bill that threatened to undermine them.

Whatever their motivations or confusion, however, it’s important that elected officials, policy analysts and everyday Americans remain clear that patent litigation reform should not be confused with “patent reform.”

Following the tragic news of Supreme Court Justice Antonin Scalia’s passing, Senate Majority Leader Mitch McConnell and other Republican lawmakers rightly have been arguing that Scalia’s replacement should be left to the next President.

Predictably, Senator Charles Schumer (D-NY), Harry Reid’s hand-picked replacement to become the Senate Democrat leader following Reid’s retirement in 2016, is crying foul.  On ABC’s “This Week,” Schumer bemoaned, “You know, the kind of obstructionism that Mitch McConnell’s talking about, he’s harkening back to his old days.”

But it was Schumer, back in July 2007, who argued in a speech to the American Constitution Society that, except for in extraordinary circumstances, the Senate should block any Supreme Court nominations made by President George W. Bush during his remaining time in office.  At the time, Schumer said:

We should reverse the presumption of confirmation. The Supreme Court is dangerously out of balance. We cannot afford to see Justice Stevens replaced by another Roberts, or Justice Ginsburg by another Alito.

Schumer went on to add:

We should not confirm any Bush nominee to the Supreme Court, except in extraordinary circumstances.

For the record, there were 18 months left in George W. Bush’s term when Schumer argued that the Senate block any additional nominees the President may have made to the Supreme Court.  The nation is now less than seven months away from electing Obama’s successor.

Late last year, we posed several questions to Banco Popular President and CEO Richard Carrion, in conjunction with his appearance as a witness during a Congressional hearing on Puerto Rico’s public debt.

Our questions centered mainly upon his recent emergence as a staunch advocate of a unilateral restructuring of Puerto Rico’s debt, a bizarrely anti-lender stance for the head of the  Island’s largest bank.  Among our questions, we asked how Carrion’s bank had avoided the severe exposure to Puerto Rican debt experienced by the Island’s other lenders and citizens, and why Popular – a private sector leader by any definition – has been so reluctant to align with other private sector actors in negotiating a consensual debt solution between Puerto Rico and its lenders.

Needless to say, we found Carrion’s newfound fondness for complete restructuring puzzling.

A closer look at Popular’s financial disclosures, however, reveals the real reason the bank so proudly advocates in support of a super restructuring:  In 2014 and 2015, Popular shed massive amounts of government and public corporation debt that would be subject to a restructuring, enabling it to emerge as an ally for the Garcia Padilla Administration.

In December 2014, Popular was itself a large bondholder, with approximately $337 million of their $811 million (42%) exposure to Puerto Rican debt in public corporations PRASA and PREPA.  Its exposure to General Obligation debt was roughly $82 million, or 14% of its holdings.

Fast forward one year.  Banco has reduced its exposure to debt that would be subject to a restructuring drastically, now holding only $59 million of public corporation debt (10%) and $23 million (4%) of general obligation debt.  The remaining 86% of its exposure is to debt is in the form of loans to municipalities, which are not and never have been part of the restructuring discussion.  It has actually increased its exposure to this “safe” municipality debt by about $20 million over the same time span.

In other words, over the last year, Banco Popular has shed exposure to hundreds of millions in debt that would be subject to La Fortaleza’s scheme, while unsuspecting Puerto Ricans held various debts (PFCs, GOs, PREPA) and lost their hard-earned money.

Herein lies the twist:  Carrion’s timing was impeccable, but it also raises red flags.

In a recent news report, the Washington Free Beacon notes Carrion’s relationship with Antonio Garcia Padilla, the scandal-plagued brother of the governor who is the lone employee of a suspicious island-based non-profit.  That non-profit, of which Carrion is a board member, has received large contributions from Banco Popular and is housed in the bank’s San Juan headquarters.  Was Popular given advanced warning of this plan in exchange for that money?

As if that’s not already bad enough, there’s more.  Popular’s close relationship with the Garcia Padilla administration continues to pay dividends.  Banco stands to generate another $9 million in profit from the government’s recently proposed liquidation of Housing Finance Authority Assets, another windfall for what has already been a profitable financial crisis for the bank.

And what about the rest of the bondholders – those who will be wiped out by an unconstitutional restructuring, and don’t have the luxury of dumping their life savings in exchange for sweetheart deals from the Garcia Padilla administration?

If Popular truly seeks to restructure these debts for the good of Puerto Rico, will it support the same type of unilateral restructuring for other types of loans taken out by regular Puerto Ricans who are Popular customers?  Will Popular allow its own clients to restructure their mortgages and car loans and cease and desist from any and all foreclosure processes against these borrowers?

Call us skeptical.

In an interview with the Center for Individual Freedom, William Yeatman, Senior Fellow at the Competitive Enterprise Institute, discusses the EPA’s Clean Power Plan overreach and why the Model FIP is a cap-and-trade policy and thereby raises concerns under the Tenth Amendment of the U.S. Constitution.

Listen to the interview here.

In a recent Daily Caller piece entitled “Patents Are Private Property, Too,” Eagle Forum adviser James Edwards throughout most of his column marshals a strong defense of America’s intellectual property (IP) rights system.

Unfortunately, in his final two paragraphs he needlessly and erroneously detours into alleging that patent litigation reform efforts before Congress somehow undermine IP protections.  The truth is precisely the opposite.  Patent litigation reform and IP rights are complementary, not contradictory.

CFIF takes a backseat to no organization in defending IP rights, and Edwards rightly highlights how America’s strong IP system provides the foundation upon which we became and remain the most innovative and prosperous nation in human history.  He correctly notes that our Founding Fathers considered IP a natural right no different than physical property, and how they accordingly specifically protected them in the text of the Constitution.  As Abraham Lincoln later observed, “The patent system added the fuel of interest to the fire of genius.”

And as we have noted repeatedly, it is not by coincidence that America maintains the world’s strongest IP protections while also standing unrivaled as the most inventive, powerful, prosperous and influential nation in history.  That relationship is causal.

Unfortunately, in his final two paragraphs Edwards veers regrettably astray.  Specifically, he claims that patent litigation reform legislation currently under Congressional consideration would somehow undermine patent rights and “make it much more difficult and riskier to defend one’s patent against infringers.”

Respectfully, that is flatly false.

Patent litigation reform legislation, which passed the House two years ago with an overwhelming 325-to-91 majority, addresses how patent disputes are litigated, not patent rights themselves.

Under current law,  as most people know, overly litigious actors can file frivolous lawsuits or baselessly defend against valid claims because it’s highly unlikely under our current system that they’ll be forced to pay the other side’s attorney fees and litigation costs when they ultimately lose.  That’s because American law generally requires each side to pay its own costs and fees, even if the other side’s claim was weak.  As a litigating attorney who defended against innumerable frivolous claims in my legal career, I can confirm firsthand that winning an award of costs and fees from even the most egregious litigants is exceedingly and unfortunately rare.  Accordingly, bad actors often use our court system to extract improper settlements or frighten legitimate patent holders from defending their rights due to the prospective time and costs of litigation.

That’s where patent litigation reform comes in.

The Innovation Act, the bill that CFIF most strongly supports, targets abuse of our court system by:  (1) Holding losing parties accountable for prevailing parties’ attorney fees and costs unless they can demonstrate that their “position and conduct … were reasonably justified in law and fact, or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust”;  (2) Reforming pleading standards to require greater clarity and justification for their case, rather than relying on vague and unintelligible boilerplate allegations;  (3)  Increasing transparency regarding the true owners of disputed patents;  and (4) Streamlining the burdensome discovery process, which too often imposes oppressive burdens and delays resolution of cases.

Those are manifestly common-sense litigation reforms that all Americans, particularly conservatives and libertarians who broadly favor reform of America’s flawed system of litigation, should support.

CFIF simply would not support any bill that undermined America’s patent or other IP protections.  The simple fact is that patent litigation reform would protect legitimate patent holders, and the only people with anything to fear are those who cannot demonstrate that their claims are based upon good faith and valid law – which is not difficult for legitimate litigants to show.  We therefore encourage all of our supporters and activists across the country to contact their elected representatives in Congress to voice their support for badly-needed patent litigation reform legislation.

As we enter 2016 and the presidential race accelerates, it can be tempting and even entertaining for conservatives and libertarians to find themselves divided on an array of issues, from foreign policy to immigration reform to how to improve our tax code.  Respectful debate and disagreement on such matters is both healthy and necessary.

On another issue, however, there should be little disagreement:  the desperate need for litigation reform in America.  That includes patent litigation reform, particularly in light of the fact that , as Wall Street Journal legal reporter Ashby Jones reports, 2015 just witnessed a 25% increase in patent suits in a single year:

Patent litigation brought by so-called ‘non-practicing entities’ continued to flourish in 2015, according to a new study, despite repeated attempts to curtail it.  According to the report, released Monday by RPX Corp., NPEs filed over 3,600 patent cases in 2015.  NPEs, also referred to derisively as ‘patent trolls,’ buy up patents and seek to make money from them through licensing and litigation.  NPEs filed 3,604 cases last year, a sharp increase over 2014, in which NPEs filed 2,891.

Fortunately, a large and bipartisan majority in Congress has recognized the need for patent litigation reform, which CFIF has strongly and consistently supported:

To address those widespread problems in our current patent litigation system, while also protecting legitimate patent claimants, Congressman Robert Goodlatte (R – Virginia) has reintroduced the Innovation Act.   Identical legislation passed the House approximately one year ago by a lopsided 325 to 91 vote, and nothing has changed since that date to justify a reversal.

The bill narrowly targets patent litigation abuses, primarily by introducing several key reforms to the patent litigation process.  Those reforms include:  (1) Greater ability to shift costs and fees to improper litigants than the current system provides;  (2) Heightened pleading standards that require greater clarity and justification for the lawsuit itself;  (3) Greater transparency regarding true owners of disputed patents;  and (4) Much-needed streamlining of the discovery process during litigation, which often imposes oppressive burdens in time and resources upon respondents.

Unfortunately, some opponents of reform have resorted to claiming that patent litigation reform would somehow undermine patent rights or intellectual property rights more broadly.  That is simply not the case, as we have explained exhaustively.  We at CFIF stand among the strongest proponents of IP protections, and we would not support any cause that undermined them.  The reality is that the bills we support target patent litigation abuse, not substantive patent rights themselves.  The Innovation Act, for instance, simply requires that losing parties in a patent lawsuit demonstrate “that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.”

That is not a difficult hurdle to clear.

Accordingly, opponents of patent litigation reform must answer why requiring parties who resort to costly and protracted litigation to show that their claim is “reasonably justified in law and fact” is somehow unfair or excessively burdensome.   They cannot, and there is simply no reason for further delay in achieving patent litigation reform legislation in 2016.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

CFIF steadfastly supports both free trade and strong intellectual property (IP) protections.  Each has played an invaluable role in making America the most innovative and prosperous nation in human history, and each is important if we hope to maintain that primacy through the 21st century.

In that spirit, we hope to ultimately support the Trans Pacific Partnership (TPP) after our own reasoned analysis.

Even the cleanest trade agreements tend to be complex,  and the TPP is no exception.  Along with so many other conservative and libertarian organizations, we are therefore carefully examining the TPP’s provisions in determining whether to ultimately support the agreement.

Making that determination in an intelligent and good faith manner, however, requires that the debate remain grounded in accurate, reliable and pertinent information.  But opponents of free trade and strong IP protections have undertaken a campaign to confuse and frighten the electorate through distortion.

An organization named IP Watch offers a perfect example of such tactics, with a recent piece about the TPP’s dispute resolution provisions known as the Investor State Dispute Settlement (ISDS) process.  IP Watch contends that, by virtue of the ISDS, “foreign corporations [will have] a huge advantage in IP disputes – private arbitrations that can override courts and statutes, effectively rewriting a nation’s IP laws,” but the simple reality is that ISDS provisions are common to international agreements and unremarkable.

Simply put, an ISDS process allows companies doing business abroad to protect themselves against unfair treatment such as discrimination and government seizure of their property, known as “expropriation.”  Over 3,000 international agreements include a process to resolve these problems, but many stubborn opponents of free trade and IP rights oppose these dispute resolution mechanisms, which are designed to give American companies similar protections to those enjoyed by foreign companies doing business in the U.S.

For its part, the TPP includes countries around the Pacific Rim, collectively  accounting for about 40% of all global trade, and like the 3,000 other international agreements referenced above, it includes an ISDS process to level the playing field for American companies doing business overseas.   Additionally, like so many other previous trade agreements, the TPP broadly exempts IP from the ISDS process unless the IP was expropriated and the expropriation violates the IP provisions of either the TPP or the World Trade Organization (WTO).

Those opposed to free trade or strong IP rights, however, don’t like the idea that companies possess that option to protect themselves, particularly companies that rely on IP protections.   Their attack on the ISDS process as it applies to IP is an opportunistic and cynical attempt to achieve their larger aim, the erosion of IP protections for creators and innovators.

Further, in practice it’s not easy to win an ISDS case.  First, an investor must prove that there was either direct expropriation (the government forcibly comes in and seizes the property, claiming now to be the legal owner of it), or indirect expropriation (the same effect as direct expropriation but without the outright seizure).  That is drawn from U.S. law, and the U.S. Constitution itself,  per the Fifth Amendment provision that, “nor shall private property be taken for public use, without just compensation.”  Moreover, the particular standards in the TPP for proving whether there has been an “expropriation” (e.g., “taking”) are drawn directly from a Supreme Court ruling on the Fifth Amendment in Penn Central Transportation Co. v. New York City (1978).

Accordingly, it should alarm readers of IP Watch that the anti-trade, anti-IP crowd has thus gone so far as to malign concepts contained in the Bill of Rights itself.

In addition to demonstrating an expropriation of IP rights, the TPP requires a company to prove that the government action violated the IP provisions of either the TPP or the WTO.  And those rules are the product of agreement by the governments of nations of all perspectives from across the globe, and constitute the basic levels of protection for IP.

That’s why companies bring so few cases.  Tellingly, only 13 cases have ever been brought to conclusion against the United States, and we won all of them.

There’s another factor that must be considered as well.  Namely, if you are an American company doing business abroad, where you rely on the local authorities for police protection and hope for fair treatment by the government and judges, how eager would you be to start a lawsuit against the whole country?  You, your board of directors and your shareholders would think long and hard about that one.

The ISDS process is a fair and appropriate one, but realistically, companies are only going to resort to it when their backs are truly against the wall.

Anti-trade and anti-IP interest groups and advocates will likely continue to publish misinformation about the TPP and its IP chapter in an attempt to scuttle the deal.  Indeed, activists are openly advertising that they will try to incite people, even though the TPP’s IP provisions are all drawn from U.S. law and have been in other trade agreements for years.

Hopefully, however, the preceding points help cut through the click-bait and hyperventilation that characterizes their rhetoric, so reasonable people can draw their own conclusions about the TPP based on fact and principle.

President Obama addressed the nation Sunday night from the Oval Office on the threat of terrorism and America’s response in light of last week’s atrocity in San Bernardino, California. The speech was . . . not good. Clichéd. Condescending. Utterly uninspired and uninspiring.

And that’s not all.

Marc A. Thiessen, Washington Post: “Usually when a president delivers a prime-time address to the nation, he has something new to announce — like, say, a new military strategy. Not President Obama. Like a notorious Christmas ‘re-gifter,’ Obama did nothing more Sunday night than repackage his old, failing strategy in the shiny wrapping of tougher language.”

Jim Geraghty, National Review Online: “At this point in his presidency, Obama speaks with only one tone, the slightly exasperated and sometimes not-merely-slightly exasperated ‘adult in the room’ who constantly has to correct his fellow Americans, who are always flying off the handle, calling for options that ‘aren’t who we are,’ betraying our values, and so on. He’s always so disappointed in us.”

George Condon, National Journal: “His low point may have come when he in­sisted on veer­ing in­to gun con­trol. If the point of the speech was to unite the coun­try and bring an anxious na­tion to­geth­er, bring­ing up one of the most di­vis­ive do­mest­ic polit­ic­al is­sues is not a great way to do that—par­tic­u­larly when the ad­min­is­tra­tion has struggled to ex­plain how the usu­al items on their gun agenda such as gun-show re­stric­tions and bet­ter back­ground checks would have made any dif­fer­ence in San Bern­ardino.”

The president’s venture into the gun control debate was particularly inept when he took up the cause of barring people on the U.S. no-fly list from buying guns. “To begin with,” he said. “Congress should act to make sure no one on a no-fly list is able to buy a gun. What could possibly be the argument for allowing a terrorist suspect to buy a semiautomatic weapon?”

There are at least two arguments. First, the no-fly list is rife with error and devoid of transparency — which is why the ACLU sued in 2010. Among those on the list: a 4-year-old child, Stephen Hayes of the Weekly Standard, Ted Kennedy, and at least 72 Department of Homeland Security employees. (Incidentally, Kennedy managed to get himself off the list — no easy feat.)

Second, there is the nontrivial matter of due process of law. The U.S. Senate last week rejected an amendment by Sen. Dianne Feinstein (D-Calif.) that would have empowered the federal government to bar a person from buying a gun if “the Attorney General . . . determines that the [buyer] is known (or appropriately suspected)” to have been involved in terrorism-related conduct “or providing material support support or resources for terrorism,” and “if the Attorney General ‘has a reasonable belief that the [buyer] may use a firearm in connection with terrorism.’”

“Can a person be denied constitutional rights, not based on a past criminal conviction or even a restraining order issued in court under a ‘preponderance of the evidence’ standard, but based just on the government’s suspicion?” UCLA Law professor Eugene Volokh asks and offers an answer at the Volokh Conspiracy:

I can’t see how that’s constitutional. And though the bill would have let the buyer go to court to challenge the attorney general’s decision, the attorney general would simply have had to show by a preponderance of the evidence that the two elements were satisfied — that the attorney general appropriately suspected the buyer and that she had a reasonable belief about what the buyer may do. Plus the evidence supporting the attorney general’s position might never be shared with the buyer, which may make it impossible for the buyer to fairly challenge it, or aired in open court. . . .

But the problem would be even more serious when we’re dealing with the denial of an explicitly guaranteed constitutional right, and not just the denial of the admittedly very important ability to fly on airplanes. If you have a constitutional right to do something, the government has to do more than just provide the attorney general’s suspicion and speculation as a basis for denying you that right. This isn’t a supposedly modest, limited gun control measure. It cuts to the heart of the constitutional right itself.

The president and congressional Democrats are demagoguing this question. They haven’t been able to achieve the sort of “common sense” gun control they’ve long sought through conventional political means — good, old-fashioned persuasion — so they’re left to exploit a terrorist attack in order to subvert the Constitution. Again. “What could possibly be the argument”? Constitutional rights shouldn’t be subject to the whims and caprices of a craven political class, that’s what.

Whereas the term “socialist” was once an epithet, among today’s political left it is a badge of honor, despite socialism’s uninterrupted record of failure across the globe and over an entire century of experimentation.  As we’ve observed, devotees typically offer Scandinavian nations like Denmark as exemplars, in violation of their professed fealty to “multiculturalism” and “diversity.”  But there’s another problem for Bernie Sanders and other leftists who constantly offer Denmark as a model for us to follow:  It’s not the socialist paradise that they imagine.

In a timely commentary this week entitled “Bernie Sanders’s Denmark Comments Show He Doesn’t Even Understand His Own ‘Socialism,'” National Review’s Kevin Williamson summarizes the flaws in their effort well:

[Y]ou probably missed the exchange between Mrs. Clinton and Senator Sanders at last night’s debate, when she lectured him that the United States isn’t Denmark and he responded with a rousing defense of the Danish model.  Never mind, for the moment, that neither of these batty old geezers has the foggiest idea of what’s going on in Denmark, or in the other Nordic countries.  Denmark, like Sweden before it, has been engaged in a long campaign of reforming its famously generous welfare state.  The country’s current prime minister is the leader of a center-right party, which, strangely enough, goes by the name ‘Left,’ Venstre.  (You might even call it libertarian:  it’s former longtime leader wrote a book bearing the positively Nozickian title ‘From Social State to Minimal State.’)  Denmark has been marching in the direction exactly opposite socialism for some time.  Our friends at the Heritage Foundation rank its economy the eleventh most free in the world, one place ahead of the United States, reflecting Denmark’s strong property rights, relative freedom from corruption, low public debt, freedom of trade and investment, etc.  Don’t tell Senator Sanders, but Denmark’s corporate tax rate is a heck of a lot lower than our own.”

More accurate examples of socialism at work include Venezuela, where consumers endure shortages of such things as toilet paper, or increasingly dystopic France.  Regardless, leftists’ image of a Danish socialist utopia simply isn’t accurate.

In March of 2014, the Obama Administration foolishly announced its intent to relinquish oversight of Internet domain name functions to the so-called “global stakeholder community.”

That is a dangerous idea for innumerable reasons, as observers like L. Gordon Crovitz of The Wall Street Journal have chronicled well.  Among other risks, consider the piracy threat that surrendering U.S. oversight poses to critical American artistic industries like music and film.  Online piracy already constitutes an enormous problem to those world-leading industries, and allowing Internet governance to drift into a Hobbesian global abyss would only exacerbate that.  Or consider the censorship threat, as Crovitz recently referenced:

Since the launch of the commercial Internet, the Internet Corporation for Assigned Names and Numbers, or Icann, has operated under a contract from the U.S. Commerce Department.  American oversight freed engineers and developers to run the networks without political pressure from other governments.  China and Russia can censor the Internet in their own countries, but not globally because Washington would block tampering with the “root zone” of Web addresses.”

Fortunately, some in Congress aren’t sitting passively as the Obama Administration attempt yet another international capitulation.  In a recent letter to U.S. Comptroller General Gene Dodaro, Senators Charles Grassley (R – Iowa) and Ted Cruz (R – Texas) and Congressmen Bob Goodlatte (R -Virginia) and Darrell Issa (R – California) remind the Administration that it cannot dispose of U.S. property without Congressional consent:

The Internet as we know it has evolved from a network infrastructure first created by Department of Defense researchers.  One key component of that infrastructure is the root zone file, which the federal government currently designates as ‘a national IT asset.’  Creation of the root zone file was funded by the American taxpayer and coordinated by the Department of Defense, and the file has remained under United States control ever since.  Under Article IV, Section 3 of the Constitution, Congress has the exclusive power ‘to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States.'”

Surrender of Internet oversight to a “global community” increasingly dominated by the likes of China, Russia, Iran and other rogues poses a terrible risk.  Fortunately, our Constitution presents a roadblock to the Obama Administration’s latest folly.  Even more fortunately, we have people like Senator Grassley, Senator Cruz, Congressman Goodlatte and Congressman Issa ready and willing to defend it.