The obvious reality, as almost any American not tied to the plaintiff lawyer lobby will agree, is that our legal system is overloaded, and in desperate need of litigation reform. That includes patent litigation reform...

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Does the name Kyle Bass ring a bell? 

Mr. Bass is a 45-year-old hedge fund manager who became famous for making hundreds of millions of dollars from the subprime mortgage market shortly before the bubble burst. Today, he pursues a different means of profit, and it's one that helps illustrate the need for patent litigation reform as Congress once again prepares to debate the issue. 

Stated simply, Mr. Bass runs an organization named "Coalition for Affordable Drugs" that files and publicizes patent challenges through a costly procedural process with the U.S. Patent and Trademark Office (PTO).  He then simultaneously bets in the market against the companies he has sued, while strategically investing in other companies that would profit if the patents he targets are weakened. 

In other words, his scheme constitutes a make-work litigation scheme that exploits patent challenges for profit. 

It should be emphasized that Mr. Bass is an obvious opponent of America's strong patent rights system, which he claims keep pharmaceutical prices artificially high.  Never mind that the United States, which maintains the strongest patent and intellectual property (IP) protections in the world, accounts for nearly two-thirds of all worldwide new drug patents despite accounting for just 5% of the world's population and approximately one-fourth of its economic power. 

Regardless, Mr. Bass and his company's tactics highlight the broader need for patent litigation reform, even if he concentrates most of his current challenges before the PTO.  As detailed by The Wall Street Journal in a front-page headline this week entitled "Record Backlog Jams Courts," an all-time high of 330,000 civil suits currently clog our judicial system, 14% of which are over three years old: 

"'Over the years I've received several letters from people indicating, "Even if I win this case now, my business has failed because of the delay.  How is this justice?"' said Judge Lawrence J. O'Neill in Fresno, Calif., who sits in the Eastern District.  'And the simple answer, which I cannot give them, is this:  It is not justice.  We know it.'" 

The obvious reality, as almost any American not tied to the plaintiff lawyer lobby will agree, is that our legal system is overloaded, and in desperate need of litigation reform. 

That includes patent litigation reform, which is the focus of the proposed Innovation Act introduced by Congressman Robert Goodlatte (R - Virginia). 

In a remarkable example of bipartisan agreement, the same bill passed the House by a 325 to 91 margin just over a year ago, and it merits similar consensus now that it has been reintroduced in the new Congress. 

Although the bill is popularly and inaccurately characterized as "patent reform," it is more accurately patent litigation reform.  That's because it doesn't change patent rights themselves, but rather the way in which vexatious litigants currently abuse our legal system to extract unjustified settlements and intimidate legitimate patent holders.  Among other things, it would more often shift legal costs and attorneys' fees to losing parties, which would discourage frivolous litigants from commencing baseless lawsuits.  The bill would also reform the burdensome and costly discovery process during patent litigation, which would reduce frivolous litigants' ability to drive exhausted opposing parties to nuisance settlements.  It also requires litigants to plead their causes more specifically and clearly, which would reduce frivolous litigants' ability to lodge vague allegations in an attempt to confuse the court and opposing parties, delaying resolution and exacerbating litigation costs. 

Unfortunately, many people who should know better have voiced baseless opposition to the Innovation Act.  That includes many conservatives and libertarians, as well as many people who otherwise rightfully support strong patent and IP rights generally. 

Such opponents claim that the bill would dissuade legitimate patent holders from enforcing their rights through our judicial system, but the truth is that good faith patent holders would be better off under any scenario. 

In cases involving good faith plaintiffs, the current system discourages them from suing because even if they win, they will have to pay enormous legal costs to do so.  Under the Innovation Act's reforms, they could sue with greater confidence that they'd be compensated by the losing side for their trouble.  In cases involving good faith defendants, the current system discourages them from defending their rights because even if they win, they will again face enormous costs and burdens of retaining counsel and responding to discovery.  Under the Innovation Act's reforms, those good faith defendants could stand firm against vexatious plaintiffs because they'd again be compensated by losing plaintiffs for their trouble.  And in close cases where both plaintiff and defendant assert their claims in good faith, the Innovation Act would maintain the current system, with each side carrying its own legal costs. 

Opponents also claim that the patent litigation explosion has recently subsided, but that simply means that conditions have temporarily moderated after reaching unsustainable peaks.  The unacceptable level of baseless patent lawsuits remains, as does the threat of "patent trolls" toward legitimate patent holders. 

As Abraham Lincoln observed, America's unparalleled "patent system added the fuel of interest to the fire of genius."  The Innovation Act preserves that fuel of interest, while promising much-needed litigation reform to protect good faith innovators against those who currently game the legal system for easy and unjustified profit.