Rep. Peters Welcomes USPTO Official for Stakeholder Roundtable in San Diego

SAN DIEGO, CA – Today, the Office of Congressman Scott Peters (CA-52), CONNECT, and Business Forward welcomed Andrew Byrnes, Chief of Staff at the United States Patent and Trade Office (USPTO), to San Diego. Mr. Byrnes attended a roundtable event with local industry leaders to hear about the unique innovation economy growing in the San Diego region.

“San Diego is home to a growing number of companies and researchers who are developing innovative technologies and therapies,” Rep. Peters said. “I’m glad Mr. Byrnes was able to get out to San Diego to hear from regional leaders about the work that is happening in our area. During my time in Congress I’ve consistently been working to find ways to showcase San Diego to policymakers and administration officials in Washington, D.C., and this continues that effort.”

“We greatly appreciate Congressman Peters’ efforts in arranging this meeting. CONNECT is pleased to host what will assuredly be an interesting exchange of views on current proposed legislation as well as the new regulations proposed by the USPTO,” said Gary Klein, VP of Public Policy, at CONNECT.

“Today’s briefing allowed some of America’s most successful inventors to brief the PTO on how reforms enacted by the America Invents Act are affecting their research and their business decisions,” said Jim Doyle, president of Business Forward. “With further reforms being debated on Capitol Hill, new trade deals in negotiation in Asia and Europe, and new technologies disrupting industry after industry, PTO counts on feedback like this more than ever.”

Mr. Byrnes spoke at the roundtable event with business leaders at the CONNECT headquarters in La Jolla. This event gave San Diego stakeholders an opportunity to discuss how to build a smarter set of intellectual property laws for the 21st century, and get updated on key actions being taken to help businesses focus on innovating, not litigating.

Patent legislation could hurt San Diego economy

CONNECT CEO Greg McKee and San Diego Regional Economic Development Corporation (EDC) President and CEO Mark Cafferty wrote an op-ed on patent reform legislation currently being considered in the U.S. Senate. They note the importance of patents to the San Diego innovation ecosystem, from technology, to life sciences, to biotech/genomics and how intellectual property contributes to job growth and the overall economy. Additionally, they point out that the current bills being considered are far too broad to deal with the problem of so called “patent trolls” and will have severe unintended consequences, particularly the devaluation of patents making it more difficult for inventors and investors to take the risk on what might have been a promising, life -enhancing technology. They urge Sen. Feinstein and Sen. Boxer to carefully review the legislation and take steps to preserve innovation in San Diego. The complete op-ed is available here.

SEC Proposes Regulation A Rules

Yesterday, the Securities and Exchange Commission announced the release of their proposed rules for Regulation A, which is intended to increase access to capital for smaller companies. Comments to the SEC are due in 60 days. CONNECT has been involved in the JOBS Act legislation since day 1 and will be reviewing the proposed regulations and submitting comments. To read the proposed regulations, click here.

Senate May Be Tougher Patent Battleground Than House

Dec. 17, 2013 – 6:00 p.m.
By John Gramlich, CQ Roll Call

Senators suggested Tuesday that a consensus approach on curbing abusive «patent» litigation may be harder to find in their chamber than it was in the House, which easily passed a comprehensive bill on Dec. 5 after relatively little debate.

Members of both parties agreed during a three-hour Senate Judiciary Committee
hearing that frivolous «patent» litigation poses an increasing threat to
American innovation and productivity. But they floated a wide range of
responses to the problem, indicating that the Senate may face an extended
debate in the weeks and months ahead.

Senate Judiciary Chairman Patrick J. Leahy, D-Vt., advocated for a bipartisan
proposal he developed alongside Sen. Mike Lee, R-Utah, that targets bad actors,
commonly known as “trolls,” that may not make any products or offer any
services, but file «patent» infringement lawsuits against companies and
consumers for the express purpose of obtaining costly legal settlements or
licensing fees.

The Leahy-Lee bill (S 1720) would address such abusive litigation through a
number of steps, including by calling on the Federal Trade Commission to crack
down on misleading “demand letters” that «patent» trolls regularly send to
businesses and consumers to accuse them of «patent» infringement. The proposal
also would provide new legal protection for customers who are targeted for
merely using a «patented» product or service.

“These measures take significant steps to address the problem of «patent»
trolls and misuse of the «patent» system,” Leahy said. “Importantly, the
measures also are balanced and targeted to preserve the rights of legitimate
«patent» holders whose inventions help drive our economy.”

But Sen. Charles E. Schumer, D-N.Y., said the Leahy-Lee bill does not go far
enough because it does not address the quality of «patents» that were issued in
the first place. Schumer urged the Senate to take up his proposal (S 866),
which would allow the «Patent» and Trademark Office to re-evaluate some
«patents» it has already issued. The White House supports Schumer’s bill.

Schumer said trolls have been able to seize on poor-quality «patents» to file
lawsuits and that giving PTO a chance to review its work would amount to a
“cost-effective off-ramp from the «patent» litigation highway.”

“At the end of the day, if we do not address the fundamental problem of
«patent» quality, trolls will continue to abuse poor-quality «patents» and we
will be right back here having this same debate,” Schumer said. “A «patent»
reform bill that does not address «patent» quality is like treating the
symptoms instead of the disease.”

Multiple Ideas

Other members of the Senate Judiciary Committee floated their own proposals.
Dianne Feinstein, D-Calif., and Chris Coons, D-Del., both said they are
concerned that the PTO is underfunded, with Feinstein announcing she will
introduce her own legislation in the coming weeks to ensure that the user fees
on which the agency relies cannot be diverted. The office “should remain wholly
self-supporting,” she said.

“I hope you, Mr. Chairman, will take that into consideration as you move your
bill,” she told Leahy.

All told, at least eight of the 18 members of the Senate Judiciary Committee
are already sponsors or cosponsors of bills aimed at frivolous «patent»
litigation, highlighting the breadth of policy ideas that the panel is

Besides the Schumer and Leahy-Lee measures, committee Republicans have their
own proposals that closely track with the House-passed bill (HR 3309). Orrin G.
Hatch, R-Utah, is sponsoring legislation (S 1612) that would require the losers
in «patent» infringement cases to pay the costs incurred by the winning party
unless certain conditions are met. Hatch argues that the bill would take away
trolls’ economic incentives to file meritless lawsuits.

John Cornyn, R-Texas, and the panel’s ranking Republican, Charles E. Grassley
of Iowa, are sponsoring their own legislation (S 1013) that has several
provisions similar to the House bill. The measure, for instance, requires
«patent» holders to disclose more information about their inventions in court
pleadings, in an attempt to ensure that plaintiffs have legitimate claims.

Differences With House

Sen. Sheldon Whitehouse, D-R.I., acknowledged that the Senate debate could
easily become derailed by competing proposals. He urged proponents of a
«patent» litigation overhaul to remain focused on reaching conference
negotiations with the House, rather than getting exactly what they want out of
the Senate’s legislation.

“Be as flexible as you can be to get a bill through the Senate that can then
get you into conference with the House,” he said.

Even in the early stages of the Senate debate, however, some senators signaled
that they oppose parts of the House bill. Richard J. Durbin of Illinois, the
Senate’s second-ranking Democrat, said he has serious concerns about the
House’s “loser pays” provision, saying it flips the current litigation system
on its head and may harm small businesses.

“You need pretty deep pockets to live under this new fee-shifting system” that
the House bill would create, Durbin said.

Coons raised concerns that Congress might step too forcefully into the realm of
the courts by mandating how «patent» infringement lawsuits should unfold, a
criticism that has been leveled at the House bill because it would create new
civil litigation rules. The proposal from Coons and Feinstein to shore up
funding for the PTO also would differ from the House bill, which rejected that

Schumer’s proposal regarding administrative review of some «patents»,
meanwhile, would be a major departure from the House bill. The House sponsor,
Judiciary Chairman Robert W. Goodlatte, R-Va., initially included a similar
plan, but removed it in an effort to win more support.

Patience, Caution Urged

Several senators said Tuesday that they hope to work more deliberatively than
the House, which passed Goodlatte’s bill by a vote of 325-91 some six weeks
after it was introduced.

“The one thing that I find there is agreement on with the California
constituency in this area is, ‘Please have another hearing,’ ” Feinstein said.

Coons noted that Congress had passed the last major «patent» overhaul, in 2011,
after years of negotiation, and said he is hopeful the Senate will devote “a
few more months to making sure we get this topic right.”

Coons and several other committee members said they are concerned that
lawmakers would upset the “fragile ecosystem” of the nation’s «patent laws if
they move too quickly or aggressively.

“I am worried about overkill,” Sen. Richard Blumenthal, D-Conn., said. “I am
worried about unintended consequences.”

New VP of Policy; Patent Troll Bill passes House; Start Up Jobs and Innovation Act; Forum on Innovation Economy

CONNECT names new VP of Public Policy

Gary Klein has been named the new Vice President for Public Policy, taking over for Tim Tardibono who, after three years of excellent service has decided to open his own firm. Gary brings extensive public policy/government relations experience to CONNECT, having served as a Counsel on two Senate subcommittees and subsequently representing industries as diverse as consumer electronics, toys, and movie theaters. Gary will be located in CONNECT’s D.C. office.

Patent Troll Bill passes House, moves to Senate

On December 5, the House overwhelmingly passed H.R. 3309, The Innovation Act, by a vote of 325-91. Despite opposition by a broad coalition including universities, and various associations including CONNECT, the bill was rushed through the process with rules designed to avoid any significant amendments. Although described as a limited reform to address the emergence of so called “patent trolls,” (entities that acquire patents and then issue demand letters threatening to sue unless paid royalties or a settlement),  the bill as passed goes way beyond what is necessary to address the problem and imposes severe impediments to start ups  and independent investors by making it much more expensive to protect their intellectual property, which may be the only real asset that they have. The joint letter opposing the bill can be found here. Congressman Peters voted “no” on the bill and his statement can be found here.

The bill now goes to the Senate where a Judiciary Committee hearing was held on December 17, 2013 on bills introduced by Senators Leahy (S.1720), Cornyn (S.1013), Hatch (S.1612) and Schumer (S.866).  It is expected that a compromise bill will be marked up sometime in February, and possibly reach the Senate floor for a vote sometime in March. CONNECT will continue to work with coalitions to make sure that the final bill will not harm the innovation eco-system and discourage investment in promising technologies.

Click here to read an excellent summary of the Judiciary Committee hearing.

 Start Up Jobs and Innovation Act Introduced

Senators Menendez (D-NJ) and Toomey (R-PA) introduced S. 1658, the “Start Up Jobs and Innovation Act” which addresses major concerns of small technology businesses and start ups. It’s major provisions include:

  • Small Business Expensing.  The current $500,000 small business expensing limitation would be made permanent and would be adjusted annually for inflation.  Without legislative action, this limitation will drop to $25,000 for 2014.  TechVoice has continually supported maintaining the higher limitation, which will enable small businesses to continue to make investments in assets – including technology – that improve business operations and profitability, benefitting both small businesses and our overall economy.
  • Small Business Investors.  Investors in certain small businesses would be allowed to exclude 100% of the capital gain on such investments, and the threshold for what constitutes a qualifying small business would be increased.  This will be an incentive to long-term investors in small businesses, which will allow small businesses to attract the investment they need to create jobs and compete in today’s global economy.
  • Startup Costs.  The bill would raise the allowable deduction for startup business costs to $10,000, from its current $5,000 level.  This means that startups can deduct an additional $5,000, as opposed to writing this amount off over a 15-year amortization period.
  • Loss Deductions and Credits for Investors.  Small businesses would be allowed to pass through losses and credits to investors that the small business could not otherwise use.  Losses or deductions from a qualified research activity conducted by a high tech research small business pass-through firm would not be treated as a passive loss to the investor.  Typically, startup companies have no net income, and therefore, do not have a current income tax against which to offset losses and credits.  Allowing these tax benefits to flow through to small business investors, promotes investments in small businesses, creating jobs to fuel the American economy.
  • Cash Accounting.  More small businesses would be able to use the “cash accounting” method, easing a significant tax compliance burden for small businesses.  The legislation would allow businesses with gross receipts of less than $10 million (currently less than $5 million) to use cash accounting.  Small businesses are less capable of bearing tax compliance costs and any reduction in compliance burden allows these businesses to use the savings to improve and grow their businesses.

Forum Discusses the Innovation Economy

The Coalition of Small Business Innovators hosted a breakfast forum, “Promoting the Innovation Economy,” featuring a panel addressing the need to simplify the tax code and eliminate specific deductions and credits while simultaneously encouraging and supporting small business innovation.  Panelists also discussed the potential for comprehensive tax reform in 2014 and recent legislative proposals.  You can see the discussion here.

Congress’ rushed “patent reform” undermines IP protection

With the House of Representatives set to vote on a new round of so called “patent reform” later this week, CONNECT joined with 6 other California tech associations to warn Congress to slow down and not inadvertently harm the world’s best innovation ecosystem.

Not only does H.R. 3309 not solve the most important issue facing America’s patent system, Congress robbing the USPTO of the fees innovators pay for patent application review, but the bill contrives a host of untested discovery and litigation changes that will weaken patent protection.  Additionally, with the continued discussion about frivolous and abusive Demand Letters, H.R. 3309 does not include serious provisions that would require those sending demand letters to provide transparency and be accountable for their vague allegations.

H.R. 3309 also ignores the dire warnings of intellectual property luminaries like former USPTO Director David Kappos and former Chief Judge of the Federal Circuit Paul Michel which both argue the bill is being rushed which will cause harm to the U.S. patent system and rescind progress made in the America Invents Act.  A host of other organizations that value IP including BIO, the National Small Business Association, the Medical Device Manufacturer’s Association and research universities have expressed concern or outright opposition.

Having just celebrated Thanksgiving in the U.S., America’s patent system is definitely something to be thankful for.  However, innovators, entrepreneurs, investors, startups and emerging companies should be very concerned about the negative bill the House will vote on as early as Thursday, Dec. 5.  Congress has plenty of important things they need to do but instead they are on the verge of damaging IP rights.

SEC Releases Crowdfunding Proposed Rules

Today, after much anticipation, the Securities and Exchange Commission released the Proposed Rules to implement the Crowdfunding provisions of the JOBS Act.  The Proposed Rules are almost 600 pages long and cover numerous issues including: investor income/net worth thresholds, limitations on amount of capital a company can raise, disclosure requirements, and the regulatory framework a crowdfunding intermediary will have to comply with to facilitate crowdfunding.  Timothy Tardibono, VP of Public Policy applauded the SEC’s effort in publishing the rules, “The SEC has been working diligently to get these rules out and make Congress’ bipartisan JOBS Act a reality.  CONNECT has been in this process since Day 1 and we will continue to review the Proposed Rules and seek input from San Diego’s innovation community over the next 90 days when Public Comments are due.”  To learn more from the SEC’s release, click here.