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.
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
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.”
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.”
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.
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.
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.
As tributes continue to roll in to honor Duane Roth’s legacy as an inspirational leader, community motivator, and humble innovation evangelist, CONNECT’s Washington D.C. Office, would be remiss to not highlight Duane’s contribution to advancing innovation-related public policy issues. Duane’s ability to capture an idea, translate it into a policy proposal, explain it by using real life examples, and fiercely advocate for it are uncanny for someone that never worked on Capitol Hill or in political office. He truly was a visionary in how Sacramento and Washington could tweak public policy to enhance innovation ecosystems to enhance America’s edge as the global innovation leader.
There is no question that Duane realized that America’s innovation edge is not guaranteed forever. The ingredients that give America its edge have to be refreshed and expanded. He often shared with policymakers his experiences as to how foreign competitors were copying America’s innovation playbook and closing the gap. He would explain that as other countries become more startup friendly, talent and capital would move where it is most attractive, despite the fact that American innovators and investors would rather keep their talent and capital in the U.S. San Diego is not just competing against Silicon Valley, Seattle, Austin, Denver, etc. but is also competing against Israel, Canada, the U.K., the E.U., Taiwan, etc.
Duane’s meetings on Capitol Hill, and in other power centers of DC, were out of the ordinary because of his approach to not advocate in a parochial way that only benefited San Diego, but in ways that would benefit San Diego-like innovation regions all across the U.S. His deep knowledge of San Diego’s innovation ecosystem made him confidently aware that that San Diego would always punch above its weight in the innovation economy, but if Washington and Sacramento don’t get innovation policy right, any region’s ability to succeed would be hindered. To be clear, he believed that entrepreneurial ingenuity more often than not would win out versus misguided public policy, but if Washington and Sacramento could just strive to do no harm to regional innovation ecosystems, innovators would be free to create, operate and thrive. If Sacramento and Washington were to actually get things right and create policies to foster the growth of regions like San Diego, there would be no stopping the U.S. from leaving behind the rest of the world—producing new life-changing products, creating well-paying jobs, and expanding local economies. He believed in the power of ideas above party and strove to develop our advocacy agenda around ideas that could garner bipartisan support.
In President Obama’s 2011 State of the Union address, he told the story of a small American company that created a new drilling technology specifically to save miners trapped in Chile. One of the employees said that they are a small company that does big things. President Obama went on, “We do big things. From the earliest days of our founding, America has been the story of ordinary people who dare to dream. That’s how we win the future. We’re a nation that says, ‘I might not have a lot of money, but I have this great idea for a new company.’…We do big things. The idea of America endures. Our destiny remains our choice. And tonight, more than two centuries later, it’s because of our people that our future is hopeful, our journey goes forward…”
Duane Roth lived to do big things—including big things related to public policy. He inspired others to do big things too. Only as more of us pick up his mantle to do big things, consider how to collaborate, and improve the system for all, not just a few, can we properly honor Duane’s legacy.
To learn more about some of the innovation policy ideas Roth supported see his Xconomy piece, click here.
Continuing its series of briefings to help educate Capitol Hill and Administration staffers on innovation policy and new technologies in various sectors, CONNECT recently held briefings in the Senate and House on genomics and diagnostic analysis that will revolutionize healthcare delivery and patient care. Joining with Life Technologies, including remarks by Rep. Scott Peters, CONNECT’s D.C. Office hosted the briefing titled: Innovation 101—Technology and Innovation in Genomics and Diagnostics. The briefing also included Massachusetts based startup Foundation Medicine which focuses on innovation in cancer diagnosis, treatment and patient outcomes.
After Timothy Tardibono introduced attendees to San Diego’s innovation story and the importance of Congress focusing on tech sector job growth policies, Tardibono introduced Rep. Peters. Tardibono pointed out how the Congressman has hit the ground running not only by listening to the innovation community, but more importantly, by acting on what he’s hearing. Rep. Peters talked with staff about the importance of the innovation economy as a pillar of America’s global edge in competitiveness. However, Peters warned that Congress needs to do a better job of creating a better atmosphere by which technology startups have greater chances for success. At the core of that effort, is the need to advance research funding. Peters encouraged the staffers to assist their bosses, his colleagues, in taking stands to educate Congressional leaders on how the innovation economy can spur the recovery to greater certainty.
Carol Cox, Senior Vice President, External Affairs and Corporate Communications, for Life Technologies shared with staffers the extensive products and services Life Technologies provides as an integral part of research labs across the U.S. and the world. Tracing the history of the development of computers from bulky mainframes to vastly increased computing power in much smaller and lighter personal computers today, Cox explained how Life Technologies’ products allow for genomics sequencing exponentially faster than was thought possible even just a few years ago. The technology is continuing to improve rapidly which is helping drive costs down even further. The information gleaned from genomics sequencing is enabling new approaches to medicine as approximately 1/3 of new drugs approved by FDA in 2012 involved a genetic biomarker. The savings to America’s healthcare system could top $600 million/year just related to genetic testing prior to treatment of metastatic colorectal cancer. In addition to improved patient care and decreased cost, Cox cited a study finding the genomics revolution has generated nearly $1 trillion in cumulative economic impact to date, more than 53,000 direct genomics-related jobs, $293 billion in personal income, all while costing every U.S. resident a mere $2/year. Sequencing applications extend to food safety, biofuels, animal health, criminal forensics, and biodiversity preservation and many more. Yet, Cox warned that America’s global lead in the genomic revolution is threatened by sequestration cuts to the NIH which reduces grant success and leaves open the international race for who will lead the next phase of the genomics revolution in the next decades.
Next up was Jerry Conway who serves as Vice President, Reimbursement and Payer Strategy, Foundation Medicine, Inc. of Cambridge, MA. Founded in 2010, FMI currently has 150+ employees focused on innovation in cancer diagnosis, treatment and patient outcomes. In addition to a host of pharmaceutical industry collaborators, FMI is engaged with leading academic medical centers in the U.S., U.K. and European Union. FMI envisions “a transformation in cancer care, where each patient’s treatment is informed by a deep understanding of the genomic and other molecular changes that contribute to their disease.” Conway went in depth to discuss the complexities of cancer and how various genes are mutated in each individual tumor, and cancer cells often contain combinations of mutations driving uncontrolled growth. Thus, FMI believes it is imperative to understand entire pathways which incorporate many genes. Conway noted how stakeholders are unable to keep up with the ever-expanding knowledgebase which results in the current healthcare system having enormous waste and missed opportunities for treatment. FMI provides stakeholders greater analysis and specificity in making important healthcare decisions. Conway mentioned that FMI has joined the Coalition for 21st Century Medicine which is working collaboratively to develop new models for CMS and other payers to use to properly determine coding, coverage and value-based payment for advanced laboratory diagnostics.
In both the House and Senate briefings, staffers interacted with the speakers on a broad array of questions that showed staffers have been studying the genomics issue. Timothy Tardibono, CONNECT’s D.C. Office director, was encouraged by the interaction from staff, “Staffers were really tuned in to the presentations and had some great Q and A with the speakers. CONNECT’s education efforts are really working and we are getting some strong follow-up opportunities as well. It was another great opportunity to showcase a San Diego innovation leader like Life Technologies while also reaching out to another innovation hub in Massachusetts via Foundation Medicine. And of course, it’s always a highlight when a Congressman stops in to give remarks. Rep. Peters really added important insights to the briefing and his staff was extremely helpful in getting all the logistics in line.”
To learn more about the briefing and see slides and videos, click here.
To learn more about the study on the impact of genomics on the U.S. economy mentioned by Carol Cox, click here.