New Legislation that Restores America’s Leadership in Innovation

On April 26, 2024, Representatives Thomas Massie and Marcy Kaptur introduced the Restoring America’s Leadership in Innovation Act (RALIA) in the House Judiciary IP Subcommittee.

RALIA is one of those rare bills that actually does what its title says it does. RALIA restores America’s leadership in innovation, which is very much in the interest of US national security today.  

Over the last 18 years, the U.S. government has gutted the U.S. patent system. Patents no longer stop infringers because injunctive relief is nearly impossible to obtain, and patents are invalidated at alarming rates in the Patent Trial and Appeal (PTAB) and under the judge-made eligibility law. The odds of winning a patent infringement suit in the U.S. are dismal, and the cost of litigation is astronomical. The floodgates to massive predatory infringement by huge multinationals are wide open, and that has destroyed countless U.S. startups and allowed Big Tech to monopolize.

It’s not that hard to figure out. When you wipe out the patent system, you wipe out early-stage investment in startups. Startups matter to U.S. national security.

China overtook the U.S. in the funding of AI startups almost a decade ago. As reported by The Verge, a 2018 report by CB Insights showed that “[China] accounted for 48 percent of the world’s total AI startup funding in 2017, compared to 38 percent for the US.” Reuters reports that startup funding is down 30% in 2023. It is no surprise that last year China took the global lead in 37 of 44 technologies critical to our national security and economic growth.

If we don’t pass RALIA, the U.S. will never retake that lead, and China will become even more aggressive and dangerous.

Restoring America’s Leadership in Innovation Act

RALIA addresses the damage caused to U.S. innovation by simply restoring the patent system to what it was prior to 2006.

Restores Injunctive Relief: 

A U.S. patent is constructed in the Constitution as nothing but an “exclusive Right” (Right is capitalized in the original). Black letter law grants a patent all the attributes of a private property right. So, since the dawn of the U.S. patent system, when someone stole a patented invention, the courts automatically granted an injunction stopping the infringer from making, selling, or importing the infringing product. Would-be infringers knew they risked losing all investment into an infringing line of business if the inventor sued and won in court. This deterred infringement and encouraged cooperation between incumbent would-be-infringers and startups.

Nevertheless, in a 2006 case, eBay Inc. v. MercExchange, L.L.C. (eBay), the Supreme Court held that a patent’s “exclusive Right” is not exclusive after all.  Instead, the Supreme Court devised a public interest test that must be passed before the court can order grant injunctive relief. To pass the test, a patent owner must effectively have a product on the market and the ability to distribute that product at the level of the infringer.

Every major patent system on the globe has default injunctive relief upon a finding of infringement. The results of the Supreme Court’s handicapping of U.S. innovation against the rest of the world are obvious.

Since eBay, if a huge multinational steals a startup’s invention and massively commercializes it, the startup will invariably go out of business. Once out of business, investors take control of the patents, and since they do not have a product on the market, the courts will not grant injunctive relief. If they steal it, they keep it; thus, the gates of massive predatory infringement were opened.

RALIA restores the patent system by making injunctive relief the default remedy order upon a finding of infringement, just like every other major patent system on the globe, including China.

Abolishes the PTAB: 

The America Invents Act of 2011 (AIA) created the Patent Trial and Appeal Board (PTAB), which is an administrative tribunal with the sole purpose of invalidating issued patents at the request of an infringer or its agent. The PTAB lives inside the U.S. Patent and Trademark Office (USPTO). During PTAB attacks, there is no incentive for the infringers to settle because infringement litigation in district court is stayed. At the PTAB, there is no due process, no jury, and limited discovery, and almost all invalidations are under a subjective obviousness test. There are no limits to the number of attacks, and each costs the patent owner half a million dollars. The PTAB effectively invalidates 84% of the patents it fully adjudicates. Patent owners make their decisions under duress with all that in mind.

No other country has a system that works like the PTAB, so its damage is unique to American companies and most severe to inventors and startups.

RALIA reverses the AIA by deconstructing the PTAB, thereby returning the patent system to its prior state. This aligns the U.S. patent system with the rest of the world and ends this assault on U.S. innovation.

Strikes Judge-Made Exceptions to Patent Eligibility: 

35 USC Section 101 is the door into the patent system. It states what types of inventions are eligible to be patented. Once the invention is determined patent eligible, it is examined under the statutory constructs of patentability: has it been done before (102), is it obvious to do (103), and is it enabled such that someone else can do it (112)? 102, 103, and 112 are common across all major patent systems.

101 is a question of the future, not the past. Nobody can know the future, so any restriction to 101 restricts inventions that nobody today knows or understands. It is not wise to restrict what you do not know, so 101 was originally written very broadly using the word “any” to describe what is eligible. Most countries do not have a similar provision to our 101, but those that do, like China, are very broad and nonrestrictive.

A 2014 Supreme Court decision called Alice Corp. v. CLS Bank International (Alice) created an exception to what is eligible to be patented, called an abstract idea. However, the Supreme Court did not define what qualifies as an abstract idea. Whatever they meant it to be, it made most inventions implemented in software ineligible for patent protection. Today, the USPTO has refused to issue thousands of meritorious patents whose companion applications are patented in China or Germany.  If it does issue, the courts invalidate around 50% of patents challenged under the abstract idea on summary judgment.

The abstract idea exception has severely damaged U.S. innovation. Of the 37 technologies in which China now leads the world, over 60% are directly related to the abstract idea exception.

RALIA restores Section 101 to the broad threshold question Congress intended. It eliminates all judge-made exceptions, allowing only exceptions for pure mathematics, inventions that can only be performed in the mind, etc. RALIA will bring certainty and reliability to issued patents, thereby encouraging innovation in important innovations of the future.

Other Provisions:  Other substantive provisions include restoring the first-to-invent procedure and ending premature publication of patent applications. But of these probably the most important is that RALIA specifically states that a patent is a private property right. That will discourage the Supreme Court from meddling with the patent system and push it back to Congress, where a public debate can guide U.S. innovation.

RALIA Must Pass for National Security Reasons

The U.S. government handicapped the U.S. patent system in ways no other country does to themselves. While we did that, China strengthened its patent system. This shifted early-stage startup investment to China. China now leads the world in 37 of 44 technologies critical to our national security.

RALIA restores the U.S. patent system to its former glory before the U.S. government started destroying it. The American free market system is superior in many ways to China’s, so fixing the patent system will propel U.S. inventors to out-innovate China and retake the lead.