The Electronic Frontier Foundation: the Lobbyists Destroying US Innovation

The Electronic Frontier Foundation (EFF) is a 501(c)(3) nonprofit corporation.  501(c)(3)s are largely prohibited from lobbying for candidates or legislation, even though a small portion of a 501(c)(3)’s resources can be used to lobby for legislation. The EFF lobbies a lot on many issues.

Among those issues, for many years, the EFF has lobbied heavily on legislation gutting patent law. This is not surprising because the EFF receives funding from Google, Facebook, and other Big Tech multinational monopolies that have no allegiance to the United States. The EFF is really just a Big Tech shill used to destroy free market competition that could damage their paymasters’ monopolies.

The EFF primes its lobbying efforts with the Stupid Patent of the Month peddling false and misleading information about patent lawsuits and cartoon characters they call patent trolls. According to the EFF, patent trolls are any patent holder that sues a predatory infringer for stealing its patented technology.

EFF Misleads on Current Legislation

Recently, the EFF published its opposition to PREVAIL and PERA; Both are patent-related legislation introduced in the Senate, and PREVAIL has also been introduced in the House. The EFF predictably trots out their cartoon characters explaining that the “two bills that would enrich patent trolls.”

It is highly debatable if these bills will accomplish what the authors claim it will, but the EFF’s position is not debatable. It is nothing short of a blatant political attack devoid of facts or logic that nefariously distorts the legitimate reasons driving the legislative effort. Nothing concrete from the legislation is cited supporting their wildly inaccurate and disingenuous conclusions. They simply attack the legitimate reasons driving the legislation.

On the other hand, inventors and startups have proffered well-reasoned and fact-based analyses of PREVAIL (see here, here, and here) and PERA (see here, here, here, here, and here). Like the EFF, they oppose the legislation, but not for the cartoonish reasons of the EFF. Instead, the opposition is based on the facts – the legislation will not do what the authors claim. However, inventors and startups have offered amendments to correct the flaws of both bills. The EFF provides nothing but cartoons.

Legitimate Reasons for Driving Legislation

While the EFF ridicules the influences driving both bills, these motives are legitimate and essential to the national security and economic growth of the United States.

In the United States, patent rights have been gutted by all branches of government. Patents can no longer stop infringers because injunctive relief is nearly impossible to obtain, and patents are invalidated at alarming rates. This has opened the floodgates to massive predatory infringement (most often from the EFF’s Big Tech paymasters), destroying startups that could have competed with Big Tech, and enabling China to take the global lead in 37 of 44 technologies critical to our national security and economic growth. The failed patent system is a true disaster for America.

In a 2006 case, eBay Inc. v. MercExchange, L.L.C. (eBay), the Supreme Court all but eliminated injunctive relief, replacing it with a public interest test. To pass the test, a patent owner must have a product on the market and the ability to distribute that product at the level of the infringer. So, if a huge multinational steals an invention and massively commercializes it, running the startup out of business, the startup and its investors cannot stop the infringer.  It is now the fiduciary duty of a CEO to its shareholders to steal the inventions of startups, massively commercialize them, and run the startups out of business.

In a 2007 case, KSR Int’l Co. v. Teleflex Inc. (KSR), the Supreme Court eliminated the objective test for obviousness that had been in place for decades, called the teaching-suggestion-motivation test (TSM). Under the new KSR test, the test giver puts themselves into the mind of an imaginary person having ordinary skill in the art (PHOSITA) to see if it would conclude that two or more references would yield a “predictable result” or are “obvious to try.”  Under KSR, reasonable people come to opposite conclusions, making the KSR test an unpredictable eye-of-the-beholder test seldom overruled on appeal. 

The America Invents Act of 2011 (AIA) created the Patent Trial and Appeal Board (PTAB), which is an administrative tribunal in the U.S. Patent and Trademark Office (USPTO). The PTAB invalidates 84% of the patents it fully adjudicates. There is no due process, no jury with limited discovery, and almost all invalidations are under obviousness via the subjective KSR test.  

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 courts invalidate around 50% of patents challenged under the abstract idea, and the USPTO has refused to issue thousands of meritorious patents whose companion applications are patented in China or Germany.

The odds of winning a patent infringement suit in the U.S. are dismal, and the cost of litigation is astronomical. It should not surprise anyone that investment has slowed in U.S. startups building the next generation of critical technologies. Early-stage funding of U.S. startups is down 62%. We are at a 40-year low in startups. In what should have been recognized as a harbinger of things to come, a 2018 report from technology analysts CB Insights stated that “China has overtaken the US in the funding of AI [Artificial Intelligence] startups,” The Verge reported, “[China] accounted for 48 percent of the world’s total AI startup funding in 2017, compared to 38 percent for the US.”

If the U.S. is to remain a free country, the patent system must be fixed.

The EFF’s Dangerously False Narrative

The EFF tells us that patent trolls are destroying innovation. But what exactly are the types of innovation destroyed by the failed patent system, and who benefits?

Lucky for us, the EFF discloses these technologies in their position. We are given four examples: “matchmaking,” online picture menus, scavenger hunts, and online photo contests.

All these inventions are in the realm of social media, the type that could compete with Big Tech social media giants. None of the inventions are initially a threat to Big Tech monopolies because their potential market is small in comparison. However, if they are allowed to grab a toehold in the market and build a brand, they can become a significant threat because they can grow and expand their product lines.

Big Tech social media giants operate on the thin outer layer of technology. Their systems run on top of millions of other people’s inventions, from desktops to server banks, fiberoptic networks to satellites, and BIOS to software systems. They sell uses of that technology in browser- and smartphone-based applications. Because of this, Big Tech social media platforms are fragile; their hold on the market can be easily broken with new innovative patent-protected uses of technology.

From the beginning of the tech industry (until the wipeout of the patent system), tech companies grew rapidly and then lethargically milked their markets. Startups with better patented technology got toeholds in their markets and eventually ran them out of business. The dustbin of tech history is littered with the once great, but now forgotten, names of hugely successful tech companies that ran out of business by startups with better technology. For example, when it was initially launched, Google’s patented search algorithm was not a threat to the giant search engine of the day, Alta Vista. But Google quickly established itself, expanded, and ran Alta Vista out of business in just a few years.

If the EFF’s list of “patent trolls” had been able to commercialize their inventions, the startups they created would have become disruptive to Big Tech social media markets.

It takes significant investment to get social media technologies off the ground. `In most cases, the only assets an inventor can collateralize to attract that needed investment are their patents. To be investment-grade collateral, a patent must be presumed valid and able to stop infringers. If a patent cannot stop infringers and can easily be invalidated, no investor will invest their money. Under the broken U.S. patent system, it is unlikely that any of these inventors would have been able to secure investment.

Whether they tried and failed, or didn’t try at all, none had products on the market at the time they attempted to defend their patent rights. If you believe the EFF, they are just patent trolls who have no rights to what they invented.

The truth is that these new social media inventions were years ahead of the lethargic Big Tech giants who own the social media markets. And the inventors have the absolute right to the fruits of their mental labor – the patent rights are their rights.

There is a reason that Big Tech creates so many lobbying shills like the EFF to peddle cartoonish false narratives – Big Tech fears competition.

To restore competition in Big Tech markets, Congress must restore patent rights.