In today’s rapidly evolving technological landscape, our current patent system often stifles innovation rather than promoting it. A solution lies in adopting an optional system of compulsory mechanical licensing for patents, similar to what exists in the music industry, while maintaining the current patent system as an alternative. This approach would balance the rights of inventors with the needs of society, fostering a more dynamic and innovative economy.
Accelerating Innovation
Compulsory licensing would allow inventors and manufacturers to choose between the current patent system and a new licensing model. This flexibility would enable manufacturers to opt for faster development of new products and technologies through compulsory licensing. The result would be increased competition in some sectors, potentially driving down costs for consumers. Furthermore, this system would create a more collaborative innovation ecosystem for those who choose the new system, as it would reduce barriers to entry and allow for more rapid iteration on existing technologies.
Fair Compensation for Inventors
Under this dual system, patent holders would still be compensated for their inventions. Standardized royalty rates would ensure fair payment in the compulsory licensing system, while inventors could choose between traditional patent protection and the new licensing model based on their specific needs and market strategies. In some cases, the potential for increased use of patented technologies could lead to higher overall earnings, especially for inventions that might otherwise see limited adoption due to licensing barriers.
Reducing Patent Trolling
The compulsory licensing would provide a powerful tool to combat patent trolling. Entities focused on litigation may find their power reduced in sectors adopting the new system, as the standardized licensing fees would eliminate the leverage they typically exploit. At the same time, companies can choose the system that best protects their innovations and business model, ensuring that legitimate patent holders can still benefit from their inventions.
Economic Growth
This dual system would stimulate economic growth by lowering barriers to entry for new businesses in sectors adopting compulsory licensing. It would encourage more diverse product offerings where the new system is used, leading to increased competition and innovation. Importantly, it would maintain strong protections for industries that rely on traditional patent exclusivity, ensuring that high-risk, high-investment innovations continue to receive the protection they need to thrive.
Addressing Public Interest
Compulsory licensing allows for better serving of public interest. Critical technologies could be more widely adopted in sectors choosing the new system, such as in healthcare or green energy. This would prevent monopolies from blocking access to essential innovations in participating sectors, potentially leading to more rapid advancements in areas of significant social benefit. At the same time, the traditional system would remain available for industries where it is deemed more appropriate.
Benefits for Individual Inventors
A key feature of this proposed system is the exemption for individual use. Natural persons making or using patented inventions for personal, non-commercial purposes would be exempt from both traditional patent infringement and the compulsory licensing system. This exemption would foster a culture of innovation and experimentation at the individual level, allowing hobbyists, students, and independent inventors to freely explore and build upon existing technologies without fear of legal repercussions. It would also reduce the burden on individual inventors who might otherwise struggle with the complexities of patent licensing.
Learning from the Music Industry
The success of compulsory mechanical licensing in the music industry provides a proven model for this approach. It has allowed for widespread use and adaptation of musical works while balancing the rights of creators with the needs of the industry and public. By applying a similar model to patents, we can achieve a more flexible and innovative technological landscape.
Addressing Potential Opposition
Opponents of this system might argue that it would reduce incentives for innovation by limiting the exclusivity that patents provide. However, this argument overlooks the fact that the system is optional. Inventors and companies that believe they benefit more from traditional patent protection can still choose that route. Moreover, the standardized royalty system ensures that inventors are still compensated for their work, potentially reaching a wider market than they might under the current system.
Critics might also contend that the system could lead to a “race to the bottom” in terms of quality, as companies might focus on quantity over quality in their innovations. However, this concern is mitigated by the fact that the market would still reward high-quality, innovative products. Companies producing inferior products would still struggle in the marketplace, regardless of their ability to use patented technologies.
Some may worry that this system could disadvantage smaller inventors or companies. On the contrary, the compulsory licensing system could actually benefit smaller entities by providing them access to technologies that might otherwise be out of reach due to high licensing costs or aggressive litigation from larger competitors. The individual use exemption further protects and empowers independent inventors and small-scale innovators.
In conclusion, implementing a compulsory mechanical licensing system for patents alongside the existing patent system would create a more dynamic, innovative, and fair technological landscape. It would ensure that inventors are rewarded for their creativity while allowing society to fully benefit from technological advancements. By providing exemptions for individual use and maintaining the traditional system as an option, it strikes a balance between protecting intellectual property rights and fostering a culture of innovation. This system has the potential to accelerate technological progress, stimulate economic growth, and better serve the public interest in an increasingly complex and interconnected world.
Below are amendments for Title 35 United States Code and Title 37 Code of Federal Regulations to implement compulsory mechanical licensing for patents to stop patent trolls and unleash innovation.
<35_USC_AMENDMENT>
Amendment to Title 35 of the United States Code
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
Section 1. Short Title
This Act may be cited as the “Stop Trolls and Unleash Innovation Act of 2024”.
Section 2. Amendments to Title 35 of the United States Code
Title 35 of the United States Code is amended as follows:
(a) In Chapter 1 - Establishment, Officers and Employees, Functions
Add the following new section:
"§ 13. Patent Royalty Board
(a) Establishment - There is established within the United States Patent and Trademark Office a Patent Royalty Board.
(b) Composition - The Board shall consist of five members, including a Chief Patent Royalty Judge and four Associate Patent Royalty Judges, appointed by the Secretary of Commerce in consultation with the Director.
(c) Functions - The Board shall:
(1) Establish and periodically review standardized royalty rates for different categories of patented technologies;
(2) Oversee the collection and distribution of patent royalties under the compulsory licensing system;
(3) Adjudicate disputes related to patent infringement claims and royalty distributions under the compulsory licensing system;
(4) Maintain a public database of patents determined to be infringed for each product category;
(5) Conduct regular audits to ensure accurate reporting and fair distribution of royalties;
(6) Provide annual reports to Congress on the state of patent licensing and innovation."
(b) In Chapter 10 - Patentability of Inventions
Amend § 101 to read as follows:
"§ 101. Inventions patentable
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title. Any patent issued under this title may be subject to compulsory mechanical licensing as provided in Chapter 39 of this title."
(c) In Chapter 26 - Ownership and Assignment
Add the following new section:
"§ 266. Compulsory mechanical licensing
(a) Notwithstanding the provisions of § 261, any patent issued under this title may be subject to compulsory mechanical licensing as provided in Chapter 39 of this title.
(b) The owner of a patent subject to compulsory mechanical licensing retains all rights provided by this title, except as expressly limited by Chapter 39 of this title."
(d) In Chapter 28 - Infringement of Patents
Add the following new subsection to § 271:
“(j) It shall not be an act of infringement to make, use, offer to sell, or sell any patented invention within the United States or import into the United States any patented invention if done in compliance with the compulsory mechanical licensing provisions of Chapter 39 of this title.”
(e) In Chapter 29 - Remedies for Infringement of Patent, and Other Actions
Add the following new section:
"§ 298. Remedies under compulsory mechanical licensing
In the case of infringement of a patent subject to compulsory mechanical licensing under Chapter 39 of this title, the remedies provided in this chapter shall be modified as follows:
(a) Injunctive relief under § 283 shall not be available unless the infringer has failed to comply with the requirements of Chapter 39.
(b) Damages under § 284 shall be limited to the amount of royalties that would have been payable under the compulsory licensing system, plus interest and costs as fixed by the court, unless the infringer has failed to comply with the requirements of Chapter 39."
(f) Add a new Chapter 39 - Compulsory Mechanical Licensing of Patents
"Chapter 39 - Compulsory Mechanical Licensing of Patents
§ 390. Definitions
As used in this chapter:
(a) ‘Board’ means the Patent Royalty Board established under § 13 of this title.
(b) ‘Compulsory license’ means a license to make, use, offer to sell, or sell any patented invention within the United States or import into the United States any patented invention, granted under the provisions of this chapter.
(c) ‘Individual use’ means the making or using of a patented invention by a natural person in their individual capacity, not as part of or in connection with any organization, business, or commercial activity.
§ 391. Applicability
(a) Any patent issued under this title may be subject to compulsory mechanical licensing under this chapter.
(b) A patent holder may elect to make their patent available for compulsory licensing by filing a notice with the Board.
(c) The Board may designate certain categories of patents as subject to compulsory licensing if it determines that doing so is in the public interest.
(d) Patents subject to compulsory licensing under this chapter shall not apply to individual use as defined in Section 390(c).
§ 392. Licensing process
(a) Any person who wishes to make, use, offer to sell, or sell any patented invention subject to compulsory licensing under this chapter shall provide notice to the Board and pay the applicable royalty rate as established by the Board.
(b) Payment of the applicable royalty grants the payer a non-exclusive license to the patent for the purposes specified in the notice to the Board.
(c) The Board shall establish procedures for the efficient administration of the licensing process.
§ 393. Royalty rates
(a) The Board shall establish standardized royalty rates for different categories of patented technologies.
(b) In establishing royalty rates, the Board shall consider:
(1) The nature of the invention;
(2) The potential market for products embodying the invention;
(3) The cost of developing the invention;
(4) The importance of the invention to technological progress;
(5) The public interest in access to the invention;
(6) Any other factors the Board determines to be relevant.
(c) The Board shall review and, if necessary, adjust royalty rates at least once every five years.
§ 394. Collection and distribution of royalties
(a) The Board shall collect all royalties paid under this chapter.
(b) The Board shall distribute collected royalties to patent holders on a regular basis, not less than annually.
(c) The Board may retain a portion of collected royalties to cover administrative costs, as determined by the Director of the United States Patent and Trademark Office.
§ 395. Dispute resolution
(a) Any dispute arising under this chapter shall be resolved by the Board through procedures established by regulation.
(b) Decisions of the Board may be appealed to the United States Court of Appeals for the Federal Circuit.
§ 396. Relationship to other laws
(a) Nothing in this chapter shall be construed to limit or alter the antitrust laws, as that term is defined in the first section of the Clayton Act (15 U.S.C. 12).
(b) Patents subject to compulsory licensing under this chapter remain subject to all other provisions of this title except as expressly provided in this chapter.
§ 397. International considerations
The Board, in consultation with the Secretary of Commerce and the United States Trade Representative, shall work to harmonize the compulsory licensing system established under this chapter with the patent systems of other countries and with international patent agreements to which the United States is a party.
§ 398. Reporting and evaluation
(a) The Board shall submit an annual report to Congress on the operation of the compulsory licensing system, including:
(1) The number and types of patents subject to compulsory licensing;
(2) The total amount of royalties collected and distributed;
(3) Any disputes resolved and their outcomes;
(4) The impact of the system on innovation and technological progress;
(5) Recommendations for improvements to the system.
(b) The Comptroller General shall conduct a comprehensive review of the compulsory licensing system five years after the effective date of this chapter and every five years thereafter, and shall report the results of each review to Congress."
§ 399. Exemptions for individual use
(a) Notwithstanding any other provision of this title, it shall not be an act of infringement for a natural person, in their individual capacity, to make or use a patented invention for personal, non-commercial purposes.
(b) The exemption in subsection (a) does not apply to:
(1) The sale, offer for sale, or importation of patented inventions;
(2) Any use of patented inventions in connection with a business or commercial activity;
(3) Any use that substantially impairs the value of the patent.
(c) This exemption does not affect the liability of organizations, businesses, or other non-natural persons for any act of infringement.
Section 3. Effective Date
This Act shall take effect one year after the date of its enactment, except that the establishment of the Patent Royalty Board under section 13 of title 35, United States Code, as added by this Act, shall take effect 90 days after the date of enactment of this Act.
Section 4. Regulations
The Director of the United States Patent and Trademark Office shall promulgate regulations to implement the provisions of this Act not later than 180 days before the effective date of this Act.
</35_USC_AMENDMENT>
<37_CFR_AMENDMENT>
Amendment to Title 37 of the Code of Federal Regulations
Chapter V - Patent Royalty Board
Subchapter A - Organization, Administration, and Procedural Rules
§ 500 Establishment and Purpose
(a) There is established within the United States Patent and Trademark Office a Patent Royalty Board.
(b) The purpose of the Patent Royalty Board is to oversee and administer a system of compulsory mechanical licensing for patents, ensuring fair compensation for patent holders while promoting innovation and public access to patented technologies.
§ 501 Composition of the Board
(a) The Patent Royalty Board shall consist of five members, including a Chief Patent Royalty Judge and four Associate Patent Royalty Judges, who shall be appointed by the Secretary of Commerce in consultation with the Director of the United States Patent and Trademark Office.
(b) Judges shall be attorneys with at least 10 years of experience in patent law and shall be knowledgeable in copyright law and economics.
§ 502 Functions of the Board
The Patent Royalty Board shall:
(a) Establish and periodically review standardized royalty rates for different categories of patented technologies;
(b) Oversee the collection and distribution of patent royalties;
(c) Adjudicate disputes related to patent infringement claims and royalty distributions;
(d) Maintain a public database of patents determined to be infringed for each product category;
(e) Conduct regular audits to ensure accurate reporting and fair distribution of royalties;
(f) Provide annual reports to Congress on the state of patent licensing and innovation.
Subchapter B - Compulsory Mechanical Licensing of Patents
§ 510 Licensing Process
(a) Manufacturers shall pay a fixed patent royalty to the Patent Royalty Board for each product they produce that may incorporate patented technologies.
(b) The royalty rate shall be set by the Board and may vary based on the type of technology, potential market size, and complexity of the innovation.
(c) Payment of the royalty grants the manufacturer the right to use any and all patents that may be applicable to the product without prior negotiation with individual patent holders.
(d) The licensing requirements of this section do not apply to individual use as defined in 35 U.S.C. § 390(c).
§ 511 Royalty Collection and Distribution
(a) The Patent Royalty Board shall maintain a fund of collected royalties for each product category.
(b) Patent holders who believe their patent is being used in a product must petition the Board for a share of the royalties.
(c) Upon determination of infringement, the Board shall allocate a proportional share of the royalties to the patent holder based on factors including the importance of the patent to the product and the extent of its use.
§ 512 Dispute Resolution
(a) The Board shall establish an arbitration process for resolving disputes between patent holders and manufacturers.
(b) Decisions of the arbitration panel may be appealed to the full Board or to specialized patent courts.
(c) In resolving disputes, the Board shall consider whether the alleged infringement falls under the individual use exemption as defined in 35 U.S.C. § 399 and § 517 of this chapter.
§ 513 Reporting and Transparency
(a) Manufacturers shall provide regular reports to the Board on their product sales and royalties paid.
(b) The Board shall maintain a public database of patents determined to be infringed for each product category.
§ 514 International Coordination
The Board shall work with the Secretary of Commerce and the U.S. Trade Representative to pursue international agreements harmonizing compulsory licensing systems across countries.
§ 515 Exemptions for Critical Technologies
(a) The Board may exempt certain critical or sensitive technologies from automatic licensing, subject to review and approval by the Director of the United States Patent and Trademark Office.
(b) Criteria for exemptions shall be established by the Board and reviewed annually.
§ 516 Continuous Evaluation
The Board shall conduct an annual review of the compulsory licensing system and propose improvements to Congress as necessary to promote innovation and protect the public interest.
§ 517 Individual Use Exemption
(a) Natural persons making or using patented inventions in their individual capacity, not as part of or in connection with any organization, business, or commercial activity, are exempt from the compulsory licensing requirements of this subchapter.
(b) This exemption does not apply to:
(1) The sale, offer for sale, or importation of patented inventions;
(2) Any use of patented inventions in connection with a business or commercial activity;
(3) Any use that substantially impairs the value of the patent.
(c) Organizations, businesses, and other non-natural persons remain fully subject to all provisions of this subchapter.
</37_CFR_AMENDMENT>