American business have long thought that they are harmed by cheap "knock-off" imports from overseas, especially from Asia and China. Once a product becomes successful, numerous imitations seem to pop out of nowhere. Without being able to stop these, many American business can suffer significant lost sales. The practice is so wide-spread that President Obama just put forth an "urgent agenda" that includes claims that China is taking American jobs, by "stealing" American technology.
What nobody has yet realized is that our own Congress is largely to blame -- not the Chinese. Yes, the Chinese do like to copy products, but in many cases they are largely within their legal rights. If a product is not protected by some form of intellectual property right, then anyone is free to make and sell that product. In most cases, the primary form of intellectual property right used to stop products from entering the United States is a patent.
If patents can be used to stop the importation of infringing goods, why then is Congress to blame? Simply put, our patent system is so dysfunctional and expensive that most Americans are priced out of the patent system.
Consider just one example. The best way to stop the importation of infringing goods is to bring a suit against the foreign company in a court know as the International Trade Commission (ITC) -- which is the agency that determines the impact that these knock-off imports have on American companies and can take action against them. Although patent infringement suits can be brought in federal district courts (which are distinct from the ITC), recent decisions have made it difficult for these courts to actually stem the flow of imports as damages are difficult to collect from these fly-by-night shops in China. As such, many companies have flocked to the ITC where exclusionary orders -- prohibitions on importing infringing goods -- are issued almost as a matter of course, being granted at a rate of almost 100 percent.
While the ITC is a great way to stop infringers, it does require one to have a U.S. Patent. However, to get an enforceable patent, most applicants can expect to pay from $20,000 to $30,000. Even worse than the cost is the time it takes to secure a patent -- usually from three to five years. Until an inventor's patent is actually granted, it cannot be used to stop an infringer. Only then can the patent holder run to the ITC and ask the court to stop the infringer from importing infringing goods.
And that's when things start to get really expensive. ITC cases are some of the fastest moving pieces of litigation in the country, with decisions being rendered about nine months after being filed. This, obviously, is so that the infringement can be quickly stopped. Yet to handle cases of this complexity, companies can expect to pay hundreds of thousands of dollars each month while the cases is being argued. Total costs are usually well upwards of $2 million. As a result, they are useless for most small businesses, and out of the question for single inventors. Because the ITC does not award damages -- just exclusionary orders -- law firms are unwilling to take these cases on a contingent fee basis.
This leaves that vast majority of America's small business with no way to stop infringing goods from entering U.S. markets. Pointing the finger at the Chinese is short sighted and skirts the real issue that American jobs are being lost because our own house is not in order.
So can this be fixed? Can we protect U.S. innovation and bring jobs back to America? Last year, Congress had the opportunity to change the U.S. patent law to address this problem. Instead, Congress caved into pressure from large corporations, declined to simplify the patent laws, and instead passed the American Invents Act, a garbled piece of legislation that makes it even more expensive for Americans to secure and enforce patents on American technology. Until Congress makes it easier to protect American technology, that technology will continue to be manufactured overseas, resulting in the loss of more American jobs.