Why Are Republicans Stifling Innovation?

President Trump’s “Big Beautiful Bill” is getting a proposed “upgrade” with an amendment by two Republicans, Senator Thom Tillis (R-NC) and Representative Kevin Hern (R-OK). With the inspirational title of the Tackling Predatory Litigation Funding Act, this amendment would significantly raise taxes on litigation funding firms to allegedly discourage foreign companies from “harass[ing] American companies, extract[ing] sensitive information through discovery, [tying] up critical industries in court battles” and “exploit[ing] our justice system to gain strategic or economic leverage.”

People have been asking me what I think about the amendment. I’m an inventor with 29 patents. I’m a consulting engineer who has worked as a testifying expert witness on nearly 300 intellectual property (IP) cases. I’ve written a textbook on IP, many technical papers, and several legal papers. I’m also seeking funding for my own patent litigation against giant tech companies that are using my patented inventions without a license. My response is that it is really sad that two Republicans don’t understand free markets or the founding principles of America.

Several years ago, I was hired as an expert witness on a case of stolen software code in Australia. My client was an individual who had licensed a product prototype from a university, funded a startup, and hired professors at the university. After a year or so, they had a falling out. The professors went back to the university, which gave them funding to start their own company.

I was hired to examine the software of both parties, which is a particular area of my expertise, having created the field of software forensics. I proved that at the new company, the professors had used the code they developed for my client, that he had paid for, and that belonged to his company.

It seemed like a simple case. However, the university filed motion after motion to delay the case and eat into his funds. Eventually, the court required an AUS $1 million dollar bond from both parties to continue. I’d never heard of such a thing because that doesn’t happen in the U.S., but it happens in many foreign courts to “prevent unnecessary litigation.” The university could easily afford it. My client had to mortgage his house, leaving him with no funds to pursue the case without outside funding.

Obtaining outside funding in Australia, as in so many jurisdictions outside the U.S., is very difficult, especially since courts impose extra financial burdens on the parties such as this bond. Australian laws do not allow law firms to work on contingency where the lawyers would get paid out of any award to the client. It took my client a year to get funding from a litigation funder so that the case could proceed. The judge ended up making a very bad ruling against my client, despite the proof I had found, and my client had to accept defeat because he was out of money and couldn’t get more.

This happens much less frequently in America than in other countries because our laws don’t put extra financial burdens on plaintiffs, allow contingency fee deals, and encourage funding by outside parties. American law is written not to limit litigation but to encourage litigation to protect individuals’ rights, including intellectual property rights.

Patent law originated in England when on April 3, 1449, the first English patent was granted to John of Utynam, an artist with a unique technique for making colored glass. King Henry VI wanted him to create stained-glass windows for the newly created Eton College and King’s College, Cambridge and to teach others. In return for John’s services, the king commanded that none of his subjects could use such arts for a term of 20 years without John’s consent. The Parliament of England subsequently codified this principle into law through the Statute of Monopolies, enacted in 1624. This law referred to “manufactures” with the understanding that that the invention needed to be manufactured before a patent could be granted. England’s patent law favored the wealthy who could afford to manufacture an invention.

In contrast, America’s Founding Fathers wanted a system that allowed anyone to invent, even those without money and connections, and so the requirement for manufacture was eliminated. Instead, the U.S. patent system simply required a written description of the invention in sufficient detail that enabled “one of ordinary skill in the art” to build it. This modern patent system, eventually adopted by all nations on earth, created a system of financial mobility accessible to everyone. Women got patents and started successful businesses before they could vote. African Americans got patents and started successful businesses while slavery was still legal. Patent rights allowed a tiny new nation to spur innovation and successfully compete in trade against long established countries.

Furthermore, the American legal system has never had barriers to lawyers taking cases on contingency. Laws regarding such contingencies evolved in the 19^th and 20^th centuries as legal cases became more complex and costly, especially patent cases. Investment in litigation was yet another way to ensure that those without money and connections could still get adequate representation. Such incentive and profit sharing mechanisms allow any person of any means to litigate for any of their rights, not just patent rights.

Tillis and Hern and others have argued that foreign companies are funding patent litigation, but actually many American companies fund patent litigations. In fact, the majority of patent litigation funders are American companies that utilize the principles of capitalism to advance innovation, support inventors, and seek licenses and penalties from pharmaceutical companies, tech companies, and other companies that are unfairly utilizing intellectual property without compensating the inventors. Tillis and Hern’s amendment would not just restrict foreign companies from funding litigation but American companies too. Without such funding, big corporations would have free reign to run over individual inventors and startups. I know this from experience.

When a litigation funder puts up money, it has a targeted financial return to make the high risk worthwhile to its own shareholders. With these new taxes, one of two things will happen. In some borderline situations, the return on investment after taxes for any particular litigation won’t be sufficient to cover the risk, so the litigation won’t get funded. In other situations, in order to get the appropriate return after taxes, the litigation funder will insist on a higher percentage of the final judgement, leaving less for the inventor. In either case, it’s the inventor who suffers, not the litigation funder.

As someone who has participated and testified in courts around the world, I can say that other countries want to minimize litigations, but the American system is designed to prioritize justice over expediency, innovation over incremental improvements, and free market capitalism over government regulation. Despite what Tillis and Hern seem to think, making a profit by supporting the underdog and righting a wrong has always been an American value. Please contact your senators and representatives and urge them to defeat the wrongly named Tackling Predatory Litigation Funding Act that will be one more law in a history of laws over the past two decades that weaken the U.S. patent system and with it, America’s economic and technological standing in the world.

Make America Innovative Again!

About the author

Bob Zeidman is the creator of the field of software forensics and the founder of several successful high-tech Silicon Valley firms including Zeidman Consulting and Software Analysis and Forensic Engineering. His latest venture is Good Beat Poker, a new way to play and watch poker online. He is the author of textbooks on engineering and intellectual property as well as award-winning screenplays and novels. His latest book is Election Hacks, the true story of how he challenged his own beliefs about voting machine hacking in the 2020 presidential election and made international news and (possibly) $5 million.