Patent Reform Bill's Wall Street Bailout

For at least five years, big corporations have waged a well-funded and sustained lobbying effort to persuade Congress to overhaul the nation's patent system. They've pushed for measures that, among other things, would squash competition and make it harder for small inventors to fight back against the companies that steal their intellectual property. This week, the House is considering a parallel bill to one passed in the Senate in March that would radically change the 200-year-old process by which the government awards patents.

Historically, the US has granted patent rights to the "first inventor"—the person who could clearly prove that he or she originated an idea. The bill would revise that standard to grant the patent for a particular idea to the first person to file for it.

But the bill contains an obscure provision inserted by Sen. Chuck Schumer (D-N.Y.) at the behest of big Wall Street banks. The language essentially immunizes big banks from patent infringement lawsuits filed by Ballard and DataTreasury. Ballard has long alleged that he patented a process for electronically processing checks in the mid-1990s. When most of the country's major banks started using a similar process years later, Ballard started suing. His litigation earned him a reputation as a "patent troll"—someone who makes his money by suing over patents rather than building a company out of them. (DataTreasury is essentially a holding company with only a couple of employees.)

Ballard received some hefty settlements, and ultimately won a ruling from the patent office confirming the validity of his patents. Last year, Ballard won a $27 million jury verdict against US Bancorp for patent infringement, and he has been fighting to force the banks to continue paying him royalties for the use of his creation. The banks would like to get rid of him, and have been trying for years to get Congress to intervene on their behalf.

Ballard isn't going down without a fight. He's attempting to rally some unusual allies: tea party activists. Tea partiers, in turn, are gaining some traction on the Hill. Rep. Dana Rohrabacher (R-Calif.) has come out in opposition to the bill, writing this week in the National Review Online that it will "overturn 200 years of legal precedent, destroy constitutional protections afforded inventors and innovators, hurt our economy, and reward big banks." The bill is supported by businesses ranging from tech giants like Apple and Verizon to pharmaceutical companies that rely on patent maneuvers to push out generic competitors.