Opinion: RESTORE Patent Rights Act will unwisely restore a costly policy

My experience as a CEO taught me to be wary of a solution in search of a problem. Trying to fix what isn't broken rarely leaves a business better off than where it started.

The same is true in government. Congress should remember this as it considers the RESTORE Patent Rights Act, legislation it has previously rejected in multiple forms and fits squarely in the category of a solution in search of a problem.

The RESTORE Act focuses on patent infringement lawsuits. It would overturn the Supreme Court's eBay v. MercExchange decision, which established a balanced and fair approach to resolving patent infringement disputes. Abolishing this precedent will impose higher costs on innocent businesses and consumers while giving greater leverage to so-called patent trolls that bring meritless lawsuits for profit.

The eBay decision governs how patent infringement cases are resolved. When a party is guilty of patent infringement, courts award damages to compensate the patent owner. In addition to monetary damages, courts may also grant the patent owner an injunction, meaning the guilty party must immediately stop making and selling the infringing product.

Before the eBay decision, injunctions were virtually automatic. Injunctions are appropriate when monetary payments are not enough to correct the harm caused. However, in some situations, they go far beyond an equitable resolution and have extreme consequences.

The eBay decision established a simple four-part test so that valid patent holders are justly compensated, while also protecting the public interest and limiting injunctions to when monetary payments are insufficient.

The RESTORE Act would bring back virtually automatic injunctions in all situations. This is troubling because of who it benefits. For years, more than half of patent infringement cases in the United States have been initiated by patent trolls.

Patent trolls (also called non-practicing entities) are entities which do not contribute to the economy, invent new technologies or make and sell any products. Rather, they buy out-of-use patents solely for the purpose of suing other businesses for alleged infringement.

Patent trolls are a massive drag on the economy and on innovation. They drive up costs for businesses and consumers without contributing anything valuable. Often, patent trolls never intend to see their cases through to completion. Instead, they bring meritless lawsuits knowing that businesses will ultimately settle for substantial sums to avoid the expense of litigation.

When I was CEO of Overstock.com , we regularly faced meritless patent troll lawsuits. Our simple approach: "Don't settle!" The way to deal with bullies is to stand up to them.

Defending ourselves in court was often more expensive than settling, but we believed capitulating to patent trolls would only empower them to target us and other innocent businesses more often and demand even larger payments.

It would have been difficult to justify taking the patent trolls to court if we thought an injunction was likely. The threat of an injunction halting parts of our business would have given patent trolls far more leverage ... even when we didn't infringe. That's what the RESTORE Act will do.

Consider this situation. A patent troll sues a car manufacturer alleging one part of a car's semiconductor chip infringes on the patent troll's patent. If the automaker is infringing, the court awards the patent troll monetary damages and automatically issues an injunction that requires the manufacturer stop making and selling the entire vehicle. The manufacturer shuts down plants and lays off workers, even as it seeks to overturn the decision on appeal. The near automatic injunction is too much!

By overturning the eBay decision, the RESTORE Act only restores an environment where patent trolls have greater leverage to make threats and extract payments from their targeted companies.

But what about operating companies which make and sell products they want to defend from patent infringement? Can they successfully request and receive injunctions? Yes!

In fact, case outcome analysis shows that the eBay decision has not created barriers for them getting injunctions when needed. Where injunctions have decreased after the eBay decision is in cases initiated by patent trolls, which have no rationale for needing injunctions other than to use the threat as leverage for an inflated, unjustified settlement.

The RESTORE Act upends nearly 20 years of effective, established law. It will allow patent trolls to profit at the expense of businesses and industries that are contributing to the economy. It will create delays in production, hiring and innovation. It will lead to higher costs for businesses and consumers.

The RESTORE Act is a solution grasping for a problem.