“Over the summer, Senator Leahy admitted that his earlier explanation was false: There was no failure among technology companies to agree on reform. Instead, Senator Reid had instructed Senator Leahy to drop patent reform on the orders of trial lawyers.”, L. Gordon Crovitz, Wall Street Journal

Information Age

Even Silicon Valley Tilts Republican

After Harry Reid scuttles patent reform, tech companies look elsewhere for a political solution.

Getty Images

By L. Gordon Crovitz

Google recently became the country’s biggest political donor, replacing heavily regulated Goldman Sachs . It’s too bad the technology industry has been forced to ante up in Washington’s money game, but the good news is that depending on the results from this week’s elections, Silicon Valley could at least start getting its money’s worth.

Washington is a disaster zone for innovation, especially for the software firms that make up the growing parts of the U.S. economy. There has been no progress in meeting Silicon Valley’s desperate needs, including patent reform and open immigration for skilled workers.

As a result, technology companies long associated with liberal causes are switching loyalties. In 2010 Democratic candidates for national office got 55% of contributions from tech-company political-action committees. This year Republicans have received 52%. According to the Center for Responsive Politics, companies with PACs giving more to Republicans than to Democrats include Google, Facebook and Amazon.

Democrats especially humiliated Silicon Valley this year by failing to enact patent reform. Patents make little sense for software, which almost always builds on earlier work. There are some 250,000 potential patent violations in smartphones alone. Companies known as “patent trolls” stockpile patents to extract huge settlements from technology companies, not to build products.

Plaintiff lawyers joke that their focus has gone from “PI to IP”: Now that personal-injury litigation has been reformed in many states, they’re turning to intellectual-property lawsuits such as patent infringement.

Silicon Valley thought this was the year to fix patent law. President Obama backed reform. The House passed a bipartisan bill that would have raised legal burdens of proof and forced the losing party to reimburse the winner’s legal fees. This would have reduced the pressure on technology companies to settle, reducing the incentive for nuisance lawsuits. Reform seemed such a sure thing that Wired magazine in March crowned Mr. Obama “the great slayer of patent trolls.”

The trolls prevailed. In May the Senate Judiciary Committee was about to send patent reform for a vote by the full Senate when Chairman Patrick Leahy (D., Vt.) shocked Silicon Valley lobbyists by declaring there would be no vote. “I have said all along that we needed broad bipartisan support to get the bill through the Senate,” Sen. Leahy said. “Regrettably, competing companies on both sides of this issue refused to come to agreement on how to achieve that goal.”

His statement made no sense. More than 500 high-tech firms had united to back patent reform. Something else was going on.

Sen. John Cornyn (R., Texas) fingered Harry Reid : “The majority leader has allowed the demands of one special interest group to trump a bipartisan will in Congress and the overwhelming support of innovators and job creators.” A shocked technology lobbyist told the ArsTechnica.com: “I feel like a mouse who never knew he was a mouse. They were just waiting to hit that Harry Reid button.”

Over the summer, Mr. Leahy admitted that his earlier explanation was false: There was no failure among technology companies to agree on reform. Instead, Mr. Reid had instructed Mr. Leahy to drop patent reform on the orders of trial lawyers. “I am furious with what happened,” Mr. Leahy told the Burlington (Vt.) Free Press. “We worked so hard to get a coalition. Harry Reid and a couple of others said, ‘We won’t let it come to the floor.’ I think that’s wrong.”

Trial lawyers have donated more to Mr. Reid’s campaigns since 2009 than any other industry. His single largest contribution total came from the plaintiffs firm Weitz & Luxenberg. Silicon Valley should be delighted if Mr. Reid becomes minority leader, which would deprive him of the power to block votes.

Silicon Valley is also using donations locally to get immigration reform back on track. Top executives including Google’s Eric Schmidt , Yahoo ’s Marissa Mayer and venture capitalist Marc Andreessen are funding challenger Rohit Khanna against longtime Rep. Mike Honda for the congressional seat in Santa Clara, Calif. Both are Democrats, but Mr. Khanna is courting Republican voters and calls Mr. Honda “ideologically extreme.” Mr. Khanna supports “piecemeal” immigration reform and rejects longstanding Democratic policy of holding skilled-worker visas hostage to comprehensive reform, which is more controversial.

Silicon Valley doesn’t need much from government, but it does need reform in areas where government policy has failed. Even liberal Democrats in the tech industry have been mugged by the reality of how Washington now operates.

Posted on November 3, 2014, in Postings. Bookmark the permalink. Leave a comment.

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