Taking from Taxpayers

Recently, several news sources (Patently-O, WaPo) have reported on a little noticed amendment in the Senate version of the patent reform bill (S. 1145).  It would grant immunity to banks for patent infringement of digital check scanning and archiving technology.  Apparently, the bill is directed at the patents of one particular company -- DataTreasury -- which have been recently upheld in a PTO reexamination proceeding.  According to the Congressional Budget Office, the federal government could be on the hook for $1 billion dollars if this immunity is interpreted as a taking of private property

In my opinion, there should be very little question that this move would require full compensation by the federal government.  Although some continue to debate whether patents are property under the 5th Amendment for takings purposes, law professor Adam Mossoff has provided some compelling evidence that this has long been the case in U.S. law.  And, in the context of pharmaceutical importation legislation, I have written about the fact that how Congress eliminates patent rights -- either prospectively or retrospectively -- is significant in determining whether a taking occurs.  But in this case, the retroactive effect is clear.  It would certainly undermine the purpose of designating patents as personal property (35 U.S.C. 261) if Congress were permitted to render them unenforceable without compensation. 

So, the real issue in this case is whether taxpayers should be forced to bear the burden of the bank's infringement.  While $1 billion isn't enormous in the context of the federal budget, it's the principle of the move that is concerning.  If banks deserve this bailout (rather than being forced to negotiate and license like every other infringer), who else is similarly deserving?  And what metric do we use to determine the payout order (does priority go to lifesaving technology, industrial innovation, etc.)?  It could be a slippery slope.