Patents, Innovation and Job Creation: A Virtuous Circle

The Freshman Class of the 112th Congress in the U.S. House of Representatives

Yesterday was the day that we remember Martin Luther King, Jr., which unofficially seems to typically be the start of the new business year and marks the end of the celebratory hibernation that occurs in the United States from the end of December through about the middle of January.  The College Bowl games are now over, the NFL playoffs are half-way over and the next federal holiday isn’t for five weeks, with the next such holiday after that Memorial Day at the end of May.  Thus, we are about to embark the heavy lifting period for business in the U.S., which coincides with the cold dark days of winter.

As a nation we continue to suffer from a number of very serious issues.  We have a new Congress with a large number of new faces.  There are 94 new Members of the House of Representatives, with 85 being Republican and 9 being Democrat, and a total of 16 “new” U.S. Senators, with 13 being Republican and 3 being Democrat.‡  See Congress by the Numbers: The 112th’s New Composition.  We can only hope that eventually our leaders will turn their attention to the most important issue of the day; namely our struggling economy and anemic job growth.

On Friday, January 21, 2011, I will be participating in a conference put on by the Innovation Alliance, which is is a coalition of entrepreneurial companies seeking to enhance America’s innovation environment by improving the quality of patents granted and protecting the integrity of the U.S. patent system.  The title of the conference is Patents, Innovation and Job Creation: A Virtuous Circle.  The event will take place in Washington, DC, at the Newseum, which is located at 555 Pennsylvania Avenue N.W.

I will be moderating the first panel, which will focus on the role of patents in the modern innovation economy.  Present and giving speeches will be Chief Judge Paul Michel (ret.) of the United States Court of Appeals for the Federal Circuit and David Kappos, Under Secretary of Commerce for Intellectual Property and the Director of the United States Patent and Trademark Office. The event begins at 8:30am and runs through 1:45pm.  Attendance is free to the public.

It is my hope that this conference will present an opportunity to start off 2011 with a bang and draw critical attention to the fact that innovation creates jobs.  That seems easy enough, but far more challenging it seems it the reality that in order for jobs to be so created a friendly legal and regulatory climate must be in place.  For innovation to play a role in job creation, which is can and must, we need the issuance of faster patents without the watering down of patent rights, which many fear to be on the horizon.

Innovation and entrepreneurship are central pillars of America’s economic strength and critical vehicles for job creation.  See Why Patents Matter for Job Creation and Economic Growth. We all know that to be true, and even our elected and appointed political leaders who are not intimately familiar with the innovation and technology industries know this to be true.  They say all the right things when on the campaign trail, they give all the right speeches after being elected, they parrot the language of a pro-innovation agenda as written for them by their staff, but sadly all too often they do not follow through with the pro-innovation policies that are necessary to actually allow innovation and technology to flourish, create new businesses and whole new industries that bring with them vast numbers of new jobs.  We desperately need to get out of this malaise and innovation based jobs are the answer.

Over the past several years I have written extensively about how companies that build their foundation on patented technologies can create the jobs we need if only the government would dedicate the resources necessary to allow the Patent Office to do its job.  No new monies are needed, the government just needs to let the Patent Office keep the fees it collects and put 100 cents on the dollar to work for those paying the user fees; those in the technology community who can and will create jobs if allowed.

Unfortunately, instead of the meager resources required and modest need for the Patent Office to keep user paid fees we see lost opportunity after lost opportunity.  The Patent Office operates on a budget that is approximately $2 billion a year, which is hardly a rounding error in Washington, DC.  Nevertheless, the only agency that can create wealth through merely recognizing it suffers from horribly outdated computer systems and not enough staff to do the job asked of them in any relevant time frame.  Perhaps with some many new faces in Congress one or more will emerge as the needed innovation champion that this energetic and determined community is looking for.

Reporter John Schmid of the Milwaukee Journal Sentinel wrote an article that was published on Sunday, January 16, 2011, aptly depicting the problems facing would-be job creators.  Despite the Green Bay Packers victory over the Atlanta Falcons the day before Editors of the paper still found front page space for this important story.  I say that straight faced and not to suggest that sporting news shouldn’t be on the front page.  Obviously a Green Bay win deserves front page news in Milwaukee, after all there is a need to sell newspapers.  But how many times have we seen front page patent news?  It is extremely rare, as is the excellent and dedicated coverage over the past two years by Schmid and his newspaper.

Schmid wrote in part of his article about a professor from the University of Wisconsin-Milwaukee who needed 11 years to obtain a patent on his revolutionary invention.  The sad tale is told like this:

Davida’s application, for secure ways to store personal biometric information on a smart card, was ahead of his time, said his patent attorney, Stephen Lesavich. He filed his patent application in 1999.

But Davida may have missed his best opportunities. Sometime after 2003, while the application was still pending, the Patent Office lost his application file…

Davida’s patent (No. 7,711,152) finally was issued in May – in the midst of a slow economy, and long after the 2001 terrorist attacks had made biometric data storage a hot technology.

Schmid would explain that Davida’s patent application was lost sometime after 2003 and found sometime in 2008.  For five years the application did not progress because it was lost.  As inexcusable as that is, and as likely as some will be to focus only on that unfortunate fact, let’s not miss the most pressing point.  The real question is why wasn’t this application allowed before it was ever lost?  It had been pending nearly 4 years prior to being lost, and then after it was found it still took nearly 3 more years to issue?

How many jobs were lost as a result of unacceptably slow processing by the Patent Office in the Davida case?  What could have become of this exciting technology in the aftermath of the 2001 terror attacks?  How many jobs will never be created because industry has moved on?  If this happened here how many other times has a similar tale gone untold?

Talk about lost opportunities.  The Davida story replayed thousands of times, as it has been, explains why the United States has seen anemic job growth out of the Great Recession.  It is wholly unacceptable by any definition.  We are supposed to see a rebound from a deep recession, but innovation is not being fostered to allow for that.  Things can and should be better.

The current leadership of the Patent Office is doing better, much better, but Director Kappos is Captain of a sinking ship thanks to Congressional inaction and the inability of the Patent Office to reinvest in itself as an ongoing, growing and cutting-edge enterprise.

The Innovation Alliance conference will hopefully generate new discussions about and direct appropriate attention to the critical role patents and the USPTO play in innovation and job creation in the United States.   Of course, how well the conference succeeds will not only be decided by those who attend and discuss the topic, but rather it will depend upon the action that comes from the conference.  Whether you can attend or not it is time to realize that everyone in the industry has a vested interest in Congress paying attention.

With the Courts poised to continue to erode the value of a patent Congress will all but certainly need to act at some point in 2011 in order to sustain the value of a patent and allow intellectual property based start-ups flourish and reach their full employment potential.  With so many new faces in Washington, DC, now is the time to get the message out.  We must all be engaged.

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‡ “New” being defined as elected in November 2010.  There are 13 Senators new to the 112th Congress, with Senators Manchin, Kirk and Coons elected in November 2010 and sworn in immediately to fulfill existing terms.

CORRECTION: Updated 1/19/2011 at 11:02 am.  The original version (paragraph 3) incorrectly reported that the Newseum is affiliated with the Smithsonian.  The Newseum is a 250,000-square-foot museum of news largely funded by the Freedom Forum, a nonpartisan foundation dedicated to free press and free speech.