The United States patent system is under attack by large corporations who benefit from weak patent protection. Ironically, the company most often identified as leading the charge – Google, Inc. – filed two patent applications as a start-up before they even acquired the domain name Google.com. Those patents Google filed related to their innovative page rank system, which is what propelled Google to dominance in the search engine marketplace. So Google understands their marketplace dominance, how they obtained that dominance through aggressive use of the patent system, and now they want to make it harder for other innovators and start-ups to supplant them as they did with Yahoo! and Microsoft, for example. It is good business for Google to have a weaker patent system, but insulating the natural monopoly that Google has become by destroying the patent system isn’t the answer for a prosperous America.
Congress, the Obama Administration and the Courts have been misled. Changing patent law in ways that make it nearly impossible for inventors and start-up companies to pursue innovation will have a substantial negative impact on job creation and the economy. As a result of misguided patent reform and bad judicial decisions a primary foundation of the great American economic engine is unnecessarily crumbling. It doesn’t need to be this way, but if we do not act soon, we will all pay dearly for this historic blunder.
Over the past eight years, the patent system has been turned on its head and patent rights have eroded year after year (see here and here). Once celebrated, inventors are now vilified simply because they assert their hard-earned patent rights against corporations who take their inventions without regard to whether exclusive rights have been obtained. The great untold story is that many giant corporations simply trample independent inventors, start-ups and others who engage in the difficult job of inventing.
A crafty narrative has emerged. There is a belief by some that our national innovation ecosystem is somehow fostered by a regime whereby patent and other intellectual property rights are ignored. It is, of course, a fallacy to argue that patents get in the way of innovation when the opposite is true — patents promote innovation. But the narrative that patents harm innovation has taken root and is grounded on an erroneous definition of innovation. Innovation is doing something new, but giant corporations that are lobbying for an ever weaker patent system have convinced lawmakers that innovation is not about doing something new that has never before been done, but instead they argue that innovation is about whether they themselves are able to sell a product that they have never before manufactured or sold. The fact that the product is new to them does not mean the product exhibits even a smidgeon of innovation. In fact, in many cases these allegedly new products are nearly identical to other products and offerings already in the marketplace. Simply stated: It is not innovative to offer something that already exists.
Innovation requires time, money, energy, dedication and long term commitment. Innovation requires patent protection or it is not economically feasible.
“At the end of the day if you do not own the exclusive rights to the problems you are solving you are going to get copied at an astronomical rate,” explains Jay Walker, a prolific inventor and the founder of Priceline.com. “If we can’t own the solution to the problem the last thing I want to do is invest in the solution.” This theme was also recently echoed by Efrat Kasznik, an intellectual property valuation expert and business consultant in Silicon Valley, who recently told me in an interview that she always inquires whether the idea can be protected because if protection is not available “then it’s not an idea worth pursuing.” Unfortunately, the simple business principle that it makes no sense to invest to create if someone can simply take your creation is lost on so many. You simply cannot invest funds only to allow a free-rider to come along and take what you have created and offer it for less because they don’t have to recoup the sunk costs associated with the risk and cost of R&D.
As recently as a decade ago infringing corporations were considered to be patent thieves who preyed upon innovators by misappropriating their creations. Ten years later these same infringing corporations have successfully portrayed themselves as the victims. Many of those same infringing corporations created an overblown patent troll narrative based on half-truths and pushed by high-powered lobbyists and public relations firms with the intent to hijack the hearts and minds of the public and decision makers with loud attacks on inventors. This has driven over a decade of continuous patent reform efforts, and many years of poor judicial decisions where the Court, particularly the Supreme Court, says they are concerned about patent trolls that are not even a party to the cases they are supposedly deciding. This highly coordinated campaign lacks factual foundations, but the myths perpetuate throughout the media silencing all other voices and have lead lawmakers and judges alike to make regrettable, misinformed decisions that have shifted the American innovation landscape at a time when high-tech innovations and intellectual property have become the currency that drives the U.S. economy.
It is inventors, small patent-based businesses, research labs and universities (collectively – inventors) that suffer the brunt of patent reform damage. If patent reform and judicial decisions were meant to target and ultimately kill patent trolls, why hasn’t the the abusive tactics of patent trolls been eliminated?
Most inventors lack a means of voicing their objections due to lack of organization, funding, knowledge, relationships or experience. Many are just too busy inventing to pay attention. For most, the damage remains unknown until they attempt to either commercialize or license their inventions and then find it impossible protect their invention in the market it created. Others first learn of their impossible plight when they are unable to raise funds required to hire employees and expand businesses because the assets they have acquired are deemed as practically junk status. Others become aware only after a large corporation has started to infringe and there is no realistic recourse available because the patent rights obtained have become worthless in the wake of Supreme Court decisions. Through all of this there is one constant: Lawmakers do not hear the objections of inventors because they are not even included in discussions that are fundamentally changing the patent system for everyone.
Patent driven innovations cure deadly diseases, solve world energy problems, protect us from identity theft, entertain us, and improve things we already use. They also fuel job creation and generate much of our national wealth. Indeed, according to a study of the Economics and Statistics Administration and the United States Patent and Trademark Office, intellectual property contributes $5 trillion to U.S. gross domestic product on an annual basis and accounts for some 40 million jobs. Many questioned whether the government should be fundamentally changing healthcare, which accounts for about 17% of GDP annual. IP-intensive industries contribute over double that number – a staggering 34.8% of GDP. How the Administration, Congress and the Courts can be so cavalier about fundamentally changing the patent system?
Once again patent reform will be coming to Capitol Hill. In December Senator Dick Durbin (D-IL) came out and strongly opposed any additional reform efforts during the confirmation hearing of Michelle Lee. Durbin explained that patent reform has been a real eye-opener, and that he has already been holding meetings with constituents and everyone is telling him that it is premature to engage in additional patent reform and the Congress should slow down. Time will tell whether that cautionary wisdom prevails, but in the meantime the fight is not over. If you or your clients care about the patent system it is time to get involved. Expecting that Congress and the Courts will figure it out on their own hasn’t proven to be a winning strategy.