Without strong patent rights the incentive for risk-taking entities and the investors who support them is simply not present. The risk-reward calculus tilts too far toward risk for investors when patent rights are weak, as they are now in America. This is one reason why today there is more funding in China for inventions related to artificial intelligence than in the United States.
A weak patent system that tilts toward risk and away from reward only works to starve those small, nimble actors most likely to achieve paradigm-shifting, disruptive innovation. Large entities full of mid-level managers and bureaucratic red tape have lost the ability to innovate. That is why giant tech companies like Google and Facebook either acquire smaller innovative companies or they simply copy smaller companies, as Facebook has rather notoriously explained is its policy and they have obviously done with respect to Snap.
When the risk-reward calculus tilts toward risk, particularly when it does so in such a dramatic fashion as it has over the last decade in America, those nimble, creative actors are starved of the capital they so desperately need. This is true because innovation doesn’t just happen, despite what so many of the tech elite want you to believe.
If by chance you believe innovation just happens, as if by magic, ask yourself why it is the Microsoft invests $11 billion annually into research and development? If innovation just happens why spend so much money to create something that will already come to fruition on its own? Saying, or believing silently, that innovation just happens and doesn’t require an ecosystem to support, encourage and nurture it is ludicrous. You might as well believe in leprechauns riding unicorns sliding down rainbows!
Taking risk is absolutely required in order to achieve innovation of a magnitude great enough to have any hope to compete with entrenched market players. This should hardly be surprising. By its very nature innovation is the act of introducing something new; something that has never existed before. Challenging what is established is never easy. The path of least resistance is simply to go along, not to disrupt.
Oddly, the merits of disruptive innovation are trumpeted in every corner of the business world and throughout Silicon Valley, but then policies are advocated that make such innovation all the more difficult to achieve. If we want disruptive innovation we need an ecosystem that supports, encourages and nurtures risk-taking.
If you want to ensure you have a bountiful harvest you don’t just plant a single tomato plant and hope for the best. You plant several, perhaps many, which maximizes your chances of getting the tomatoes you want and need. Innovation is no different. The more risk-taking that results the greater the likelihood that one or more of the resulting innovations will be disruptive.
Assuming America wants paradigm-shifting, truly disruptive innovation we need to recognize the need to incentivize the risk-takers and those that provide the capital to those risk-takers who dare to challenge the status quo. This means policies, laws and rules that foster innovative activities from smaller entities who are most likely to innovate.
With an eye toward policies, laws, rules and actions that would most benefit innovators, their endeavors more attractive to investors and more feasible to pursue, the U.S. should adopt policies, laws, rules and actions including:
- Treating patents as property, not a government franchise, not as a public right, but as a vested property that is presumed valid in all forums and treated as a real asset with a quieted title at some point.
- Declaring loud and clear that software, medical diagnostics, medical discoveries and biotech innovations are patent eligible.
- Recognize that a patent cannot be property without the right to exclude, and when a patent has been infringed and withstood all invalidity challenges the patent owner must presumptively be entitled to an injunction.
- Institute fewer post grant challenges because surely if the Office is correct about the 96+ percent quality output of examiners there cannot be as many mistakes made during prosecution as have been identified by the Patent Trial and Appeal Board (PTAB).
- Requiring the PTAB to issue final written decisions confirming the validity of patent claims challenged by not instituted, which would allow estoppel to attach to those claims the PTAB has necessarily determined to be not likely invalid.
- Introducing a new category of entity between micro-entity and small entity for companies with 50 or fewer employers, which would benefit small businesses and start-ups that actually innovate.
- Moving applications to the front of the line where the micro-entity or small business applicant has received angel, venture capital or crowd funding, which will advance technologies that have the greatest commercial potential.
- Reducing or eliminating all USPTO fees for micro-entities and the newly created small business category.
- Redefining micro-entities so that the number of patent applications filed no longer disqualifies applicants from micro-entity status, which unnecessarily disqualifies serial independent inventors.
- Instructing patent examiners to actually follow the law and presume the applicant is entitled to a patent unless a credible rejection can be made, and terminating or reassigning patent examiners who refuse to follow the law and instructions from senior Officials.
- Terminating, or reassigning, patent examiners who have not issued patents for years.
- Shift quality review of patent examiners away from primarily considering only patents granted to equally considering patent applications that are denied.
Turning the patent system around is possible, but bold action is required given the significant hole America has dug for itself, and given so many nations around the world understand that a strong patent system is the way to economic prosperity.