EDITORIAL NOTE: This article is adapted from the original version appearing in The Washington Post on November 16, 2015. It is published here with permission.
Abraham Lincoln once called the patent system one of the three greatest advances in human history, along with the discovery of America and the printing press. The U.S. was the first nation to allow commoners to own patents. Having a patent allowed the Wright brothers (two humble bicycle mechanics from Ohio) to beat Dr. Samuel Langley, their government-backed rival, to become the first to fly — and land — a heavier than air machine. Before then planes went up, but few walked away when they came back down.
Patents give inventors the right to control how their discoveries are used in exchange for telling the public how they work. This bargain increases knowledge and drives modern economies. Patents are supposed to shield entrepreneurs from having their inventions stolen by powerful competitors, but modern inventors now face a system that has broken its pledge. Rather than addressing the underlying problems, the pending patent reform legislation tilts the system even further against inventors.
If a patent cannot be effectively enforced, it has little value. Courts have made it almost impossible for patent owners to obtain injunctions that can stop the sale of products that infringe upon their inventions. Giant corporations employ “efficient infringement” strategies knowing they can make big money pirating patents, even if they get caught. Because it is so hard to recover damages, lawyers are often unwilling to defend inventors on a normal contingency fee system, and instead insist upon being paid up front for the considerable costs of an infringement trial.
It’s a grim world if you’re an American inventor hoping to safeguard your work — and it’s getting grimmer.
Congress has established an administrative process at the Patent and Trademark Office known as inter partes reviews to evaluate contested patents. Ironically, the same Office that awards patents does not assume they are valid in this review. Some call the process a “patent death squad,” because it strikes down 77 percent of the patent claims it reviews. It also drains badly needed cash from entrepreneurs: each review costs anywhere from $200,000 to over $1,000,000. Even if the patent is upheld, innovators lose time and money, commodities desperately needed to commercialize their inventions. It’s no wonder that a company’s stock can tank overnight if an IPR is filed against its patents.
Even worse, unscrupulous parties from around the world can initiate IPRs using fraudulent or deliberately misleading information without fear, because patent owners are prohibited by a court decision from suing to recover resulting economic damages.
You might think these issues would be the focus of Congressional patent reform efforts — but you would be wrong. Intead, Congress is fixated on “patent trolls,” noxious, ill-defined entities threatening Mom and Pop retailers with bogus infringement suits unless they’re paid off. Tragically, the proposed solution harms legitimate patent owners more than trolls.
The latest patent reform bill in the House, called the Innovation Act, would force patent owners to pay their opponent’s legal bills if their infringement suit proved unsuccessful. This gives big businesses a formidable tool with which to intimidate inventors from enforcing their patents, as there’s always a chance that any lawsuit will fail. The expense of paying the legal fees of a giant corporation would bankrupt most small companies.
Compounding the problem, the legislation also makes those who back patent-based companies liable for these costs. This could be the death knell for university spin-off companies. Venture capitalists and angel investors would have to think long and hard before putting money into startups built around a patent. What inventor would go to their friends and family for support to launch a company knowing this sword hangs over their heads?
The result is a patent system in crisis, which threatens our economic future. Small businesses received 30 percent of U.S. patents in 2000. Last year the number plummeted to 19.5 percent. Small companies undertake the risk and expense of developing breakthrough technologies that made us the most prosperous nation in history. When they lose confidence in the patent system the country will suffer.
Emblazoned on the side of the Department of Commerce facing the White House are Lincoln’s words: “The patent system adds the fuel of interest to the fires of genius.” If we allow that fuel to rot, we will have no one to blame but ourselves. We would be better advised to restore the patent system that Honest Abe loved so much.