Each week, In Theory takes on a big idea in the news and explores it from a range of perspectives. This week we’re talking about patent reform. Need a primer? Catch up here.
Patent reform isn’t the kind of topic you’d expect to get much attention. It’s really boring — and I mean deep in the weeds wonky and boring. But start-ups and small inventors are now so threatened by people exploiting loopholes in the patent system that Congress must now step in and take action.
That’s why patent reform moved from the back halls of Congress to front and center of policy debates. It’s all thanks to the emergence of the “patent troll” — an entity that doesn’t produce things based on its patents but instead uses patents to sue (or threaten to sue) others for infringing them.
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In the early days, these so-called trolls targeted big companies who could pay them to go away, and patent law was practiced largely out of sight — its exorbitant costs creating a barrier to entry. But within the past five years, the start-up economy began to experience real growth. In 2011, for instance, tech-sector start-ups were being created at a rate 210 percent higher than that of 1980. Not only were these companies growing and creating jobs, but software developers also found themselves in a brave new world where everyone had a smartphone at hand, giving those developers an easy and accessible avenue to distribute their software to millions.
The trolls — armed with low-quality, impossible-to-understand patents and outrageously expensive patent litigation reaching into the millions of dollars — began targeting unprotected start-ups and developers. In fact, 55 percent of troll suits are filed against companies with revenues of less than $10 million.
Imagine being the boss at a small start-up, cash-strapped and hungry, and receiving a patent infringement claim from a company you’ve never heard of, claiming to own some seemingly basic technology. Your have two choices: hire a lawyer and spend valuable time dealing with the problem or pay the troll to go away, usually for a sum smaller than what it would cost to hire that lawyer or go to court, but still significant. (This really happens. See here, here, here and here.)
All of a sudden, patent law isn’t so boring.
To really stop patent trolls, we need to do two things: First, close the litigation loopholes that allow trollish practices to continue and, second, eliminate the low-quality patents that the trolls exploit.
Current legislation pending in the House (the Innovation Act) and the Senate (the PATENT Act) largely take on the first task — cleaning up our litigation system. Specifically, the bills would level the playing field by requiring patent owners to file responsible suits. Both include tweaks as simple as requiring transparency around the alleged infringement, reasonably limiting unnecessary, expensive discovery, enabling judges to require bad actors to pay the prevailing party’s attorney fees and other costs incurred, and ensuring that parties can sue only in a district that bears a relationship to the underlying lawsuit.
Thus far, legislative efforts have not addressed patent quality. Why? Politics. To wit, while many in the high-tech and software industry support cleaning up patent quality, entrenched interests — like the pharmaceutical industry — and their supporters on the Hill have opposed any efforts to change a system they perceive as working for them. This is because we have a one-size-fits-all system, which means we treat pharmaceutical inventions the same as software inventions and biotech inventions. It also means that every industry that uses patents at all basically has to sign off on changes to the system. And sadly, there has been no political appetite to even address patent quality, let alone fix it.
Unfortunately, some reform proposals would further weaken patent quality by blunting a process called inter partes review, designed to allow parties to challenge patents more cheaply and efficiently at the Patent Office, as opposed to in a courtroom. Although the new process has proved to be an effective instrument to weed bad patents out of the system, certain political players arguing that IPRs are “patent death squads.” Putting aside the fact that the data prove otherwise, I can’t understand why anyone would support changing the law to make it harder to get rid of bad patents, particularly because there is no evidence that the process negatively impacts high-quality patents.
That’s the thing about real patent reform: Not only does it help the start-ups, small businesses, innovators and creators who suffer at the hands of those who exploit a broken system, but it also helps that system itself. The Constitution enshrines patents as a tool to incentivize innovation and invention. Right now, exploitation of the system means that they’re having the opposite effect. It’s time to right the system and return it to its original purpose. It’s time for Congress to pass patent reform.
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