Patent Reform and Our Innovation Economy

Jonathan Ortmans, President, Public Forum Institute

Momentum for a comprehensive patent reform has been slowly building in Congress. Last week, the House Judiciary Committee began examining a patent bill introduced in March by Judiciary Chairman John Conyers (D-MI) and ranking member Lamar Smith (R-TX). In the Senate, Leahy (D-VT) recently cut a deal to soften damages language in last year’s failed Senate bill. Most are eager to see reform. The rules, protections, and the adjudication process surrounding IP requires constant adjustments to keep up with challenges of the digital revolution. However, as new policy is considered, I hope policy makers contemplate the effects of patent legislation on our future job creators.

The existing system contains deficiencies that are worrisome from the perspective of entrepreneurship. While patents for new inventions provide a strong incentive for people to both create and publicize their intellectual property, patent laws are increasingly cumbersome. In many cases, innovation is being hindered by overly broad and strong decrees. Since 1982, courts have allowed for much stronger patents. Yet, stricter IP does not necessarily produce more innovation. It can actually discourage entrepreneurs from introducing new ideas to fields where incumbents have patent protection and resources to pursue litigation for infringement. Incumbents’ patents may be of dubious merit or may be accumulated to shelter older IP from competition. In this regard, it is important to remember that firms with less than 500 employees produce 13 times more patents per employee than larger firms.

Moreover, the U.S. Patent and Trademark Office is currently overburdened. Wait times have increased dramatically and we are seeing a low invention standard in awarding patents. This in turn translates into non-deserving patents driving expensive litigation due to the legal presumption of validity. America clearly needs to develop a more cost-effective post-grant review procedure for patents to help weed out non-deserving patents before they are misused by their applicants

The creation of new ideas is essential to a growing economy, and it happens that small, new firms have been the drivers of radical innovations. This is why PDE has laid out thoughts in a factsheet that I hope will guide policymakers as they consider reforms. In this document, two principles for patent reform are suggested: (1) patents should only be provided for truly non-obvious inventions; and (2) consistent with the first objective, the procedures for contesting patents should entail minimum cost. I think all Americans wants to make make sure that our laws do not end up inhibiting innovation and growth rather than encouraging it by protecting its authors.

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