Patent Trolls: Major Contributors to a Stagnant Economy
They have come to be known as patent trolls, but they could easily be branded as vampires, sucking the life blood from inventors, entrepreneurs, startups and enterprise in general.
Most of us subscribe to the notion that the best “fix” for the nation’s debt problem is a robust economy, pumping tax revenues into the treasury. The STEM Jobs Act was a step in the right direction, but the bill has languished in committee since mid February, 2013 and is given a prognosis of passage like one’s chance of hitting the Powerball jackpot.
Few really view immigration legislation in the context of growing the economy and so it is with patent legislation. Perhaps nothing would meet with less pushback from the American people than an overhaul of our anachronistic intellectual property laws. It is a step that Congress could take with a real potential for enhancing long-term growth prospects in our economy.
Current Patent Law Is Slowing the Pace of Innovation
Present patent law is a significant brake on the growth of our gross domestic product (GDP) because mature, incumbent companies use patent law to create an economic moat against new competitors. Tech companies, our biggest innovators and growth drivers, are particularly vulnerable to this unsavory tactic. Add to that, the relentless assault of the patent trolls and stagnation is the inevitable result.
In 1983, the United States Patent Office handled less than 60,000 domestic patent applications. By 2012, that number had risen to almost 269,000; a percentage change of 353 percent! A fact of even greater interest is the parallel increase in foreign patent seekers. What does this suggest?
The optimists among us might think that our patent law is the envy of the world but the cynics may view these statistics as evidence that our patent system has become little more than a “rubber stamp” operation, granting patents to whomever applies. The truth probably lies somewhere in the middle.
There is no question that the influx of patent applications, domestic and foreign has served to dilute the standards under which a patent is granted. This has been the real reason patent trolls have flourished and frivolous lawsuits abound. The IP lawyers and incumbent corporations got their noses under the tent and the rest is history.
The propagation of so many patents has dampened the enthusiasm of many a would-be inventor. Fraught with licensing concerns and fears of potential litigation from the patent trolls, innovation has slowed.
What can be done?
The ideal solution would be for Congress to step up and enact some legislation to revamp our intellectual property laws and perhaps increase funding for patent office staffing. Of course, this isn’t likely to happen anytime soon … if ever. The 2011 Leahy-Smith America Invents Act (AIC) was a step down an obvious path, but didn’t go as far as necessary. The act alters the system from a first to invent to a first to file procedure. There were other minor changes. The act took effect March 16, 2013—we’ll see what happens.
However, the private sector has stepped up its game in some meaningful and interesting ways.
Enter Crowdsourcing
Private companies and individuals have sprung up on the Internet and elsewhere and dedicated themselves to patent research. They are out to neutralize or at least mitigate successful patent troll litigation.
They accomplish this by charging clients a fee to research potential infringements or alleged infringements outlined in actual litigation. One such firm is Article One Partners and it has paid about $4.7 million to independent researchers since its inception. This is small change compared to the court awarded settlements that might have otherwise been paid by a defendant in an IP or patent case.
Kudos
While kudos are certainly in order for firms such as the one described above, they are merely a finger in the dyke. Patent and intellectual property issues are costing business billions of dollars annually. Upwards of 14 percent of R & D dollars are sucked up, up and away by patent litigation expenses, driven in large part by patent trolls and corporations using patent law as an economic moat.
It is impossible to gauge the loss to our GDP from innovators and inventors cobbled by the current system but I suspect the number, if it could be quantified, is huge.
Meanwhile
In the interim, a robust patent lobby continues efforts to fortify intellectual property provisions on the domestic front and abroad, via the Office of the U.S. Trade Representative. This fight for extended global monopolies will come at great cost to consumers and economic growth.
It is likely that the U.S. will find itself on the toothy end of this farce, courtesy of patent trolls from Beijing to Tokyo.
We’ll have more on this subject later. For now, you have enough to consider.
