Things are starting to change a bit in the patent world. The U.S. patent system has traditionally been a very one-sided affair. Largely conceived and run by traditional industry—e.g. pharmaceutical companies—those in charge have represented primarily one point of view: that of patent holders.
This imbalance has led to a system that might make sense for companies with incredibly high R&D costs (drug companies). Unfortunately, this comes at the expense of other industries, where a 20-year monopoly is nonsensical (think software), and of the public interest, where innovators, startups, and garage inventors need space to invent and create without the threat of patent infringement litigation hanging over their heads.
{mosads}This problem has manifested itself in the current state of affairs: a patent troll epidemic. Which, fortunately, is starting to change.
First, the Supreme Court stepped in, issuing a series of rulings improving the standard for patent quality and making efforts to better balance the playing field between patent owners and inventors (many of whom, of course, do not own patents). The most well-known ruling, Alice v. CLS Bank, has now directly led to at least 19 lower court rulings throwing out low-quality patents. Significantly, just recently, the Federal Circuit finally followed the Supreme Court’s lead and invalidated a particularly bad patent in a case called Ultramercial v. Hulu.
This case has bounced around the courts for years, with the Supreme Court twice sending it back to the Federal Circuit. Now, finally, five long and expensive years after this case began—spearheaded by a brave company called WildTangent who continued the fight while all of the other defendants settled—there is one fewer really bad patent out there.
In another indication that the tide is starting to turn, President Obama recently nominated Michelle Lee to direct the Patent Office. Michelle Lee, who currently acts as the agency’s deputy director, would not only be the first woman and first minority to hold that post, but she has a background rare in a long lineage of PTO directors: a patent lawyer from Silicon Valley who has worked for and at companies who operate in the software space. (For all these reasons, and more, we strongly support Michelle’s nomination.)
For those of us who have been trying to reform a broken patent system for some time, these milestones are important. They signal that other voices now have a seat at the table, and that, after being long ignored, the tech and startup world—and the public interest—are now real players in the patent system.
Now these communities are speaking up, calling on Congress to finish its job and pass meaningful patent reform. Because even with cases like Ultramercial striking down patents, and even with Michelle Lee installed as PTO Director, there is much work to be done. In fact, for trolls who already own patents—even patents that might not withstand a challenge under Alice—there is little disincentive to make a threat of patent litigation or bring a case in federal court.
Some numbers:
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A patent has a lifespan of at least 20 years.
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Currently, there are approximately 2.24 million active patents in the United States. More than a million of those represent a software-type invention. This trend shows little signs of abating: in 2014, the Patent Office is on target to grant more than the 277,000 patents than it granted in 2013.
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Patent trolls disproportionately target startups and small businesses.
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In a survey of 200 venture capitalists, 100 percent indicated that the presence of a patent demand could be a major deterrent in deciding whether to invest. Even more, it is estimated that VC investment in startups would have been more than $8 billion higher but for troll threats in the last five years alone.
These last two data points are particularly important. Research shows that new firms—startups—are responsible for net new job growth in the United States and that this job growth takes place all over the country. This growth would be impossible without robust support from the investor community. Thus, the patent troll problem affects more than just startup technology companies: it negatively impacts our entire economy to the tune of at least $29 billion a year.
To be sure, we are encouraged to see positive court rulings and people from our community in leadership positions at the Patent Office. But that alone will not stop the bleeding. We cannot wait for this generation of crappy patents to expire and bad actors to go away. Congress must act now.
Samuels is the executive director of Engine, a research foundation and advocacy organization supporting tech entrepreneurship. She’s on Twitter at @juliepsamuels.