By Dana Rao
August 7, 2017 at 5:00 am ET
Every patent holder is proud of their patent. As they should be. Obtaining a patent is expensive, time-consuming, and there is an adversarial process with the U.S. Patent and Trademark Office that you must overcome to establish that your invention is valid. But the business of patents has changed. It used to be a system that rewarded an inventor for a genuine innovation, one that the patent clearly described, and entitled that inventor to prevent anyone else from making that invention. That was a good system; it produced good patents, and strong businesses were built on the backs of those patents. That system provided an incentive for innovation that has kept America the technology leader for more than 200 years.
Unfortunately, that system is broken. Patent filings have surged over the years. Twenty years ago the USPTO granted 123,147 patents. Last year, the USPTO granted 333,583 patents. That’s 168 percent growth! Does anyone think that the number of true innovations has increased by more than 200,000 patents in just 20 years? Not a chance.
What happened? A patent gold rush built by patent profiteers. In the last 20 years a new business model has sprung up, where patents no longer represent the fruits of hard labor but are merely an investment class. Their value lies not in the innovation behind the patent but in the vagueness of the patent’s claims and the ability to enforce it in a plaintiff-friendly forum. These bad patents drove high returns on investment for the early profiteers. Patents still had their gold-plated reputation, so when people saw a patent lawsuit they quickly settled. And then the victims decided to file their own patents, early and often, securing patents not just on true, game-changing innovations, but on every incremental thought or idea. The Patent Office was quickly overwhelmed, and scrutiny dropped.
Where did the material for these bad patents come from? The advent of software. While software inventions are among the most complex technologies our society develops, the Patent Office was not prepared for the onslaught of filings for this new type of invention. Most early software was not patented, and so the Patent Office did not have the prior art to force inventors to narrow their claims to their true inventions. Instead, software was being used as a “magic box”: Here is my idea, add software, and now I get a patent. This led to idea-only patents being granted with broad and often invalid claims, and eager patent profiteers were only too glad to take advantage. The profiteers’ success drove the market for patents, and this only led to more patent filings. And then more lawsuits. And, well, we are where we are today.
Who are these patent profiteers? They are not innovators. They are not implementers. They are not living in a garage dreaming up the next big thing to change the world. They are lawyers, investors and “IP asset managers” who are just buying patents, or hundreds of patents, for little money from actual inventors and then using the legal system to extort a few dollars from businesses that don’t need those patents to sell their products. But the number of true inventions hasn’t changed since 1997 or even 2007.
Every bubble bursts. The right outcome wins, even if it takes time. The last four years have seen a rebalance in our patent system, where quality is once again the most important driving factor in a patent’s value. Recent court decisions have lessened the impact of an unbalanced litigation system. Inexpensive post-grant validity reviews, early motions to review a patent for its abstractness, fee shifting to deter abuses in the courtroom, and common sense forum choices have all combined together to ensure that the patent system rewards good patents.
With the bad quality patents being tossed out of the system, and the proper incentives restored for seeking a patent, there will be a lot fewer patents in the system. The adjustment back to the normal will be hard for the patent profiteer. As you see the restoration of normalcy, you will certainly hear outcries from those who have built their livelihood on bad patents and quick dollars. They will tell you that the patent system is in danger, and infringers abound, and chaos is going to ruin the world. The most pernicious of their untruths is their theory that if you don’t license their bad patent you are an “efficient infringer.” Most technology companies license hundreds of patents each year. As in-house counsel, I can tell you that we review patents carefully, and if we believe the patent has merit, we take a license.
Unfortunately, given the rise in the sheer volume of patents, and the corresponding and not-coincidental rise in bad quality patents, we turn down far more patent offers than we license. And when we do, the profiteers cry foul and demand that we must take a license for a patent we don’t need, often to cover a feature that we shipped in our product a decade before the patent was filed. It’s a silly business, and one we are glad to see coming to an end. And it hurt the real inventors and the real makers in this country who are harmed by the loss of credibility in the patent system caused by the bad patents and bad actors.
History tells us that a refocus on quality in our patent system will not end innovation in this country. Good patents will still be awarded for good inventions, with clear claims that limit the patent to the invention the inventor invented — the way it is supposed to be. And businesses will be built on the backs of those good patents, just like they always have. Instead of complaining about the end of the age of bad patenting and patent profiteering, we should be celebrating the rebirth of a strong and credible patent system, one that will enable America to maintain its technology leadership now and into the future — built on the backs of good patents.
Dana Rao is vice president of intellectual property and litigation at Adobe.
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