It’s been almost a year since the global pandemic shut down businesses across the country. In that time, restaurants, grocery stores, retailers and many other Main Street establishments have had to reimagine how they do business. This has often meant an increased reliance on technology to make dining and shopping safer for customers and employees, like software for placing orders and mobile applications for contactless checkout.
While this technology has become a must for businesses, it has also made them the target of opportunistic and wasteful patent litigation. When President Joe Biden nominates the next director of the U.S. Patent and Trademark Office in the coming weeks, the impact the patent system is having on Main Street businesses must be a factor in selecting the right person to lead the agency.
The rise in patent litigation targeting Main Street businesses is thanks to another kind of business that is taking advantage of the economic downturn: non-practicing entities, or NPEs, which buy up patents and threaten productive businesses with costly litigation.
While many businesses have been struggling in this economic environment, 2020 was another banner year for NPE activity. Lawsuits based on often-questionable patents held by NPEs surpassed the surge that had begun in 2019. Among those sued was a grocery store whose its mobile app allowed customers to order delivery or schedule curbside pickups. NPEs also sued numerous companies that sought and received loans under the Paycheck Protection Program, which means money that was intended to help retain jobs and rebuild businesses instead went into the pockets of NPEs.
What these NPEs have been doing during the pandemic was both predictable and preventable. The patent system had been moving in the right direction through positive developments in the courts and Congress, and as a result abusive patent litigation was actually going down. But the previous administration changed course and sought to bring an end to these improvements. In the crosshairs was one of the most important improvements: the Inter Partes Review program.
With strong bipartisan support, Congress created IPR in the America Invents Act of 2011 — the first overhaul of the U.S. patent system in more than 60 years. Its passage was championed by President Barack Obama, who signed it into law at Thomas Jefferson High School for Science and Technology in Alexandria, Va. IPR provides a way for experts at the Patent Office to resolve questions about the scope and validity of questionable patents in a procedure that’s faster and cheaper than litigation.
In recent years, the Patent Office has largely ignored that patents of low quality are being used to target American businesses. Instead of working to improve patent quality, especially through preservation of its strongest tool for incentivizing it, the Patent Office has made several changes to IPR that have weakened it almost beyond recognition.
Without having this tool readily available, businesses will continue to be targeted and have no option but to pay an NPE simply to avoid the cost of litigation and potential reputational harm. This is money that could go toward paying employees, buying products and continuing the hard work to make it safe for employees and customers. The focus now must be getting IPR back to where it once was and addressing the underlying problems of patent examination that got us here in the first place.
The patent system exists to promote innovation for the benefit of the American public, not to issue and protect undeserving patents that place a drag on innovation and erode the public’s confidence in the system. The next director of the Patent Office must recognize that improvements are needed and take action to address them. It will help make sure that our road to economic recovery is not made more challenging by opportunistic lawsuits.
Stephanie Martz is chief administrative officer and general counsel of the National Retail Federation and a co-chair of United for Patent Reform.
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