Opinion

Why the Best Patent System in the World Is Now Under Attack

Many factors contribute to our nation’s status as the global leader in innovation, but our patent system deserves special thanks. Our determination to protect the liberty and creativity of innovation drives our economy, fuels our job growth and powers our society. The United States has the best patent system in the world and the most innovative and entrepreneurial companies to show for it.

Over the years, we’ve taken steps to improve our patent system, most recently by introducing inter partes review. This proceeding allows a panel of expert judges on the Patent Trial and Appeal Board to assess the validity of weak patents without requiring a long and costly court proceeding.  A good patent system is about having quality patents, not merely permitting more patents.

study by the Chamber of Commerce’s Global Intellectual Property Center claims the U.S. “Patents, Related Rights, and Limitations” ranking has fallen from first place in 2017 down to 12th in 2018. The Chamber claims that patents subjected to IPRs experience a “disproportionate rate of rejections” – meaning many patents don’t survive scrutiny. But the study’s conclusions on IPR are biased and one-sided, as highlighted in a recent letter from the United for Patent Reform coalition, pointing out that the Chamber used inaccurate data from a third party. If accurate data from the U.S. Patent and Trademark Office had been used, the U.S. patent system would have been ranked No. 1.

IPRs were established by the 2011 America Invents Act – legislation widely supported by most stakeholders in the patent system. IPR provides a fairer and more cost-effective alternative to expensive and burdensome court litigation. For many U.S.-based small and medium-sized businesses, IPR offers a more accessible means to fight back against extortionist patent abusers – also known as “patent trolls” – who threaten lawsuits based on overly-broad and poor quality patents to extract a settlement payment based solely to avoid the cost of dispute.

The number of troll lawsuits swelled 500 percent from 2007 to 2017. And according to a report from Boston University School of Law, the lawsuits drain upwards of $80 billion from our economy every year.

This abuse is a serious threat to the integrity of our patent system and to the ability of American companies, especially small ones, to innovate and launch real businesses and products. IPR is a sorely needed defense against this economically damaging behavior.

Predictably, trolls would like to weaken or eliminate IPRs. Some other businesses support this view as well, fearing the validity of their patents could be challenged. But this fear is unfounded. Of all patents that have gone through IPR, only 16 percent are ultimately invalidated by a written decision. Nonetheless, anti-IPR viewpoints prevail in the Chamber’s ranking of patent systems.

IPR is also under attack from several anti-innovation bills in Congress. The STRONGER Patents Act would dismantle critical parts of IPR, resulting in a patent system heavily favorable to abusers. The misleadingly named Restoring America’s Leadership in Innovation Act and the Inventor Protection Act are even more drastic attempts to undo IPR.

The consumer technology industry supports high-quality patents. It doesn’t matter who holds the patent – if a patent is erroneously issued, the industry needs a fair and accessible mechanism to challenge its validity. That’s why the Consumer Technology Association recently joined with Engine, a pro-technology nonprofit based in California, to file joint comments opposing the USPTO’s proposal to weaken IPR by changing the standard that judges use to review patents. The USPTO aims to do away with a standard that has been used in Patent Office review proceedings for over 100 years – and was recently upheld by the Supreme Court. Trolls and others seeking to chip away at IPR will applaud the move. Those who value a just patent system should be concerned.

Weakening IPR would compromise our nation’s edge in technology and innovation. Companies sued by patent trolls lower their investment in research and development by 25 percent on average. Conversely, in the time since Congress passed the America Invents Act and instituted IPR, U.S. innovation has soared. The 300 U.S. companies that invest the most in research and development spent nearly $300 billion on R&D last year – about 45 percent more than they did in 2012. And during the past five years, we’ve risen from 10th place to sixth place on the Global Innovation Index, a ranking that considers the innovation economies of 127 nations.

This is not to say that our patent system can’t be improved. Making sure we’re granting high-quality, unique patents would help reduce the need for IPR and prevent trolls from gaming the system. But cutting a strong program that helps create stability is not the path forward.

By keeping IPR intact, our U.S. innovation economy will continue to grow, American inventors will continue to thrive and startups can continue to innovate and create the systems and solutions that will help our country flourish in the 21st century and beyond.

Gary Shapiro is president and CEO of the Consumer Technology Association, the U.S. trade association representing more than 2,200 consumer technology companies, and author of The New York Times best-selling books, “Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses” and “The Comeback: How Innovation Will Restore the American Dream.”

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