President Obama has recently proposed a number of executive order and legislative-based initiatives which are intended to curtail certain alleged abuses in connection with the enforcement of patent rights.
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The President’s proposals are centered on a June 2013 report called Patent Assertion and U.S. Innovation issued by the Executive Office of the President, which specifically identifies several areas for improvement, including measures to curb what is perceived as excessive litigation.
I applaud the concept of improving the patent system. However, as with any political process, it is important to try to shed light on the stakeholders involved, the parties affected, and their true respective motivations.
We have largely transitioned from a product-based economy, to a service-based economy, to now a knowledge-based economy. Intellectual property rights, including patents, are an indispensable means of protecting knowledge. Patents are the new currency of our modern economy. With the increased importance of patents, it is not surprising that the incidence of patent lawsuits has increased.
Much of the innovation in this country still comes from individual inventors and small companies. The President’s own report acknowledges the importance of such contributions to the economy:
“Potential inventors may not have the resources to protect their patents from infringement; their incentives to invent may be increased if they can sell their patents to firms that specialize in litigation and other means to collect license fees from those who are using the patented technology”.
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This is exactly what my current company, CopyTele does. Not only have we spent millions of dollars developing our own patented technologies, we also help inventors and other businesses monetize their patents when they don’t have the resources or expertise to do it themselves. By being a public company in the space, CopyTele also provides investors with an opportunity to invest in an industry that has paid with enormous upside potential.
History reminds us of tales of innovation coming from individuals and small companies -- and efforts to misappropriate their inventions by the dominant economic players of the time. Although the dominant parties may have changed, the conduct has not. Instances of either outright theft, or "depraved indifference" to the intellectual property rights of small companies and inventors, continue to be perpetrated by the economic giants of today. It is these same large, technology driven companies that are now crying “foul” and attempting to use their political influence with the President and Congress, to limit the number of patent lawsuits filed against them.
As with any new industry, the lure of big dollars attracts opportunistic individuals that push the boundaries of fair dealing, and engage in unscrupulous conduct. The patent assertion space is no exception. However, the illicit conduct of a minority few, should not be allowed to cloud the activities of legitimate companies that operate in good faith, and provide a needed and valuable service to inventors, and companies that do not have the economic resources or expertise to protect or derive benefit from their patented inventions.
We should also not allow big technology companies, who generate billions of dollars in profits from their own intellectual property, to benefit from ignoring and/or infringing on the intellectual property rights of others with fewer resources.
While at first glance, I have no problem with many of the initiatives proposed by the President, we need to recognize that intellectual property should be treated no differently than tangible property, when it comes to the rights of the owner to legally sell, license, enforce, or otherwise seek benefits accustomed to ownership. The Constitution provides that inventors shall have the exclusive rights to their inventions, and any attempts to give one set of inventors more rights than others, would likely be unconstitutional.
While it remains to be seen exactly how these new initiatives would improve our current patent system, or whether the initiatives will even make in through Congress (the last patent legislation took 7 years), as a practitioner with 15 years of experience in the patent space, I have a few suggestions of my own:
- First and foremost, an adequately funded and staffed USPTO would result in better quality patents, which would benefit all parties. While the USPTO does an admirable job with what they have, Congress allows them to keep only a fraction of the money that they generate. Patent examiners make what could be billion dollar decisions about cutting edge technologies and nuances in the English language. We should give the USPTO the resources that it needs to hire and retain examiners that have the both the scientific and language skills necessary produce a better product. This one change would do more
to benefit the patent system than any proposals currently on the table.
- Make companies pay their fair share for over burdening the USPTO. If you do the math, the top patent filers each year are granted multiple patents every hour of every business day (the top filer receives a new patent every 18 minutes). By charging higher filing fees after threshold numbers of patent applications, the USPTO could hopefully dissuade these excessive filing practices. These same companies that complain about weak patents making it through an over-burdened patent office, are causing much of that burden.
- Litigation is an extremely inefficient and expensive means to force the parties to talk to each other. Special rules could be enacted to streamline the discovery process so that each party quickly gets what it needs to assess the merits of the case and their respective risks. Mediation should also be compulsory. These changes would dramatically increase the likelihood of a faster amicable resolution.
While we welcome changes that may dissuade any abusive practices from a minority of patent assertion companies in the industry, it is imperative that we ensure that any such changes are fair to all inventors, regardless of size, or stature. The system is already skewed in favor large companies, and any further changes in that regard would do more harm than good, and have serious economic consequences.
Finally, much has been written over the past few weeks about large technology companies, such as Apple, Google, and others, taking advantage of loopholes in the Federal and State tax laws, resulting in billions of dollars in lost revenue to Federal, State and local governments. Whether those practices are illegal, or merely the result of shrewd tax planning, remains to be seen. However, the irony is not lost that much of the sheltered taxable income from these companies comes from royalties on software, digital content, and other intellectual property based products and services, where income can more easily be diverted to tax havens outside of the U.S.
When considering the alleged burdens placed on large technology companies from patent infringement lawsuits, compared to the enormous costs to everybody else from the wide ranging tax avoidance behaviors by many of these same companies, one has to question the true genesis behind these proposed changes to the patent system, and whether the White House is focused on the right problem.
Robert Berman is the President and CEO of CopyTele, Inc. (COPY), a publicly traded company specializing in patent monetization.