Patent Reform for Startups: Where are we now?

feb floodThe 2011 SBA report on reducing startup barriers listed some useful ideas regarding patent reform. (The report was the product of nationwide roundtables held with more than 1,000 entrepreneurs and investors). The first notable suggestion was an extension of the Department of Energy’s “America’s Next Top Energy Innovator” to other federal agencies. This program made it cheap and easy for startups to purchase and commercialize the Department of Energy’s thousands of unlicensed patents. Also suggested was a central database of federally funded research and IP available for licensing (and a few challenge contests on such research). Lastly, it was recommended that the application process be improved by shortening the time to patent denials.

What movement has been made on these? The DOE did not run the Innovator Program in 2014 or 2015, and others departments have not filled the gap. The United States Patent and Trademark Office does record patent applications, but a workable database on federal patents and research will take more time, which is understandable given the quantity of data. This is especially true, as more USPTO resources have been devoted to the third suggestion: making the application process more efficient in line with the America Invents Act.

A more efficient process is certainly welcome. However, the slow movement in federal technology sharing speaks to one of the larger problems for entrepreneurial firms: the lack of technology sharing and the constant threat of patent litigation from bigger firms with deeper pockets. Not to mention sneakier tactics.

For example, patent flooding is a practice where a firm files many small patents surrounding the core technology of another inventor, in an attempt to extract cross-licensing agreements. As patent disputes drag on, so does innovation, especially in highly innovative sectors like technology and life sciences. This practice has been made infamous by the Apple and Samsung rivalry, in which Apple sought to enforce patents on trivial design features like the rectangular shape and translucent screen of its mobile phones.

The America Invents Act is meant to align the United States more closely with Europe and the rest of the world, but perhaps it does not go far enough when it comes to dispute resolution. Maybe the Japanese system is worth a second look. The goal of the U.S. system is arguably to protect and reward innovative entrepreneurs and to encourage invention. The goal of the Japanese system, however, is to spread technology among competitors in a manner that avoids litigation and encourages broad-scale cooperation. This probably has larger industry benefits than does the American system. Both systems would leave startups vulnerable to big firms, but the Japanese version would reduce litigation costs and arrive at cooperation/settlement sooner. Since I am not sure of its effect on incentives, this is only a tentative endorsement. 

But it is food for thought.

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