Promoting US invention; Aiming high in innovation

What do patents mean to you?

It’s important to measure U.S. patents not by number, but by impact.  Over the last two decades, technology has contributed $2 trillion to the U.S. GDP and created hundreds of thousands of jobs.  Cisco’s 10,000th patent was filed by a virtual team of engineers from Massachusetts, North Carolina, Texas and California, all states with significant technology-industry presence.  And we’re proud to have shared the fruits of our patents through standards bodies to help the technology industry expand.

The technology embodied in Cisco patents has led to the creation of ruggedized, outdoor routers that can withstand temperatures of minus 127 degrees Fahrenheit to 184 degrees Fahrenheit to help our electric grid run more efficiently and consistently.  They – along with the inventions of others – have enabled the cloud technology that we today use to store photos, watch movies and share documents among virtual teams of workers.  Internet technology is currently connecting servicemen and women who are leaving the military with high-skilled, private-sector jobs.  IT has revolutionized health care and transformed education.  All possible thanks to American ingenuity, our history of invention and our patent system.

Frivolous litigation threatens our history of invention

Unfortunately now, as the Internet of Everything emerges, abuses of loopholes in the patent litigation system are hindering innovation and restricting the growth of exciting applications and industries.  Patent assertion entities have long brought frivolous litigation against large enterprises like Cisco in the hope of extracting settlements, but are now also targeting customers in attempts to extort small, hometown businesses including retailer and grocery stores, and startups in order to try to place a needless tax on the venture investment that is the lifeblood of innovation.

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As evidenced by a recent White House study, the impact on our economy of PAEs is significant. Valuable resources that should be spent on inventing products are diverted to defending claims.  Cisco, despite allocating almost $6 billion a year to research and development in the U.S. and employing 20,000 engineers, spends almost $60 million a year on patent-related legal fees.  Ten years ago we had a handful of patent cases, almost exclusively involving competitors. Today we are defending almost sixty, none with companies that actually make anything.

In one case, a PAE which bought nearly-expired patents from a large chip manufacturer has targeted 13,000 entities including small businesses, retirement homes, children’s health clinics, and restaurants, which offer Wi-Fi to their customers using equipment from Netgear, Motorola, Cisco, and others.  Tellingly, much of that equipment is already licensed because they include chips, costing a few dollars each, made by licensed manufacturers.  However, this PAE is demanding that each customer pay up thousands of dollars per location or they will be sued.

Ensuring a vibrant IP system for the future

Ensuring that true inventors receive the credit and rewards they deserve should be the basic tenet of our patent system.  It is time for Congress to take action against patent assertion entities.  Cisco advocates  four important legislative changes: passage of the SHIELD Act or other means to discourage procedural abuses that feed this litigation; completing a technical fix to the America Invent Act’s post-grant opposition provision to ensure that patents that shouldn’t have been granted can be effectively challenged; and slowing down  PAE use of the International Trade Commission as another shakedown mechanism; and, finally, amending the reach of prior user rights so that American businesses are not at a disadvantage internationally and so that true innovators aren’t subject to suit for use of inventions they created first.

10,000+ patents and strong

Cisco’s 10,000th U.S. patent (No. 8,478,859) enables a simple, accurate way to indicate who is on-line and who isn’t, an increasingly important indicator of “presence” as we communicate more and more by video and collaboration tools, such as IM.  It is an exciting milestone in Cisco’s history but, most importantly, it is intellectual property that we as a nation must protect in the right way and encourage for future innovations.

Chandler is senior vice president, general counsel and secretary of Cisco.  He holds a bachelor's degree in economics from Harvard College and a juris doctor degree from Stanford Law School.