Samuel L. Clemons, better known as Mark Twain, received his first patent 142 years ago this month. At his very core, Twain was a believer in a strong patent system that helps entrepreneurs create products and bring them to the marketplace. One of his fictional characters once remarked that “a country without a patent office and good patent laws was just a crab and couldn’t travel anyway but sideways and backwards.”
Twain and the founders who believed in a strong patent system never intended that system to be abused by bad actors seeking private gain. Yet that is exactly what patent assertion entities (PAEs), commonly referred to as “patent trolls,” do. These interlopers impose hidden taxes on our most innovative products and services and force whole companies out of business with costly, illegitimate claims. In the past year alone, patent trolls cost the American economy more than $80 billion in total indirect costs. That’s why, in a rare display of bipartisan agreement at the close of this year, the House voted overwhelmingly for a bill to clamp down on the worst abusers of the patent system.
We held a series of meetings, roundtables and briefings with key stakeholders from tech groups like the Internet Association and the Software Alliance to main street organizations like the Restaurant Association and the National Retail Federation. We learned about the devastating economic effects wrought by patent trolls, and we concluded that the rapid growth of expensive patent warfare harms the progress of science and the arts in our nation – the very two goals that our Founding Fathers eloquently laid out in Article I, Section 8 of the U.S. Constitution, which authorizes and justifies the power of Congress to grant patents.
The advocates we met made clear to us that the American patent system, in its current form, impedes technological innovation and serves as a barrier to growth. Last year, both Apple and Google reached the dubious milestone of spending more on patent lawsuits and large-dollar patent purchases than on the development of new products. It’s not just the largest companies in America that are affected, either: 52 percent of the companies sued by patent trolls have revenues of less than $10 million annually. If we want to protect the small businesses that are key engines of job growth and innovation in our economy, then we have to increase transparency in patent infringement cases.
This problem affects more than just the tech industry. As the number of patents granted has surged in recent years – The New York Times recently reported that the U.S. PTO granted 576,000 patents in 2012 compared to 176,000 in 1990 – the number of patent lawsuits has surged. It’s tripled in the past two decades, creating an effective “patent tax” that harms small retailers, restaurants, hotels, automakers, and transit authorities; while inflating research and development costs for technology companies by nearly 20 percent. One small business, for example, was sued for $75,000 per head just for using a copying machine. Patent trolling hits every corner of the American economy and stifles job creation.
The Innovation Act builds upon the key reforms of the America Invents Act, which passed with bipartisan support in 2011, to bolster the strength of the patent system. It restrains bad actors by implementing key new transparency and accountability measures that maintain the rights of legitimate patent holders to enforce their claims while keeping trolls at bay. It requires potential trolls to provide detailed, specific information about what patents are being violated, and it would give judges the flexibility to impose punitive measures that deter the worst offenders from sending illegitimate assertion letters.
There is more work to be done as this bill to protect America’s innovators and entrepreneurs moves through the Senate, but this bill is an important first step. It shows that, at least when the health of our economy and the security of our small businesses are concerned, Congress can still work together. With a strong vote in the Senate, we can send this bill to the President’s desk and take a stand against nuisance patent trolls.
Mr. Twain would be very thankful.
Connolly has represented Virginia’s 11th Congressional District since 2009. He sits on the Foreign Affairs and the Oversight and Government Reform committees. He is also vice-chair of the pro-growth, pro-innovation House New Democrat Coalition.