Change is needed to spur innovation, ward off litigation

For the past year, we’ve heard a great deal about what it’s going to take to “fix” the economy. Whether it’s bailouts for automakers or for banks, Congress and the administration have spent billions of dollars to “rescue” American industries in an effort to jumpstart the American economy.

Amazingly, one solution that has gone largely unnoticed during this debate is how Congress can encourage the invention of new technologies that will create jobs and strengthen the economy.

Few issues are as important to the economic stability of America as our ability to create and protect intellectual property. Whether it’s a mousetrap in your home, an iPod in your hand or a pacemaker in your heart, intellectual property plays a critical role in our daily lives and the global economy.

American IP industries now account for over half of all U.S. exports and 40 percent of our economic growth. These industries provide millions of Americans with high-paying jobs. Patents encourage innovation and provide incentives to create, build and market new products.

But to continue leading the world in new technologies, our patent system must be reformed. The current system — in place since before the Internet — is outdated and invites lawsuits from holders of questionable patents seeking to extort millions of dollars from high-tech companies. These lawsuits discourage the very productivity that we need to help lift our economy out of a recession.

That’s why a bipartisan and bicameral group of members has been working diligently to enact patent reform. For more than five years, we have negotiated, compromised and debated the relevant issues. But after five years of debate, the time to act is now. We need a system in place that enhances patent quality, discourages frivolous litigation, streamlines international patent principles and enforces property rights. In other words, we need to modernize the law to help inventors invent.

One of the biggest problems in our patent system is that it is susceptible to abusive litigation tactics. Under the current system, a plaintiff could hold three patents on a product that includes 1,000 patented parts. If a jury finds in favor of the plaintiff, the jurors are then responsible for determining how much the three patents contribute to the worth of the entire product. That’s not an easy task, especially when the guidance given is vague and the subject matter is overwhelmingly technical. Juries end up playing guessing games with damages and often the award is far greater than the worth of the patent.

In the last five years, frivolous lawsuits against high-tech companies have doubled. It costs these companies an average of $5 million to defeat each frivolous suits. So often defendants pay large sums just to settle the case. This money is diverted from worthwhile research and development that leads to more jobs and economic growth.

Patents allow companies to make a profit off of products and technologies they spent years developing. They need this money to recover their costs and to fund research for new technologies. In addition to providing products we need and enjoy, these new technologies create jobs for American workers and bring money into the economy.

Encouraging the creation of new technologies is essential to restoring American prosperity. But if we want intellectual property industries to help invent a way out of the recession, we must put an end to the legal gamesmanship that rewards lawsuit abuse over creativity.

All industries directly or indirectly affected by patents — including finance, automotive manufacturing, high-tech, bio-tech and pharmaceuticals — will benefit from patent reform. It will encourage innovation — from the lone inventor in his or her garage to the high-tech company that files a thousand patents each year, and all businesses in between. And that, in turn, will spark new growth in our economy, help create jobs and put Americans back on the path to prosperity.

Smith is the senior Republican on the House Judiciary Committee and is an original cosponsor of the Patent Reform Act of 2009.