(Bloomberg View) -- There are lots of patents floating around that don't represent bona fide inventions.
The office that evaluates patent applications is overwhelmed, and doesn't really have a mechanism to conclusively reject low-quality applications. As a result, clever and persistent lawyers can wrangle patents for long-established technologies like GPS tracking and scanning and emailing documents, without adding innovative ideas.
Patents give their owners the right to exclude others from commercializing “arguably similar” ideas. Thus owners of low-quality patents lurk like sharks, ready to attack all kinds of companies.
It's prohibitively costly to review every patent that's been granted, so the intellectual property ocean won't be de-sharked anytime soon. But in 2011, the America Invents Act set up a partial solution called inter partes review (IPR), under which third parties can challenge the validity of individual patents directly – effectively, to clean up the waters near where innovation is actually happening.
Any patent challenged under IPR goes through a formal review at the Patent Trial and Appeal Board, part of the U.S. Patent and Trademark Office. IPRs are expensive – they cost tens of thousands of dollars to file, and that's not counting legal fees – so nobody undertakes them lightly. You file only if you have a clear reason, and if you expect to succeed.
From an economic perspective, this makes sense. If you're sued for infringement on low-quality patents – or if you're worried that you might be in the future – then you can challenge those patents through IPR without needing a court proceeding, which would be even costlier. Thus, IPR effectively imposes extra upfront scrutiny for those patents that might block productivity or technology development. Low-quality patents that actually crowd out innovation can be caught and invalidated, leaving less harmful ones to sit in the background like so much intellectual junk DNA.
For the most part, the system works. IPR has partially or fully invalidated over a thousand patents, including some particularly high-profile examples like Personal Audio LLC's U.S. patent 8,112,504, which covered podcasting. (You don't think that “disseminating media content” in a “serialized sequence” was invented in 1996? Neither did the Patent Trial and Appeal Board.) At the same time, IPR has been far from the “death squad” for legitimate patents that some had feared – it leaves in place the majority of challenged patents, especially in certain industries.
Sounds great, right? Well, not to patent trolls, who profit off opportunistic litigation and often bring lawsuits based on low-quality patents. And also not to Senator Chris Coons, who represents Delaware, a state that's already a patent litigation center and is likely to get a large influx of new patent lawsuits soon. Coons just introduced the STRONGER Patents Act (capital letters and all), which would gut the review process to the benefit of trolls.
Can you figure out the backronym? “STRONGER” stands for “Support Technology and Research for Our Nation's Growth and Economic Resilience.” (Zero points if you guessed “Stop Trolls Ravaging Our Nation so as to Galvanize Entrepreneurship and Research.”)
Like many initiatives aimed at bolstering patents, the declared purpose of the STRONGER Patents legislation is to encourage growth through increased innovation. The problem with this rosy motivation is that it's not clear that enhanced patent protection actually encourages either innovation or growth.
Patent trolling costs billions of dollars – and reduces research and development efforts, startup financing, and small business employment – without increasing innovation by small inventors. Making it harder to fish out low-quality patents with IPR certainly won't improve matters.
And the STRONGER Patents Act has other provisions that would further empower patent trolls. It would roll back a 2006 Supreme Court decision that made it hard for patent litigants to extract preliminary injunctions that force quick settlements. And it would expand U.S. patent law to cover global sales of products designed at home – a change that would probably push innovation overseas.
Taken together, STRONGER Patents would mean weaker American innovation. For backronym fans, that's “Wrecking Economic Activity by Killing Entrepreneurship and Research.”
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Scott Duke Kominers is an associate professor at Harvard Business School and the Harvard Department of Economics. Previously, he was a junior fellow at the Harvard Society of Fellows and the inaugural research scholar at the Becker Friedman Institute for Research in Economics at the University of Chicago.
No offense intended to junk DNA, which has turned out to hold numerous treasures
It's worth noting also that there have been a couple of suspected attempts to abuse the IPR system, such as a case in which hedge-fund manager Kyle Bass is alleged to have challenged the validity of a number of pharmaceutical patents in order to profit through speculation on their owners' stock prices.
To contact the editor responsible for this story: Jonathan Landman at jlandman4@bloomberg.net.
For more columns from Bloomberg View, visit http://www.bloomberg.com/view.
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