Patent News

May. 12, 2014

Detroit Free Press: The belief that our patent system is broken is patently false (guest column), by David Kappos

This article originally appeared in the Detroit Free Press on May 12, 2014.

David Kappos, the former director of the U.S. Patent and Trademark Office, is a partner with Cravath, Swaine & Moore, LLP and is a senior adviser for the Partnership for American Innovation.

If you listen to some commentators on the subject of patents, you could form the belief that the patent system is irreparably broken.

According to these arguments, “patent trolls” are bringing businesses to a complete halt and that software patents are a barrier to innovation. Some pundits even equate “patent troll” litigation with the legitimate legal interests of inventors who are defending their intellectual property.

The same anecdotes and flawed studies are trotted out time and again to the delight of those who wish to substantially restrict the patent rights of operating companies in favor of their own narrow business interests. What these sound bites don’t tell you is that the cost of reducing or eliminating the incentives for innovation would be devastating for nearly all sectors of the U.S. economy. Worse, it could make slow growth permanent by ceding our position as a global high-tech leader to foreign competitors.

Industries that are intellectual-property intensive are a crucial economic driver, contributing $5 trillion and 40 million direct and indirect jobs to the American economy. And these jobs — in fields such as engineering, manufacturing and research — pay on average 42% more than positions than those in industries that aren’t intellectual-property intensive.

Because the patent system is so important to our economy, it is imperative that the public discussion be thoughtful and balanced. It should not be dominated by a vocal minority seeking to weaken our strong system for narrow, short-term gains. Research by Kenneth Sokoloff indicates that since 1852, the patent system has had a powerful impact on stimulating growth of the technology market and promoting technological change — and that incentive is just as powerful today.

Many inventive companies, from a variety of industries, stake their businesses on innovation. Companies such as Apple, DuPont, Ford, GE, IBM, Microsoft and Pfizer invest more than $40 billion every year in research and development and support more than 1.2 million jobs. These companies know first-hand the value of intellectual property and the patent system to the U.S. economy. They’ve just joined together as the Partnership for American Innovation to drive public awareness of the profound benefits of a system that protects inventors and incentivizes innovation.

The benefits of the patent system extend far into our economy, beyond just large corporations. Small and medium-sized businesses across the country depend on patent protection to bring products to market and compete. This competition is good for our economy and great for consumers seeking the next big thing.

In my time as the director of the U.S. Patent and Trademark Office, I saw that companies of all sizes depend on patent protection to attract the investment capital they need to bring products to market and create jobs. This is also true of the smallest start-up companies that are creating new products and new jobs. A recent studyfound that software firms with patents raised nearly $11 million more on average from venture capitalists compared to similar firms without patent assets. Nine out of 10 such companies that were backed by venture capitalists held at least one patent, and for good reason — each patent helps raise an additional $1.8 million at IPO.

As the Supreme Court, Congress and state legislatures take up this once arcane and crucially important topic, they should know the choice is more nuanced than weakening the system or doing nothing. Over the years, the patent system has evolved and grown, and it should continue to do so — measures that would help it do so include full funding of the U.S. Patent and Trademark Officeand enhanced transparency to increase patent quality. These measures will help curb abuse, while also encouraging innovation by promoting a climate that safeguards the risk-taking inherent in pushing technological frontiers.

As policymakers look to reduce unemployment and bolster American competitiveness, one of their best bets is improving the patent system. By improving and expanding incentives, our nation can offer talented engineers and scientists the encouragement needed to continue pouring their ingenuity into the next wave of breakthroughs. Whether the inventor is developing a great idea in a lab or in a garage, risking their savings and energy is feasible only if they know their innovation isn’t up for grabs by copycats as soon as it hits the market.

Great inventions deserve great protection. The American economy and its inventors are best served by a strong patent system that protects high quality innovation in all fields.