Patent News

Jan. 6, 2015

IP Watchdog Op-Ed: A Sensible response: Do not rush to pass a bill, by Judge Paul Michel

This post originally appeared in IP Watchdog on January 6, 2014.

The new Congress will either upgrade or degrade America’s patent rights system, our primary engine of economic growth and job creation, when it resumes efforts at “patent reform.” Although some manufacturing that was off-shored is returning, our economy remains an innovation-driven one.

Patents incentivize the repeated investments needed for R & D, invention, and commercialization of new products by assuring a reasonable return on these inherently risky investments If these incentives fade, so will the investments, for money managers have many other options

What creates the incentives in the first place is the value of patents, but their market value depends on the owner’s ability to get courts to enforce them. Patents cannot enforce themselves.

And, in commerce, there is no honor system, so every licensing transaction takes place in the shadow of the courthouse even when no infringement suit has been filed. It is the realistic threat that suit can be filed and succeed that convinces those using others’ technology to take a license. The potential to enforce patents in court drives the entire system.

Proponents of proposed legislation admit that they want to deter and burden such suits. Led by 20 Silicon Valley IT giants, these companies demand legislation that would make suing more expensive, more difficult, slower and less certain. But the principal deficiency in the enforcement system at present is that suing is too expensive, too difficult, too slow and too uncertain. The justification offered for aggravating these ills is that the IT companies are being forced to spend considerable money defending suits that they assert are mostly frivolous, taxing innovation and diverting funds from innovation to wasteful litigation. To be sure there are some such suits. But they must not be the majority because courts rarely find infringement suits to be frivolous. I estimate they constitute less than 10%. Adjudicated frivolity is less than 1% of all suits filed, although a large majority settle before trial, so the real percentage is unknown. In any event, as everyone can see IT innovation is astonishingly rapid and profits at these companies are at historic highs.