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Patent reform and innovation

This article originally appeared in the Washington Times

On February 5, the Senate confirmed Andrei Iancu as director of the Patent and Trademark Office. An attorney with long experience in the field, Director Iancu takes office at a time when, by every measure, our innovation economy is rocketing upward. And yet a key element to that success, patent reforms spurred by the U.S. Congress and the U.S. Supreme Court over the past decade, has ignited a fierce debate.

At issue is a new procedure, established by the 2011 America Invents Act (AIA). It provides an mechanism for the Patent Office to double check its work and weed out its mistakes, revoking patents that never should never have been granted. A few critics claim that, because of this procedure, innovation in the United States is on the wane. The data shows just the opposite.

Consider these ongoing developments. Cloud computing is making possible ubiquitous access to shared pools of data, freeing companies and other organizations to focus on their core businesses. 3D printing is decentralizing production, making it more efficient. Artificial intelligence is enabling advances that once were only in the realm of science fiction.

Our recent past was one in which biometric security was thought to be a distant reality, but now a fingerprint unlocks our phones. And this month drones helped rescue two people in distress. Our near future will no doubt include more amazing advances, such as self-driving cars and the ability to restore mobility to those paralyzed by tragic accidents.

But before the recent patent reforms technological advancement had started to become a victim of its own success. Complex new technologies had proliferated to such a degree that the abundance of patent applications began to overburden a busy examination process. Mistakes were bound to occur, with patents going to frivolous or old ideas, rather than real advances.

By granting patents on frivolous ideas, we encourage litigation and discourage the development of solid innovations. When litigation results, we divert to the courtroom resources that better deployed in laboratories. We needed a streamlined, efficient and speedy process to catch such mistakes.

The AIA, passed by Congress in late 2011, provides that needed safety net. Its inter-partes review (IPR) process, which became effective in 2012, provides a vital means to challenge the thicket of erroneously granted patents that slow progress by stifling the inventors creating new technologies. Along with the Supreme Court 2014 decision in Alice Corp. v. CLS Bank Int’l that patents can be issued only for actual inventions and not for abstract ideas, these changes are helping clear out the invalid patents.

The proof of the value and success of this streamlined patent review process is evident:

  • R&D spending in the United States is up. R&D investment by the 300 companies with the highest R&D spending including companies in high tech, pharmaceuticals, autos and aerospace — increased R&D levels by 44 percent since 2012.

  • Venture capital funding in the United States is up dramatically, nearly doubling between 2012 and 2016, from $32.8 billion to $61 billion. Venture capital funding for software and Internet companies in the three years following the Court’s Alice decision increased by 88 percent compared to the three years prior.

  • Startup activity is way up. The Kauffman Index of Startup Activity shows a 194 percent increase in overall startup activity from 2012 through 2016.

Even the number of U.S. patent filings continues to rise. From 2012 to 2016, filings increased 15 percent. In 2016, more than 650,000 applications were filed, and over 334,000 patents were issued — the highest number ever on both counts. Far from being discouraged by reforms to U.S. patent system, inventors have embraced them and welcomed their protections.

In other words, following the introduction of the IPR procedure and the Supreme Court’s Alice decision, innovation in the United States flourished more than ever. Emerging technologies that could have been more easily blocked by unwarranted patent claims now see the light of day. Patent applications whose claims were stretched to abstractness in an attempt to portray relevance to many new industries are less likely to stand in the way of progress.

Innovation is moving faster than ever. The people who devote their lives to making all of ours better have a clearer and stronger incentive to create. And we all reap the benefits.

John Thorne is a partner at Kellogg Hansen and general counsel of the High Tech Inventors Alliance, an association of Adobe, Amazon, Cisco, Dell, Google, Intel, Oracle and Salesforce.

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