Barack Obama left the patent system in a much worse state than when he took office. The Patent and Trademark Office (PTO) is controlled by patent critics with an extreme anti-patent bias. Smaller entities and, in particular, independent inventors, are an endangered species. Investment in innovation is at its lowest. Productivity growth resulting from investment in innovation is at its lowest multigenerational level. Due to the extreme mismanagement of the patent system and the resulting decline in its productivity growth, economic growth is low.
The patent system is the basis of economic productivity and growth. The US constitution establishes a system to provide an “exclusive right” for a limited time to provide an incentive to invent and discover new things. Left-wing socialists and right-wing market players never liked the idea of providing competitive tools, so they persistently attacked the patent system.
The result of the attacks on the patent system has been a concerted critique of the key elements of patent rights protection. These include allowing the PTO to attack the validity of patents in a second window, attacking categories of inventions such as software and medical diagnostics, limiting access to courts, increasing multi-order enforcement costs and restrict patent remedies. The totality of these attacks on the patent system, made possible in large part by the spending of considerable sums to influence the policies of incumbent technology operators to protect their historic monopoly profits, consisted in fundamentally changing a democratized patent system into a system that requires substantial capitalization. . The net effect has been the decline in investment in innovation, especially by smaller entities that need patents as a key tool for competition.
What can be done?
In fact, the new administration can do a lot to balance a patent system that has been badly damaged by misguided policies. First, it must be recognized that a patent is a form of private property. This is clearly recognized in a Republican convention platform board. From this recognition, it is essential to restore the patent rights with a strong recourse for infringement, regardless of the identity of the patent holder. In particular, an injunction must be issued in the event of a finding of an infringing patent. Courts can settle the details of providing an injunction for a small item in a larger system by appropriately narrowing the injunction. The CAFC must move away from an inflexible interpretation of eBay and allow innovators to obtain injunctions in appropriate circumstances. The new administration can greatly influence this change.
Second, anyone should have access to the courts to enforce an infringing patent. US courts should allow a patentee to have access to a jury within a reasonable period of less than two years. Decisions about location must be made based on a balance of factors that are fair to both parties to a dispute.
Third, the Trump administration needs to be very clear that legislation involving the patent system must be pro-patent, not anti-patent legislation designed and bought by incumbent technology operators to perpetuate their benefits and undermine competition.
Fourth, the Trump administration must enforce antitrust laws. In particular, enforcement against large technology operators must promote competition. Someone has to keep their feet on the fire to obey the law and Trump is the guy to do it. Market entrants need a level playing field that is ensured by effective antitrust enforcement.
Fifth, the Trump administration must clean up the PTO house. Director Lee appeared more like a fox in charge of the chicken coop than a legitimate manager. CAFC rules should be applied to examinations involving software patents; some units, with a subsidy rate of 20% or less or frozen due to incompetence, need to be reorganized.
The power take-off must become pro-patent again. To do this, it must be friendly and cooperative, not hostile or disparaging, towards patent applicants.
The greatest need for change, of course, must occur within the Patent Trial and Appeal Board (PTAB), which has been totally out of control for years and has seriously damaged its credibility. The PTAB needs a new leadership with a new set of rules to administer a fair and balanced patent examination policy.
PTAB needs a high bar to establish a patent examination institution. Preferably, all patent examination institutions should be ordered by judges of the Federal District Court. This requirement assumes that there is a standing to apply for patent examination.
Since the presumption of patent validity is paramount, a high level of clear and convincing evidence should be applied to patents both before the Federal District Court and the PTO. Likewise, the Phillips Standard should be applied to patent examinations before the courts and the PTO. Otherwise, there are inconsistent results.
The PTAB must implement a mechanism to allow the modification of the patents that are being examined to adapt the language of the claims if the prior art suggests the need to restrict the claims. Alternatively, a rapid loss modification exit ramp can be instituted. The original language and legislative history of the AIA was quite clear on this point.
Serial patent challenges should be strictly limited. Abusive patent challengers are required to pay the patentee’s attorney fees, with challengers being required to pay a non-refundable scaling fee based on the institution’s number of requests. PTAB should not be the compliant pet of big tech companies with a history of serial counterfeiting.
Patent examinations have been costly and deadly, illustrating a one-sided risk that puts patent holders at risk at limited cost to infringer. This asymmetry has made patents a handicap and not an asset.
When patents are expensive and difficult to defend, the incentive to invest in innovation is greatly diminished. The consequences of this situation have included the perverse deterrence of large companies to invest in innovation since they can ride free rides.
The combination of these elements enabling the incoming administration to improve the patent system can have dramatic effects in providing incentives to invent and protect innovation that will have lasting positive effects on productivity growth. Strong patents promote competition, which is good for the economy. Rather than relying solely on temporary policy changes, such as short-term tax cuts, these proposed changes to the patent system will stimulate sustainable economic growth.
Evidence shows that strong patent policies – like those of Presidents Reagan and Clinton – will translate into long-term economic growth. What are we waiting for?
Neal Solomon is CEO of Advanced System Technologies Inc. A prolific inventor of technologies involving semiconductors, communications, data management, imaging, robotics and health, he is a graduate of Reed College and University from Chicago.