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What Will the Patent Reform Bill Mean for Innovation?

Will the latest attempt to protect small tech companies work?

5Aug

Patent trolls are one of the tech community’s biggest fears.

Acacia Research Corp. - one of the most prolific perpetrators of patent trolling according to the ARSTechnica - sued NetApp in 2011 - a computer storage and data management company, claiming that its server-based software infringed on two of its patents.

Last year, however, they were ordered to pay NetApp $1.4 million in attorneys' fees, with the court stating that Arcacia had no grounds to sue, calling their claims 'frivolous'.  

Unfortunately, Arcacia represents just a tiny percentage of the problem. In fact, the issue has heightened to such an extent that Congress recently took steps to reform the nation’s patent system legislation. Under the proposed laws, patent trolls will have to explain how a piece of technology infringes a patent - they currently don’t have to do this - whilst perpetrators will also be forced to reveal their true identities, rather than hide behind tech-sounding company names.

The tech community, however, isn’t holding its breath. A similar proposition - called the America Invents Act - was signed by Barack Obama in 2011, but has been largely ineffective due to Congress stripping out its core principles.

There’s evidence to suggest that patents are now an ineffective way to gauge the prevalence of innovation. The Bloomberg Innovation Index - which includes a list detailing the nations with the most patents - doesn’t have a place for any Scandinavian nation, despite the general consensus being that Sweden in particular, is one of the most innovative countries in the world. (For instance, the Swedish company Volvo invented the three point seatbelt but gave away their patent and have saved countless lives in the process.) This led Dominic Basalt from the Washington Post to call patents ‘a tax on innovation’, caused by patent trolls which are ‘transforming the patent from a proud badge of innovative activity into something negative’. To add to this, the Harvard Business Review - through three research studies - found that patent litigation was putting venture capitalists off investing in startups, with the fear of lengthy court battles creating too much risk.

The patent system does however, have its advantages. More than anything, and particularly in the United States, entrepreneurs are uneasy with the notion that their inventions are unprotected. Removing them could have real implications, and potentially even put would-be entrepreneurs off experimenting with new ideas. This would imply that patents aren’t the issue, but that their ownership - especially when in bulk - can be taken advantage of.

The importance of patents can be seen in both the bio-tech and drug industries. Joseph Allen, from IPWatchdog, refers to the scientific breakthroughs relating to the treatment of a number of neurological disorders as proof that patents still have value.

He states; ‘Without reliable patent protection and effective licensing these revolutionary treatments requiring decades of effort and billions of dollars to develop will not become available to help desperate patients.‘

The Patent Reform Bill needs to address the issue of patent trolls, because rather than decreasing in importance, patents are now the foundation from which successful startups, especially in the industries mentioned above, thrive. If the legislation can do that, it should stimulate innovation and stop exciting technology companies from being quashed by patent trolls which are out to simply make money.

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