It’s time to overhaul the broken, ineffective U.S. patent system so that it actually promotes innovation and doesn’t inhibit it.
Under current law, the U.S. Patent and Trademark Office issues patents with overly broad claims, that last too long, and require too much effort to understand. While intended to protect inventors, the system as currently constructed instead creates disincentives for entrepreneurs and provides undeserved riches to patent assertion entities. We need a new approach.
Created over 200 years ago, the current system does more to inhibit innovation than promote it. And it all starts with patents – freely granted by the U.S. government – that last 20 years from the date an application is filed.
Let’s think about that. What were you doing 20 years ago? You likely weren’t surfing the internet, using a smart phone, reading books on an e-reader, shopping online, or watching TV on a giant flat-panel display. You weren’t storing your photos online, streaming movies or downloading music from the sky. Google, Yahoo, LinkedIn, Facebook, Amazon, Tesla, and many of the world’s other most innovative technology companies either didn’t exist 20 years ago or were just emerging. Today, those companies combined have a market capitalization of $830 billion dollars. Throw in the likes of Uber, Twitter, Yelp, Airbnb, Dropbox, Workday, Arista Networks, Palo Alto Networks and ServiceNow and the total grows over $900 billion and approaches 1 trillion dollars.
The point is, technological innovation unfolds at a stunning rate. Rather than allowing 20-year old patents to block innovation, we should ensure that our patent system supports and nurtures innovation.
For example, it is irrational for a patent filed 10 or more years ago to be used to prevent innovation from happening in e-commerce or software today. The 20-year patent term needs to go. Back in 1789, when the first patent was granted, patent terms didn’t exceed 14 years. Fast forward 225 years: patents now last 20 years from filing – but the pace of innovation has gone up exponentially. If patents are really meant to encourage innovation, the life of a patent should be reduced – and innovators should be encouraged to exploit their limited exclusivity or lose it. While 20-year term patent owners will rail about how much money they have put into their innovations, and thus they should be allowed more time to recoup their investment, in today’s fast paced technology world, five years of patent life should be enough time to make your investment back.
We propose the following changes be considered to ensure that patents and the patent system help, not hinder, innovation:
- Shorten patent terms: Patents should only last five years from issuance; for patents related to drugs or medical devices requiring separate regulatory approval, publish the allowed patent application but only issue the patent when regulatory approvals are obtained to sell the drug or device.
- If patents must be allowed to be “maintained” beyond year five (not recommended), allow it only once for a short time (two years at most) and charge a much higher amount for it than we do today. The current highest maintenance fee is $7,400 due 11.5 years into the patent term. We would recommend charging an order of magnitude more: at least $75,000, and preferably more. This will encourage conversion to public domain for the majority of patents.
- Use it or lose it: Patent owners, like trademark owners today, should be required to show evidence that they have actually productized their patented invention within a time certain (e.g., 12 months from issuance). If not, then the remainder of the patent term should be forfeited. This approach will police the patent ranks and get rid of stale “paper” patents. Patents could be purchased by others in this time period, and the purchaser could provide the necessary evidence of use to keep the patent live.
- Tighten up on novelty: Require a clear statement in every patent application from the Patent Examiner explaining exactly why the patent is being issued. If a party finds an earlier example of the “novel” feature, reexamination/inter-partes review is granted automatically on request of a party challenging the patent.
- Require acquired patents to be put to use: Allow patents to be sold, but only if the buyer can demonstrate plans to actually use the IP in question as expressed in the “use it or lose it” section above.
- Unite against patent assertion entities: Communities such as The LOT Network (in which Pure Storage participates) promote innovation by reducing the risk of litigation from PAEs and others who buy patents in today’s current open market. Until systemic changes like those proposed are adopted, the high tech industry needs to take the lead and do what it can to protect innovation. Any company can join LOT and help support innovation by limiting the impact of patents that fall into the hands of patent trolls or others that might use them to create a tax on innovative companies.
For those of you who would argue that all of the innovative companies identified above came to be with the current system and therefore change is not required, you should know that those companies have been involved in almost 400 patent lawsuits in the last three years alone. Imagine how much more innovation these companies would have produced if they didn’t have to deal with the cost and distraction of these lawsuits.
The above proposal may sound simple. But then again, a couple of lines from a document written 225 years ago gave rise to our patent system, and from that to billions and billions of dollars in intellectual property-related litigation and legal spend. Maybe simple is exactly what we need right now.