Patent Reform Pending

Patent Reform Pending

Patents are an important part of the U.S. enterprise system -- they protect inventors who have great ideas, and they give entrepreneurs an incentive to create and build businesses. This, in turn, provides a benefit to the consumer, providing new, innovative products at lower prices. But lately, as we've written in the past, the patent system has become rife with schemers and serial lawsuit-filers looking for a way to make a quick buck on the backs of innovators.

Much has been written about the broken patent system's effects on startups and tech companies. But now, other businesses are feeling the effects too -- including restaurants, airlines, and supermarkets. These industries have written Congress, urging legislators to take action and make it harder to get low-quality patents filed and approved. These non-tech companies have seen a spate of patent lawsuits recently -- grocery stores have been sued for using common map/location technology on their websites, and real-estate agents have been pinged for using alerts on theirs.

These legal wranglings are costing brick-and-mortar establishments millions of dollars per year in legal fees. Now, these non-tech industries are providing more strong voices for a much-needed overhaul of the system.

The tech industry has been pushing for patent reform for years. Patent trolls, or people who acquire patents for the sole purpose of enforcing them through lawsuits, are a big and growing problem; since 2005 the number of lawsuits filed by trolls has quadrupled. It's estimated that at least one-third of all startups have had to fight a patent troll, and it can cost millions of dollars to either settle these suits or fight them in court. Either way, it's an expense most companies, especially young ones, aren't equipped to handle.

When these costs are compounded with the lost productivity from dealing with these lawsuits, the legal costs can altogether sink a company. A Boston University study from 2012 found that patent trolls cost businesses $29 billion every year -- and the U.S. economy around $80 billion annually.

New legislation to alleviate these problems has been introduced by Rep. Goodlatte (R., Va.) and co-sponsored by a bipartisan group including Rep. Zoe Lofgren (D., Calif.). The bill, known as the Innovation Act, contains many provisions that reformers have been looking for -- such as a loser-pays system, whereby the lawsuit-filer will be forced to pick up all the legal costs should they lose their case.

Another provision is to put an end to the hidden structure of many of the patent trolls, which conceals ownership and interests. Yet another would invalidate the many low-quality patents that exist.

The Innovation Act could go a long way in helping to alleviate many of the problems plaguing businesses. It would limit would-be trolls' ability to game the patent system, and it would encourage innovation for the benefit of the economy and consumers.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research.

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