Posturing Over Patent Reform Shows How Young Companies Innovate While Old Companies Litigate

It’s hardly a surprise, but the latest draft bill, put forth by Rep. Bob Goodlatte, head of the House Judiciary Committee, has many really good things included, but is unfortunately weak in other areas. While it does include changes like requiring disclosures for those who sue over patent infringement (to get past the problem of shell companies), and a few other useful reforms, it really misses out on some big useful changes. For example, it doesn’t include a provision that will make it easier to invalidate bad patents, which would be a huge step forward.

Of course, as you might expect, there’s something of a “split” within the tech sector over whether or not there’s support for Goodlatte’s latest bill. On the one hand, you’ve got over 200 startups asking for that accelerated review process for questionable patents. At the same time, you’ve got a coalition of about 100 more stodgy old line businesses (some of whom are in the tech world) arguing that such a review would “undermine many valid patents.” Frankly, that’s hogwash, as we’ll discuss in a bit.

It’s really not difficult to see how this all breaks down. As we’ve explained for years, the general rule of thumb in the tech industry is that when you’re young you innovate, and when you’re old you litigate (with patents). Entrepreneurs and startups generally don’t think or worry too much about patents. They’re kind of a distraction more than anything else. The focus is actually on building an awesome product and disrupting the legacy players. It’s only the bigger old stodgy companies who freak out at the possibility of being disrupted, and who suddenly start suing the upstarts (and, well, any competitor they can find) when they realize that it’s more difficult for them to keep pace with the startups, and that it’s more cost effective to shut down innovation from others, rather than compete.

Given that, it’s not difficult to pick randomly from signatories of the two letters and figure out who signed onto which list. Automattic, FindTheBest, StackExchange, TechStars and FireBase? Yeah, they’re on the innovators letter. 3M, Adobe, IBM, Microsoft? Yup. On the old stodgy companies letter, arguing against accelerated review of patents. And yet, laughingly, they claim to be the “innovators.” Yes, maybe decades ago, but all those companies are now way behind the true innovators of today. Also, it’s telling that pharmaceutical giant Eli Lilly is on that letter as well. The big pharma companies were the ones who spent most of the last decade stifling any kind of patent reform, which was being fought for by many of the same tech companies that are now trying to block new patent reform. The innovators got old and now they’re trying to stifle competition, rather than innovate. It’s sad. Looking down that list, it’s difficult to find any that you could legitimately call innovative today, even if some were in the past.

Furthermore, the claims made in that letter (which apparently was written by the BSA under the new leadership of the White House’s former IP czar), that this would somehow undermine valid patents doesn’t pass the laugh test. As Matt Levy over at Patent Progress notes, the arguments in the letter make no sense at all:

Suppose a company has an innovative product and asserts a related patent against a competitor. If the competitor requests [an accelerated] review of the patent and wins, the original company still has an innovative product; the difference is that now it might have a competitor in the marketplace.

That’s actually a good thing. Now we have two companies with innovative products instead of just one. And the competitor is allowed to keep making its product, which might be even better than the original company’s.

But a company with a patent, even an invalid one, can stop an innovative product from coming to market or add significantly to the product’s cost. That’s because fighting patent infringement is incredibly expensive.

Nothing in an accelerated review process could possibly harm actual innovation. The only thing it does is ensure that old, stodgy, slow companies will have to keep pace with more entrepreneurial entities, and compete by continuing to innovate. That’s a good thing, but you can see why those legacy players are scared. They know they can’t keep up any more.

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