On October 8, 2012 the New York Times ran “The Patent, Used as a Sword,” an article that details how large technology companies use abuse patent law to exclude start-ups and cripple the competition.  Not surprisingly, most of authors‘ Charles Duhigg and Steve Lohr’s attack focuses on Apple and their practice of applying for patents with borderline patentable ideas.  According to Duhigg and Lohr, Apple has received 4,100 patents since 2000 and filed many more applications.  In the years since 2006, when the first generation iPhone was announced, Apple has aggressively enforced its patent rights against any potential or actual infringers.  At that time, the late Steve Jobs proclaimed, “we’re going to patent it all.”  While Apple has taken advantage of the law, it is the patent process itself that requires revision.

Following his decision in Apple v. Motorola last summer, Judge Posner lamented the current state of patent law, emphasizing the frivolity and great financial cost of patent litigation.[1]  The Times article raises another grave issue—by freely granting patents to large technology companies and patent trolls, has the government encouraged not just the monopolization of novel ideas, but the monopolization of an industry as well?  “One consequence of all this [patent] litigation . . . is that patent disputes are suffocating the culture of start-ups that has long fueled job growth and technological innovation.”  Suppose a large technology company receives a bad patent.  When a small company innocently infringes a lawsuit is likely, if not imminent.  Even if the small company prevails at court, the cost of litigation can be fatal.

Opponents of the bipartisan Leahy-Smith America Invents Act, which inter alia switched the patent system from “first to invent” to “first inventor to file,” have argued that the current system impairs access to venture capital—a common and often necessary means of funding innovation for individuals and small businesses.  Gary Lauder, a notable venture capitalist posits, “VCs are investors, not gamblers. VCs only invest in companies that can make convincing showings that they have a good likelihood of being profitable, and maintaining that profitability for years.”  When a small business is badgered by lawsuits it ceases to be a wise investment and becomes a liability.

Technology giants like Apple or Google have more than enough capital to file pre-emptive applications, “[In 2011], for the first time, spending by Apple and Google on patent lawsuits and . . . patent purchases exceeded spending on research and development . . . .”  The same strategy is unavailable to start-ups and small companies, which often dedicate much of their budget to R&D costs, leaving little room for legal fees.

With so much wrong, how can the system be fixed? One preemptive solution would be for the Patent and Trademark Office to grant fewer patents that employ overly general or practical details.  Apple does not sue because other companies have copied the exact design of the iPhone—it sues to protect minor elements of its products, such as rounded corners on the iPhone.  A strict application of the traditional patent requirements (a novel, not obvious and useful invention) would lower the number of applications granted and raise competition within the tech industry.  Moreover, increased funding for the PTO would allow it to hirer more examiners, lessening the heavy workload and encouraging greater attention to detail during the patent review process.

Of course, more severe and sweeping reforms are possible as well.  In the Times article, Judge Posner recommended that Congress reduce the duration of patents for digital technologies to five years.  This idea takes into account the consistent and rapid evolution of technological developments, in addition to preventing patentees from bringing suit to protect stale technology.  Unfortunately, such a change to the system appears unlikely, given that the government has been extremely reluctant to revise the system over the last two hundred years.  The America Invents Act represents one of the rare instances of a revision by the federal government to the patent system.  Until drastic reforms can be made, start-ups and small tech companies will have to rely on judicial activism and hope for leniency from larger, higher revenue competitors.

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