The nature of the patent system has fundamentally changed since Congress last addressed patents. As Supreme Court Justice Anthony Kennedy explained in a concurring May 2006 eBay decision,"[i]n cases now arising... the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees."



Perhaps the best known recent patent disagreement was that of NTP against Research in Motion (RIM), the maker of the BlackBerry. As the case dragged on, the months of uncertainty over the fate of the BlackBerry took a financial toll on RIM. For the quarter preceding the settlement, RIM reported net subscriber accounts and sales were significantly lower than anticipated. Because RIM's business was put at serious risk, it ultimately was forced to settle the dispute for $612.5 million, even though it was likely that the NTP patents that were the basis for the suit would be overturned and, in fact, many later were.

The Black Berry case is just one well-known example of the problem. Regardless of the merits of the patents at issue, the combination of an overworked PTO, inadequate procedures to review patents, and unclear rules in the courts combine to put defendants in the position of rolling the dice in a game of "legal lotto" which ill serves inventors and producers of products alike.

"American companies should be spending time, money and manpower on innovating and growing, creating jobs and delivering
more value to consumers and shareholders."

Nationwide, the number of patent disagreements nearly tripled between 1991 and 2004. In the Federal Eastern District of Texas - a jurisdiction that has become a magnet for patent cases because of the high percentage of cases that are decided in favor of plaintiffs compared to other venues - 32 patent lawsuits were filed in 2002. This year, an estimated 234 cases will be filed in the district.

Abuse of the patent system results in extremely high costs to consumers and business. Today, a typical patent case costs $4.5 million through trial. This is more than four times as expensive as a typical copyright case with similar liability exposure. Rather than having to fend off these abuses, American companies should be spending time, money and manpower on innovating and growing, creating jobs and delivering more value to consumers and shareholders. Under the current system, American innovation suffers.

For the patent system to promote innovation most effectively, it must balance clear boundaries of rights, fair procedures and good disclosures. Failure of any of these is an imbalance. The increasing failure of all three requires congressional intervention.

For the sake of consumers, businesses both small and large and U.S. economic competitiveness, it's time to modernize and strengthen the patent system.

"With the number of patents being issued each year skyrocketing, it is increasingly difficut for inventors to assure the validity of their own patent application."