The Case for Change

America leads the world in technology innovation. This innovation is core to America’s economic strength and increasingly important to the future of our country. While the patent system has traditionally helped support and inspire innovation, new and emerging abuses of loopholes are hindering development of new innovations and restricting the growth of new industries.

Although the passage of the America Invents Act (AIA) in 2011 represented a step forward, it stopped short of fixing a number of significant flaws – flaws that continue to stifle innovation, limit economic growth, and keep American entrepreneurs on the sidelines.

First among these flaws is the lack of oversight governing Patent Assertion Entities (PAEs), commonly referred to as “patent trolls.” According to recent research, patent trolls cost the American economy more than $29 billion in 2011 alone – and this estimate does not even begin to measure the indirect costs of lost innovation. For large companies, the costs inflicted by patent trolls are a huge burden. For small companies and startups, the financial fallout can be absolutely devastating. Unfortunately, studies find that the targets of this game of patent extortion are increasingly small- and medium-sized businesses, the very job creators that make up the backbone of our economy. These startups are essential to innovation and job creation, and yet they are also the most vulnerable to the uncertainties and expenses of a patent system that is long on litigation and short on common sense.

As a matter of principle, we need to foster an environment where innovation and entrepreneurship are free to grow, without fear of patent trolls gaming the system in order to profit off the innovative work of others. The simple truth is that these patent trolls profit off the market innovation of others, and they are lining their pockets because of loopholes in the laws. Americans deserve better.

We need to return to a patent system that empowers individuals to create, encourages startups to innovate, fosters the growth of job creators so they may hire, and expands the American economy. Now, more than ever, it is time for Congress to work to achieve all of these goals and ensure that the U.S. patent system is strengthened to protect the very job creators who are working hard to power America’s economic recovery. Click here to read our letter to Congress outlining our recommendations to improve America’s patent system.

In fact, on February 14, 2013, President Obama took part in at Google+ hangout, where he had the following exchange.

Question: High tech startups are an important engine of the American economy. When I go around and talk to other entrepreneurs, what I hear is that they're afraid that if they become successful, they're going to be targeted by patent trolls... What are you planning to do to limit the abuse of software patents?

President Obama : A couple years ago we began a process of patent reform. We actually passed some legislation that made progress on some of these issues. But it hasn't captured all the problems.

The folks that you're talking about are a classic example. They don't actually produce anything themselves. They're just trying to essentially leverage and hijack somebody else's idea and see if they can extort some money out of them. Sometimes these things are challenging. Because we also want to make sure that patents are long enough, and that people's intellectual property is protected. We've got to balance that with making sure that they're not so long that innovation is reduced.

But I do think that our efforts at patent reform only went about halfway to where we need to go. What we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.

To read our statement in response to President Obama’s comments, please click here.