Today, several members of the House Judiciary committee released the Innovation Act of 2013 as an attempt to curb the pernicious growth of the patent troll business model.
Entrepreneurs, young businesses, and emerging, high-growth technologies are powering what resurgence there is in the American economy. But these businesses are subject to an arcane, onerous system of patent regulation that leaves them vulnerable, and that vulnerability is abused by patent assertion entities and their allies to leverage that system against innovators. With this reality, we are faced with two options: a broken system, or the chance of a reformed system that champions innovation and growth.
Engine, a San Francisco-based research foundation working with startups and government to create better public policy, completed groundbreaking research this year on technology entrepreneurship in America. Our findings highlight that these young companies create more and better jobs with higher wage premiums than any other industry and that they do so in a way that strengthens communities, creating 4.3 local jobs alongside their own. Moreover, it has become clear that these young, high-growth businesses have created all net new job growth since the time of Ronald Reagan.
Meanwhile, the patent troll racket is directly responsible for $29 billion per year in lost capital and investment. It is this lost capital that could otherwise be used to create the next great American companies that would rejuvenate the American economy.
For these reasons. among others, we are encouraged by House Judiciary Chairman Goodlatte’s proposal to reform the litigation system that allows these trolls to build their racket, proliferate, and profit. In this endeavor, he is joined by Reps. Zoe Lofgren (D-CA), Jason Chaffetz (R-UT), Howard Coble (R-NC), Peter Defazio (D-OR), Anna Eshoo (D-CA), Lamar Smith (R-TX), Tom Marino (R-PA), and George Holding (R-GA).
The Innovation Act would take many necessary steps to curb the activity of patent assertion entities, most notably by shifting the burden of proof and payment onto the aggressors, instituting a bonding scheme to protect against needless and superfluous litigation, and limiting the liability of end users in court findings. This bill also changes pleading standards so that assertions by trolls are more visible, and it extends the patent review process instituted by the America Invents Act to more types of patents so that we can ensure only good patents enter and stay within the system.
This bill puts our community, so deeply under threat, on the right path for a proper debate and the possibility of real change in Congress next year. Chairman Goodlatte and his allies in the House and Senate, along with their staff, have done an admirable job, and we applaud their efforts.
In the end, what matters most is that we work to protect innovation in America. We are fighting a global war for talent, and to retain our primacy in a global marketplace, we must do all we can with all sides to work towards a balanced, thoughtful solution that allows the kind of growth young companies can power to take root here in America. The Innovation Act sets us on a course that leads to that ultimate goal, and we look forward to working with our friends in Congress, as well as our allies to make real reform a reality. In doing that, we can support our entrepreneurial communities, reject the practices of protectionist patent trolling, and ensure that we build an America that can lead the global economy in innovation business for generations to come.
Michael McGeary is the cofounder and Chief Political Strategist for Engine, a San Francisco-based research foundation working with startups and government to create better public policy.