print-icon
print-icon

The System Is Broken: The American Patent System is Nearing Crisis Levels

valuewalk's Photo
by valuewalk
Tuesday, Mar 22, 2022 - 17:52

As the United States government works to resolve geopolitical tensions halfway around the world, while undertaking the threats caused by the global pandemic; a crisis has been tearing at the seams of the nation, and it’s starting to reach crisis levels.

For decades, the U.S. Patent and Trademark Office has worked tirelessly to ensure that the most sought-after inventions and notable discoveries will receive honorary prestige of being patented and trademarked.

Within the last few years, new applications for patents have increased, with between 600,000 and 650,000 new applications filed each year. American employers and manufacturers have been urged to leap forward, looking to push the boundaries on innovation and authenticity for invention patent referrals.

In 2011, Congress passed the America Invents Act (AIA) as a way to ensure high-quality patents are filed and approved. This helped manufacturers, most of them American, to take charge of the new system, allowing to eliminate of low-quality patents from the system and lobbyist gamesmanship that’s hurting smaller players.

The solution worked, partially.

While AIA stood strong throughout its inception years, a growing number of multinational companies and patent trolls, those hoarding lesser value patents looking to extend the rights thereof which are far beyond its actual value, have flooded the system and are now slowly deteriorating the system from within.

Research found that around 28% of all current patents are somewhat or even entirely invalid. For software, the estimates are even higher ranging between 39% and 56%. So how did we get here, and if there’s a solution to the problem, how do we get it fixed?

How We Got Here

With the advent of technology and the internet, it’s become a lot easier for us to constantly be connected via social media or other digital platforms. For multinational companies, this was the perfect opportunity to expand their reach, and infiltrate new consumer markets without having to be physically present.

At the time it seemed as if AIA had a good grip on the patent trolls who made off with more than $500 billion from American companies. Patent trolls were digging deep into the pockets of manufacturers and medium-sized organizations.

By the time the law finally passed, it was almost too late. Hedge funds and foreign investors were already within the system and sidestepped the new laws almost instantaneously. Although it meant that old patents could be purchased, it gave life to a new problem - corporations weaponizing companies and manufacturers at the expense of innovation.

By 2018, patent litigation increased by more than 35%, in 2021, litigation jumped to 43.3%, the highest of any first quarter filings since 2015.

Companies that do end up taking legal action against a patent troll are faced with high legal fees and infringement lawsuits that can take years to finalize. The high cost of taking the legal route has put companies in a position where it’s easier to simply pay off the troll.

More so, the U.S. Patent and Trademark Offices have managed to bypass congressional intent, changing rules and regulations as they please which in the long run has made it harder for smaller companies, manufacturers, and inventors to take legal action against any patent trolls.

As new patent filings increase each year, with more than 600,000 applications each year and less than 8,000 patent examiners - it’s easy for low-quality patents to quickly slip through the cracks.

Time has also played a major part in the demise of the system, with research suggesting that a patent in the U.S. is examined for at least 18 hours before being approved, whereas the European Union and Japan would deny patents for the same invention. The cost of running extended examinations has proven a massive problem for the USPTO, with examination costs being paid from the application fees.

Low-quality patents that have no real contribution to the economy and the greater development of innovation are now seeping out of every industry, and it’s become nearly impossible to establish solutions that will be able to resolve the issue.

The Road Forward

The issue at hand is a lot bigger than one may think, and to start, we need to review the current system. There have been suggestions that Congress needs to step in, taking hold of current patent trolls, from the U.S. and those abroad.

In a recent turn of events Senator Patrick Leahy, D-VT, and Senator John Cornyn, R-TX was able to introduce S. 2891 - Restoring the America Invents Act. While it may take some time before we will witness the full effect of S. 2891, it helps put USPTO and the AIA under a microscopic view looking to better understand how the current situation is reaching a point of no return.

Furthermore, the nomination of President Biden's new director for the USPTO, Kathi Vidal, partner of Winston & Strawn, is perhaps a step in the right direction. While Vidal is still set to address the Senate in her confirmation hearing, American manufacturers are hoping that Vidal will be able to reinstate the inter partes review (IPR) process and further enforce the AIA as it was originally intended by Congress.

The patent office should challenge the ability of all patent applications, looking to eliminate any bad, poor, and low-quality patents permanently from the system. We’ve reached an inflection point that has caused more damage than what it’s doing right.

American manufacturers are faced dealing with clear patent trolls breaking the rules without any justification for their actions. It’s still not an easy road forward, but we’re now faced with lower innovation that’s become a clear burden on America’s foothold as a global superpower.

Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.
0