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A $900 Billion (Per Year) Decision: Will Supreme Court Side With Innovators Or Government?

Most Americans probably have never heard of Andrei Iancu or even the post he occupies — director of the United States Patent and Trademark Office. In light of other pressing matters our nation is facing, claiming that a speech by this non-Cabinet-level official delivered to a private organization was the most important thing to have happened in Washington over the last two weeks may sound foolish, but consider the following.

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The United States patent system is responsible for nearly $900 billion per year (or 5% of the GDP) in added value to the economy. It sustains 7.5 million jobs, which pay workers, on average, twice as much as jobs in those sectors of the economy, while bringing in billions in foreign trade.

The reason for these eye-popping numbers is that patents protect the investment of time and money into innovation, allowing those who bring new goods to market to be secure in their knowledge that the fruits of their labor won’t be stolen from them. They are one of the reasons the United States is the leading economic power in the world.

Yet, over the last decade or so, forces led by the Silicon Valley giants have convinced Congress that the American patents system has lost its way, grants too many patents, and is in dire need of reform. In 2011, Congress obliged and created new mechanisms that make it easier to invalidate patents, promising that the reform would provide more certainty to and increase the supposedly flagging confidence in our patent system.

The result is the exact opposite. The new procedures, which are literally stacked against the patentees, resulted in an over-80% invalidation rate, becoming, according to a former federal judge, a “patent death squad.” And those patents that survived were subjected to ever more reviews until a finding of invalidity could be made.

By some estimates, American patents lost two-thirds of their value, costing the American economy over a trillion dollars. The American patent system, previously a “gold standard,” is now ranked 12th in the world. What is particularly ironic is that it wasn’t the “silly” patents that got challenged and invalidated, but some of the most valuable ones.

This is why Director Iancu’s speech was so important. He announced point-blank that “we will not continue down the same path.” It is the clearest indication yet that there is finally recognition within the administration that the patent system is critically important to the nation’s well-being and prosperity, and the speech stands in sharp contrast with the views of the previous Patent Office director who recently stated that in her view “the patent system is working as intended.”

Patent Dysfunction

Director Iancu understands that the patent review procedures that Congress mandated in 2011 have created a number of problems that the previous administration only exacerbated. He is committed to fixing them as thoroughly as possible.

This would be a welcome albeit incomplete step. Instead, these administrative review procedures in and of themselves make patents less secure and should be eliminated entirely. Of course, as an executive branch official, Iancu cannot ignore congressional mandates, but he may not have to.

The Supreme Court is considering a constitutional challenge to these procedures and will announce its judgment before July. The correct decision would be to strike down these procedures.

However the Supreme Court decides the matter, there will still be work to be done by the Patent Office leadership. Instead of focusing on tabloid stories of inconsequential errors, the Patent Office under Iancu’s leadership will be guided by two simple questions: “Are we helping these inventors?” and “Are we incentivizing innovation?”

A properly working patent system is indispensable to innovation. And innovation is the engine of growth, prosperity and a better standard of living.

Today’s political debates even over some of the most contentious issues of the day will fade, but when it comes to patents and innovation, the choices we make today will determine our economic, military, health and technological world standing for generations to come. That is why last week’s little-noticed speech by a largely unknown official was the most important thing that happened in Washington in quite some time.

  • Dolin is Associate Professor of Law at University of Baltimore School of Law.

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