The Demise of a High-Tech Economy


In a blog post from March 2014, Marian Underweiser, IBM’s Counsel for IP Law Strategy & Policy, wrote:

Computer implemented inventions, particularly in software, form the basis for innovation not only in the technology products we use every day, such as laptops and smartphones, but in everything from cars to surgical techniques to innovations that increase efficiency and production in factories. Strong and effective patent protection for these innovations in the U.S. has fostered a fertile environment for research and development and, as a result, the US is the undisputed leader in the software industry.

But will the U.S. be able to maintain its position as the leader in the software industry under a patent regime that seems openly hostile toward software innovators?

Unfortunately, many simply won’t believe what IBM says because, as one of the most innovative companies in the world, they are also the top patent filer ever year. IBM is a company that spends $6 billion annually, year after year, on research and development, so they have a bias. But the Government Accountability Office does not have a vested interest and, in a 2013 report, they concluded that between 50% and 60% of all patent applications filed seek protection for innovation related to software in one way or another. That means that at least half of all innovations could potentially be lost due to the Supreme Court’s failure to follow the enacted patent statutes and instead act as a super legislature that despises all things patent. The Alice decision will likely be viewed in years to come as a devastating decision for high-tech entrepreneurs and start-ups.

The Alice decision, like the Myriad and Mayo decisions, will be good for those who don’t innovate and simply copy, but innovation that relies on software and genetics will largely cease because it simply will not make sense to invest more than modest sums into development. You cannot invest modest sums and expect to come up with anything revolutionary in the biotechnology sector, and while less cost-sensitive, the software industry will be squeezed as well, given the lingering and lengthy credit crunch that makes it extremely difficult for entrepreneurs, even with pristine credit ratings, to get loans.

The real problem with software patents is that the Supreme Court decision in Alice seems to have more to do with patent trolls than it does with patents in general, or the patents that were before the court in the case. Unfortunately, it seems that anyone who obtains a patent is now considered a troll. Indeed, the issue of patent trolls has been an area of major debate in legal circles for some time, and a minority of Silicon Valley high-tech companies has continued to push the troll image. But innovators are responding.

In an opinion piece published earlier this year on The Hill, by Steve Miller asserts the rights of companies to protect their innovations without being labeled “trolls.” Miller is Vice President and General Counsel at Procter & Gamble.

To label a patent holder as a “troll” simply because it legitimately enforces its patents against competitors, copyists, counterfeiters, and knock-offs who steal or copy the inventions of others, is to turn the definition of “troll” on its head.

He is indeed correct. Innovators of all sorts must be able to prevent copyists, counterfeiters, knock-offs and competitors from simply copying inventions. The innovator puts a great deal of time, money and energy into inventing, and if the copyists (or “infringer” in patent parlance) is able to ignore rights lawfully granted, then they have a competitive advantage over the innovator who created and invested in that creation. Thus, the vilification of patent owners who enforce patents is not only absurd, it is also un-American.

Until recently, America celebrated the innovator and vilified the infringer. Today, things are turned on its head, with real innovators being swept up alongside those bad actors who make a mockery out of the system by engaging in litigation abuse that exploits judicial inefficiencies to essentially shake down individuals and companies that are simply not infringing. There are bad actors for sure, but innovators cannot and should not be tarred with the same brush. Innovators power a better way of life, with more conveniences, greater functionalities, and life-saving technologies.

One thing seems abundantly clear. In the wake of the Alice decision, a great many software patents that were issued previously are likely to be full of invalid claims. Also true is the fact that a great many pending software patent applications will be unable to ever produce issued patent claims because the disclosures are written to satisfy a different and now largely defunct standard. Without the ability to add description after the filing date, a decade of software has largely been rendered unpatentable. Surprisingly, however, while the USPTO, PTAB and Federal Circuit continue to shoot down software patents, the USPTO has been issuing these same types of patents to big banks, which raises the question about whether there is a double standard at play.

Things will get more interesting over the months and years ahead, but it looks like our once high-flying software industry will see fewer start-ups capable of competing, which won’t be good for the U.S. economy.

Tags: , , , , , , ,

Leave a Reply

You share in the PLI Practice Center community, so we just ask that you keep things civil. Leave out the personal attacks. Do not use profanity, ethnic or racial slurs, or take shots at anyone's sexual orientation or religion. If you can't be nice, we reserve the right to remove your material and ban users who violate our Terms of Service.

You must be logged in to post a comment.