Trouble In The Patent Office

By Ed Sperling
The next wave of patents being filed in the United States involves efficiency and power rather than simply speeding up performance of chips.

But the patent system is moving so slowly these days that startups are unable to talk about what exactly they do, for fear of having their IP stolen, extending the time it takes to come out of stealth mode and arrange deals with potential partners who could speed the delivery of new technologies to market. And in some cases, offshore companies aren’t even filing patents in the United States anymore.

Low-Power Engineering sat down to discuss the U.S. patent system with Bijal Vakil, partner at White & Case and an expert in intellectual property. What follows are excerpts of that conversation.

LPE: What’s wrong with the U.S. patent system?
Vakil: We need patent applications to proceed to final determination quicker. Right now it takes about three years. That’s a long time. The U.S. Patent Office could definitely expedite the process. The Patent Office generates a surplus of revenue and Congress siphons that off. The Patent Office is supposed to encourage small entrepreneurs and to obtain a monopoly in timely manner. It’s like a tax for innovators. When you add in a delay that certainly doesn’t encourage innovation.

LPE: But when there were fewer patents there was incredible innovation in the semiconductor industry. Now we’re seeing “patent trolls” everywhere. How do you fix that?
Vakil: The patent system was important enough that it was included in the Constitution. I don’t believe the innovation of large companies has been impacted by patent control. The non-practicing entities have added to litigation costs, which are an expense to companies. But companies are innovating more quickly than ever, both in software and hardware.

LPE: So what do you do with these so-called patent trolls?
Vakil: There should be some patent reform legislation that brings certainty to a number of areas with respect to non-practicing entities. For example, the patent damages laws are not clearly defined with respect to non-practicing entities. Some clarification of those rules would discourage the volume of these cases. You also could force changes in venue. A number of these cases are brought in the Eastern District of Texas. That increases the cost for a company in Silicon Valley, and it allows a non-practicing entity to pick a jurisdiction it perceives to be friendlier to patent holders. A lot of these companies don’t even have offices.

LPE: Any other areas?
Vakil: Yes, the Eastern District of Virginia and the Western District of Wisconsin.

LPE: Is the volume of patents increasing?
Vakil: No. In 2009 there was a trend downward for new patents. At the same time, there has been an increase in other jurisdictions, including China. There are several reasons for this. First, companies are trying to limit their legal expenses so they’re cutting back on patent applications. Second, it may be a result of a decrease in the workforces at innovative companies. And third, patent holders are no longer viewing the United States as the center of the universe. You file patent applications in countries where you expect your business to grow. The role of the United States is diminishing, and patent holders see markets in China and India on the rise. With patents you have to anticipate what markets are going to be like in 15 years.

LPE: There’s also a lot of concern about whether patents filed in China will be upheld, right?
Vakil: Yes, but steps are being taken to make it easier to enforce patents. Countries such as India and China are big markets for U.S. companies.

LPE: Let’s go back to the U.S. Patent System. What exactly needs to be fixed?
Vakil: Improving the IT infrastructure is paramount. One of the problems is that the Patent Office grants many patents that should not be granted. That’s where the problem is with non-practicing entities trying to cajole money out of larger defendants. By allowing the Patent Office to maintain its own revenue base it could invest in an IT infrastructure that would allow more accurate ‘Prior Art’ searching before patents are granted. That would improve the integrity of the patents and ultimately benefit the economy. Second, an improved IT infrastructure could help the application. If the Patent Office’s database was made public then the person applying for a patent would have that same resource and know what the examiner would be looking at. With that information they could tailor their patent, either narrower or broader, making the whole system more efficient and improving the time it takes to approve a patent.

LPE: If it is improved, will more patents be filed or will patents simply be quicker?
Vakil: Both. Over the long term, increased confidence in the patent system will lead to companies wanting to innovate in the United States. That would create jobs and improve the United States’ relevancy. If we don’t, some other country will.

LPE: In the United States, who is most affected by the patent system?
Vakil: Silicon Valley. It’s estimated that 60% of the United States’ exports relate to intellectual property, and more than 70% of the patents originate in Northern California. Fixing the patent system can encourage innovation and ultimately create jobs.

LPE: Is there any progress?
Vakil: There was a movement in Congress, led by a number of Silicon Valley heavyweights, to get patent reform legislation approved. It always gets pushed off. There is the natural tension between the Silicon Valley companies, which want a more effective patent system, and the pharmaceutical companies, which have a different interpretation.

LPE: What are pharmaceutical companies looking for?
Vakil: The public reports show the pharmaceutical industry is happy with the system as it is.

LPE: Because it keeps out smaller companies?
Vakil: That’s correct. But while patent reform isn’t high priority, the appellate courts are aware of public reaction to patent reform and have taken a much more active role in dealing with these issues that would have been addressed in patent reform regulation.