Principle

#1

Strong Patent Protections Are Critical to Investment in Breakthrough Technologies

It is difficult and perilous to start any new company from scratch. The process requires visionary people willing to give up secure jobs, take risks, and join companies that have a significant possibility of failure. It also requires investors with a strong appetite for risk, who are willing to invest in an often-distant prospect of returns sufficient to justify such risk. For technologies having a long development cycle, these prerequisite conditions simply cannot exist without the security provided by a properly functioning patent system.

Enforceable patents are essential to protect startups from the predatory behavior of would-be competitors who are anxious to copy any new product or technology once it is proven workable. Startups also depend on strong and enforceable patents to help attract the capital needed to build companies that can bring such products to market. Without enforceable patents, there is simply no reason for investors or entrepreneurs to take the risks involved in challenging entrenched market players.

Principle

#2

Patents Are Constitutionally Protected Property Rights

Patent owners depend on the federal government to protect and enforce their property rights. Article 1, Section 8 of the Constitution directs Congress “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  

 The founding fathers recognized that the new and free society they were enshrining needed an incentive to take risks and an assurance to protect risk-takers. In fact, James Madison and George Washington explicitly spoke about the need for a strong patent system in the early days of our nation. This set an important precedent, as other presidents including Lincoln and Reagan followed suit and reconfirmed the bedrock principle of a strong intellectual property system.

We believe that our founders carefully chose the word “securing” when drafting this passage of the Constitution. Congress was given the explicit responsibility not only to create a strong intellectual property (IP) system, but to secure the rights of creators as well. It is critical that Congress upholds this promise by protecting and enforcing the property rights of our nation’s innovators.

Unfortunately, a series of Supreme Court cases and the faulty implementation of legislation, including the America Invents Act, has led to a weakening of the patent system over the past decade.

Principle

#3

The U.S. Patent System Needs Reform to Prioritize True Inventors and Entrepreneurs

Federal policymakers must reform the U.S. Patent system so that it prioritizes true inventions and breakthroughs. This is because the different characteristics of R&D-intensive startups and small companies competing in areas such as life sciences, communications infrastructure, energy, advanced manufacturing, materials science, and other complex industries demand a strong patent system to secure significant funding.

For instance, a medical device company may require multiple rounds of funding of up to $250 million and several years of R&D and regulatory approvals before even entering the market. Without a strong and enforceable patent portfolio, this company likely wouldn’t exist, and consumers would be deprived of the opportunity to enjoy the benefits of its medical advancements.

On the other hand, some sectors, such as app developers, social networking, online search, online commerce, gaming and financial services, do not require strong patent protections to secure venture funding or grow their businesses. In fact, the opposite is often true. These sectors and the investors who have poured money into them over the past decade often view patents as a burden and label anyone who asserts them as a “patent troll.”  This label is typically affixed to smaller competitors, research institutions, or even major universities. 

This is a dangerous and narrow-minded game that is starting to have serious consequences.  The implications of these nefarious actors in our innovation marketplace is most recently exemplified in the U.S. slipping to #12 on the U.S. Chamber of Commerce’s annual Global IP Index . Even more troublesome is the fact that we have simultaneously witnessed our competitors, such as China and Germany, compete with the U.S. to better protect investment and invention.

Some like to tout the overall growth in venture capital investment in the U.S. over the past decade as evidence that legislation, such as the America Invents Act, and a string of court cases that have weakened patent laws are “working.”  Here is what is going on behind those numbers.  

While it may be true that there is still a significant and growing amount of venture capital being invested in this country, less and less is being invested in the kinds of new companies we need to ensure our national security and preserve the American dominance of science and technology that our country has enjoyed for the last 75 or 80 years.  To illustrate this point with a glaring example, the total amount of venture capital dollars invested in the United States between 2004 and 2017 increased four-fold, from about $20 billion to $80 billion, but the amount invested in companies pursuing new semiconductor technologies fell by 80%, from $1.2 billion to $250 million.

This is a shocking statistic, unless one believes that a handful of corporate giants, having international obligations in addition to their commitment to our country, are going to produce all the new semiconductor technology needed for the next 30 years to deal effectively with cybersecurity, defense intelligence, artificial intelligence, machine learning, quantum computing, space travel, weapons systems, bioinformatics, and other areas that are critical to national defense and well-being.  Semiconductors are among the most critical and foundational technologies, and it should be apparent that our country is not attracting enough entrepreneurs and startups to pursue them.

Investment declines are also evident in a number of other technologies that, like semiconductors, are essential to national welfare and security. Venture capital invested during that same period in fiber optics technology, for example, fell by a factor of 10 as a percentage of total VC investments. Similar declines can be seen in new drug discovery, networking equipment, medical devices, biotechnology, computer hardware and a host of other industrial sectors that are core technologies if our country is to retain its position of technological dominance.

Principle

#4

The U.S. Needs a Strong Patent System to Remain a Global Leader

Policy makers have correctly pointed to aggressive efforts from China and other major economies to acquire leading technologies developed by the United States as a part of their strategy to propel their own economic growth. Fighting this outright theft of American IP is critical, but it is only half the battle. We also must have a strong domestic IP system that ensures high quality patents are granted and provides consistent and predictable enforcement for them as they are commercialized. 

This is not the current situation in the U.S., and we are seeing our position slip as a leader in the development of cutting-edge technologies. We are still the best at creating new apps, games and social media platforms, but without predictable patent protections in areas like life science, AI, robotics, networking software, and other key sectors, we risk falling behind in core technologies. The U.S. patent system need to reclaim its role as the global gold standard.