Is it Time to Reevaluate the U.S. Patent System?

IP News

The old adage is “if it it’s not broke, then don’t fix it.” So what about the U.S. patent system; is it broken? Some would argue that yes, it definitely is broken and that it needs to be fixed. If it is broken, then what exactly is wrong with it and how can it be repaired? First, patents should be considered a positive, as they provide individuals and companies the ability to protect their intellectual property by receiving a property right through the U.S. Patent Trade Office. Patents should not be considered the bad guy.

Not Enough Time

However, there are problems with the American patent system. One such problem has to do with timing. According to U.S. patent law, the person or entity that receives a basic patent has 20 years of exclusivity on those rights. The problem is many industries receive patents on technologies or inventions that take many years before they actually receive approval to be used among the general public. In these types of situations, 20 years can run out before the creators ever have a chance to profit from their inventions.

No Chance to Profit

Take a biotech company, for example, that has created a new medication. It could take years to do research and to conduct clinical studies before the medication is approved for use. That means realistically the creators could only have a few years to profit from it, or in some cases no time at all. While not all industries are affected, introducing new patent standards that would protect innovators and inventors from all industries seems fair.

Pesky Patent Trolls

Another problem with the patent system is the negative effect of patent trolls, those individuals or entities that don’t really make any products for consumption, but rather sit back and wait for others to infringe on their patent rights in hopes of suing them for that infringement. While many of these cases never see a courtroom, and many others that do don’t end favorably for the trolls, patent trolls still give the U.S. patent process a bad name.

Hedge Fund Problem

There’s another growing problem with the current system, which might not get as much attention, but could end up being a much more significant issue than patent trolls. It involves hedge fund managers that are finding ways to abuse the Patent Trade Office. By shorting stocks and then challenging American companies’ legitimate patent rights, these managers are making big bucks. When the stock prices of the companies that own the patents fall, the hedge fund managers then make millions. Meantime, as these companies’ stock values take a hit they lose both the incentive and the funds to continue doing as much research and development. This scenario is even playing out for companies that have already commercialized their products and put them up for sale.

Is Change Coming?

There is some possible good news on the horizon. That’s because a new senate bill was recently introduced that could be the beginning of much-needed reform for the U.S. patent system. However, while the bill would take measures to limit the ability of patent trolls, it might not do enough to slow down these hedge fund managers, which short the stocks of legitimate patent holders, and then file grievances against them. Therefore, while this new legislation is a move in the right direction, it could still be argued that the U.S. patent system needs even greater change, in order to protect innovators and inventors and their intellectual property rights.