Today, over 70% of U.S. companies’ value is intellectual property. Over the last two decades, compensation in innovation-intensive sectors has increased by over 2.5 times the national average.

In a Jan. 21 speech, United States Patent & Trademark Office (USPTO) Director David Kappos said that American history has been driven by innovation and that our economic security depends on it. He added that the U.S. “invests more in intangible assets that any of our major trading partners, and our intangible investments now exceed those in tangible assets by more than 20%.”

Today, over 70% of U.S. companies’ value is intellectual property. So, it is true (in a manner of speaking) that the USPTO is “the biggest job creator you never heard of,” in the words of Harvard Business Review. Over the last two decades, compensation in innovation-intensive sectors has increased by over 2.5 times the national average.

Then along comes Congress. In the last four Congresses there have been 22 bills in the House and Senate to “reform” the system. In the current Senate, S.23 (Patent Reform Act of 2011) was passed by the Judiciary Committee on Feb. 3 (15 yes, 0 nays and 1 abstain) and now awaits full Senate vote. There is no House companion bill, but Lamar Smith, Chairman of House Judiciary, will hold hearings on this topic. While both sides of Congress are giddy with “bipartisanship,” folks in Reality Land (like you) need to know and understand what is happening and why in order to select best outcomes and learn what actions you can take that foster preferred results.

Remember that intellectual-property (IP) protection is a main federal responsibility defined by the Constitution. Critics of S.23, and I am one, believe that the bill is not “reform” in spite of that word. This bill replaces the primary purpose of patents to safeguard the creator and owner of innovation with “infringer friendly” provisions and encourages those with means to “game the system.” It is a work order for lawyers.

S.23 does not address real problems, like reducing the backlog of 720,000 pending patent cases. It tries to “harmonize” the U.S. patent system with that of Europe, China and Japan for God knows what beneficial purpose. It claims to raise the quality of patents. It does not document how, other than to identify court processes that favor big business and disfavor small businesses and individuals that cannot afford legal frivolities and tries to codify recent court decisions on infringement. As example, S.23 (Section 4, page 31) wants “to identify methodologies and factors that are relevant to the determination of damages,” which is not part of considerations for granting patents. This bill would codify gradations of infringements and be most harsh on those that are “willful.” S.23 is mixing litigation remedies into the innovation definition process.

Supporters of the bill often say that the U.S. patent system has not been updated for over 60 years. Do you remember the saying, “If it ain’t broke, don’t fix it”? This bill shifts the U.S. to a first-inventor-to-file system like the rest of the world, which then exposes the filer, upon required public announcement, to infringements and theft. This provision, along with the next, will not encourage investments for commercialization.

The bill allows granted patents to be attackable for nine months after issue, the rationale being that this will urge the patentee to actively pursue commercialization. The Constitution does not provide authority for this type of private-property infringement after a patent is granted. Further, it is a gross waste of USPTO resources to become so involved in these “re-examination” regimes where history shows that 95% of all post-grant review challenges are resolved without litigations.

There are several provisions of S.23 that do have merit. There is great concern over “patent trolls” and “business-method patents,” which are 30 times more frequently litigated than all other patents and are probably a target category to be banned from USPTO jurisdiction. A second provision in discussion as part of S.23 will prohibit diversion of USPTO fees paid by patent applicants and used for other purposes. How do you suppose that the USPTO is 720,000 cases in arrears with insufficient resources? You think that politicians spent the money elsewhere? A fee-diversion amendment will be introduced in the full Senate debate, probably by Senator Coburn (R-OK) who said, “If an American pays a fee, he should get what he pays for” and not fund other aspects of government.

There is time for readers of this journal to contact their members of the Senate and House with clear instruction on what you want and expect with regard to subjects of IP protection, supporting what is truly needed and clearly rejecting all of the shams in patent reform. IH