America is the world’s innovation engine. The modern world as we know it exists thanks to American innovation. From 100-plus year old inventions such as the airplane, to the internet delivering this article to the newest computer/tablet/smartphone you are reading it on, America’s contribution to global innovation tops the rest of the world put together.
A major part of America’s innovation infrastructure is its powerful patent system, which makes it possible for inventors to profit from their ideas for a fixed period of time before others can freely use the technology. According to a government study, industries that rely heavily on patents contribute $770 billion/year to the American economy and create over 7 million jobs.
The lobbyists for large companies that want to control key technologies themselves while squeezing out smaller players and individual inventors have convinced many members of Congress that there is a problem with “patent trolls” stifling innovation. They find a few small companies that have been attacked by scam artists to make it sound like they are on the side of the “small guy” and “innovation.”
The truth, of course, is much more complicated than the black and white picture painted by lobbyists.
The “patent trolls” that big tech is targeting are “Patent Assertion Entities” (PAEs). PAEs are companies that are specialists in protecting intellectual property. You don’t have to be Google or Apple to come up with a great idea for a smartphone feature. Individual inventors or small companies have developed a lot of exciting technology, sometimes investing every last bit of their savings, and their only protection is patents. But if you’re a small company and Google is stealing your ideas, you don’t have the millions of dollars it can take – or the specialized expertise needed – to sue Google.
Large companies and universities also spend millions on developing and patenting inventions, not all of which they can directly commercialize. So they also turn to PAEs and their specialized expertise for assistance in earning a return on their IP investment.
Big tech is working hard to convince the public that there is something wrong with getting a patent and choosing to make money simply through licensing the patent. Big tech claims there is something morally superior about enforcing patents for products you make.
But the American patent system was specifically designed to encourage invention without production.
When the Founding Fathers were crafting the section of the Constitution dealing with patents they started by looking at what was being done in Britain – and decided it was flawed. In Britain in the 1700s there was a requirement that if you had a patent you had to commercialize it yourself – you had to practice the patent, manufacturing whatever it was that the patent covered. What that meant as a practical matter is that any patent of any industrial value could only be owned by those wealthy enough to set up a factory. The Founding Fathers instead chose to democratize the patent system so that it would be available to all, not just the industrial elite. They consciously took away the requirement to manufacture the product covered by a patent, and enshrined that in the Constitution. They believed – correctly – that this would unleash a great deal of creativity, to the benefit of society (and inventors and innovation).