Kerrigan: Small businesses and startups need stronger patent protection

Karen Kerrigan

Submitted photo

From a family-owned coffee shop on Main Street with a unique brewing method to a tech startup working out of a garage in Silicon Valley, entrepreneurs across America rely on a key fundamental principle: the ability to protect their creations from theft.

In recent years, a troubling trend has emerged and is becoming a crisis for U.S. innovation: patent protections essential to small businesses and startup companies are degrading. It’s time for Congress to step up and stop the erosion.

In 2011, the America Invents Act created the Patent Trial and Appeal Board to improve the patent litigation system. Some large businesses have since weaponized the PTAB. They’ve been using it to file duplicative, frivolous challenges to patents on technologies that they have taken from smaller rivals. This deep-pocketed war of attrition against smaller competitors wastes precious time and money for no justifiable reason.

In addition, over the past decade, a series of Supreme Court decisions have constricted the standards for patent eligibility in several tech areas. This shifting landscape has left some small businesses uncertain whether they can safeguard their innovations.

Together, PTAB abuse and these court precedents spell bad news for the American economy. Small businesses account for two-thirds of job creation and employ half of the private workforce in the U.S.

Fortunately, two bipartisan bills under consideration in Congress could address this emerging crisis in intellectual property protection and strengthen America’s innovation economy. They’re called the Patent Eligibility Restoration Act and the PREVAIL Act, which stands for Promoting and Respecting Economically Vital American Innovation Leadership.

PERA would reverse course on the errant Supreme Court rulings and expand patent eligibility in areas the court has foreclosed. It would also blow away the dense fog of patentability uncertainty in areas ranging from computer software and AI to medical diagnostics and fintech.

The PREVAIL Act, meanwhile, would reform the PTAB. It would close the loopholes, allowing infringers to file duplicative proceedings in the hope of wearing smaller companies down. It would also set the same standard of proof for invalidating a patent before PTAB as required in federal courts.

In addition, the bill includes welcome provisions to make it easier for small businesses to navigate the patent system. It also calls on the Small Business Administration to prepare reports in two critical areas: first, on the role of patents in small-business operations; second, on the effect of abusive legal “demand letters” directed at small businesses from large corporations.

PERA and the PREVAIL Act would help small businesses fend off larger rivals who might otherwise rip off their innovations. The legislation will also encourage more investment in startups and other small businesses.

Small businesses need stronger patent protection to succeed when they are set upon by interests with endlessly deep pockets. Researchers at MIT concluded that startups with a patent have an 87 times greater chance of growth compared to those that don’t have one.

China is outcompeting the U.S. in 37 of 44 major technology fields — including energy, biotechnology and artificial intelligence. To continue to compete globally, we need to jumpstart America’s economy by boosting our small businesses and startups.

By passing the PERA and the PREVAIL Act, Congress can help ensure that America’s inventors continue to drive our economy forward.

Editor’s note Karen Kerrigan is the president and CEO of the Small Business & Entrepreneurship Council. She wrote this for InsideSources.com. Reader reactions, pro or con, are welcomed at AzOpinions@iniusa.org.