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Friday, January 27, 2023

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Patent ‘reform’ will undermine small business

Starting and growing a business is challenging, even in the best of times. But these are not the best of times, and Congress could soon make it even harder for small businesses to compete and grow.
A new bill from Senators Patrick Leahy (D-VT), Thom Tillis (R-NC), and John Cornyn (R-TX) is gaining momentum — and if it passes, big corporations will find it easier to pilfer their smaller competitors’ patented ideas and designs. The “Patent Trial and Appeal Board Reform Act of 2022,” as the bill is called, could snuff out many of the small firms — and much of the innovation — that power America’s economy.
Congress created the Patent Trial and Appeal Board back in 2011 with the best of intentions. Their aim? To create a suitable, cost-effective alternative to the court system for parties to settle patent disputes.
But bad actors quickly twisted this system into a platform to challenge — and ultimately invalidate — their competitors’ patents. Corporate behemoths sometimes infringe on their smaller competitors’ patents. When those competitors sue in district court, on patent infringement claims, larger companies turn around and challenge the very existence of these asserted patents at the PTAB. This essentially forces small firms to fight a war on two fronts to defend their intellectual property.
This strategy has worked remarkably well, and to the detriment of many small firms. In the decade since it was founded, the PTAB has at least partially invalidated 84 percent of the patents it has fully reviewed.
To remedy some of this problem, the U.S. Patent and Trademark Office implemented what it calls the Fintiv factors, a set of guidelines established after its 2020 Apple v. Fintiv decision that allows the PTAB to decline to review a patent challenge if the patent in question is already the focus of a patent infringement case moving in federal court.
Fortunately for small businesses, the Fintiv factors curtailed predatory tactics by larger companies. Shortly after Fintiv was first enforced, the number of patent challenges heard by the PTAB fell by 40%.
Now, Senators Tillis, Leahy, and Cornyn are moving forward with legislation that will hurt small inventors. Their PTAB Reform Act would effectively invalidate the Fintiv factors, stripping protections away from small businesses and subjecting them to years of legal proceedings at the hands of well-funded rivals.
Few small businesses will have the financial backing to weather parallel legal storms — and the consequences on innovation and entrepreneurship will be disastrous.
Without strong intellectual-property protections, many new businesses would fail to launch. As every entrepreneur knows, building a business is a high-risk endeavor. By licensing proprietary technologies, business owners reduce risk and attract investors with the promise of exclusive rights to sell a successful product.
It’s encouraging to see lawmakers making patent-system reform a priority. But the model that Senators Leahy, Tillis, and Cornyn propose will send unintended shockwaves through our nation’s most innovative sector. Small businesses account for six out of 10 jobs in America. That’s something lawmakers would do well to remember when, and if, the misguided PTAB Reform Act comes to a vote.
Karen Kerrigan is president and CEO of the Small Business & Entrepreneurship Council. This article originally appeared on InsideSources.com

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