How the Government Is Killing Job Creation
A backlogged patent system is stunting innovation and job growth
An outdated, inefficient patent system is stifling the innovation the U.S. economy relies on to thrive, slowing down economic growth and dampening job creation the country desperately needs.
Virtually untouched for 50-odd years, the patent system is saddled with a backlog of more than 600,000 patent applications, keeping eager inventors waiting as long as 34 months for intellectual property protection. Experts blame a combination of insufficient staffing resources and outdated computer systems for the back-up.
The delay in patent issuances trickles down to inventors, start-ups, and small businesses, all of which rely on patents to protect their intellectual property, and help raise funds to invest in their products and businesses. "You can think of receiving a patent from the patent office as akin to getting title to your home," says Marc Berejka, senior policy adviser at the U.S. Department of Commerce. "When you get title to your home, you have your ownership claim and banks will lend you money to make improvements on your home and you'll take money out of your pocket to make improvements on your home."
The same concept applies in the patent realm, Berejka says. The sooner inventors get clean title to their patent the sooner they are likely to invest in the business side of their product, including hiring more people. That, in turn, helps fuel the economy.
But three years is a long time to wait for a patent, and experts say the delay is one of the factors that has stunted the growth of start-ups and small businesses, which has been disastrous for job creation. Although small businesses and start-ups have been responsible for nearly 65 percent of new jobs created over the past two decades, one of the worst recessions in U.S. history has taken its toll on America's innovators. Chilling numbers from the Bureau of Labor Statistics show a steep drop-off in the number of new start-ups, which has in turn significantly reduced the number of jobs created by those businesses. The number of new start-ups for the year ending in March 2010 was lower than any other year since the government began collecting such data in 1994, and the number of jobs created by start-ups has decreased from 4.1 million in 1994 to just 2.5 million in 2010.
Inventors face yet another hurdle when it comes to challenging infringements on their patents. With a mountain of new patent applications waiting to be processed, reviewing existing patents and infringement claims can get pushed to the back burner, says Matt Potts, founder and president of Archport, a footwear company. Oftentimes, patent holders must also pay fees to initiate patent infringement review proceedings and hire an attorney to manage the suit, which adds additional financial pressure for fledgling businesses.
"I would expect that when you have a patent you would be able to protect yourself, so that was the biggest disappointment," says Potts. "Even after you have your patent issued and you find someone who you allege infringes, it's an even harder battle, not only with the legal costs but also in terms of dealing with the patent office. There's not a proactive approach within the patent office to help protect people's patents."
The bottom line is a major engine of economic growth doesn't need another stumbling block in the form of inefficient and outdated patent application procedures, experts say. "Because of the backlog and the time it takes to get a patent [application] reviewed, it hurts the economy," says Kevin Griffis, spokesman for the Department of Commerce. "[It] inhibits creation of jobs, the growth of small business, and even large businesses."
While the patent office has instituted a number of programs to expedite application processing for inventions in industries such as clean energy, in the big scheme of things experts say the programs do little to help patent examiners address the mountain of applications waiting to be reviewed. Legislators hope to change that with the passage of the America Invents Act, which seeks to reform the patent system by giving the patent office greater access to the fees it collects, and streamlining the review and re-examination processes.
"It's our creative genius that has brought about new types of jobs, whether in electronic or in large manufactured goods," says Sen. Patrick Leahy (D-VT), sponsor of the bill. "If we're going to compete with the rest of the world, we can no longer just stick in the fortress of America. We're in constant international competition. This is an international economy and there's real international competition."
Although a final vote on the bill has been delayed by tense debt ceiling negotiations in Washington, Leahy expects the bill to be passed and signed into law in September. But, how fast the reforms will trickle down to inventors and make a meaningful impact on the jobs situation is anyone's guess.
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