Startups Can’t ‘Give It A Rest’ on Software Patents


David Kappos, head of the United States Patent and Trademark Office, gave a presentation yesterday morning telling those claiming the patent system is broken to “give it a rest.”

Kappos approached the debate over software patents in context of smartphone lawsuits between large corporations like Apple and Samsung. He admonished detractors of the patent system to “get the facts.” Here at Engine, we’ve been following developments in the patent system closely; the fact is startups can’t afford to give it a rest under the current patent regime.

The economics are clear: startups fuel net job growth in the U.S. economy. Small, technology-focused businesses are developing innovative products and promoting competition. Software patents are a real challenge to young firms that don’t have the legal resources to defend themselves against non-practicing entities -- often called trolls -- that use patents for litigation instead of innovation.

A June paper from Boston University showed that patent trolls cost companies $29 billion in 2011 in direct costs from litigation. While large companies pay more of the overall settlement and legal costs, the expenses make up a greater share of smaller companies’ revenue, according to the research.

Last Friday, we attended a conference aimed at finding solutions to the software patent problem. Hosted by the High Tech Law Institute at Santa Clara University Law School, lawyers, software engineers, and activists came together to discuss possible solutions. Legal, procedural, and economic ideas were floated, but investor Brad Burnham of Union Square Ventures made a critical point, saying that 25 percent of USV’s startups had been sued and that half had received demand letters. Suits like these don’t just cost companies revenue; they threaten the survival of startups and destroy jobs.

Policymakers like Kappos must recognize the existential threat bad patents pose to young companies. While he emphasized new review procedures available to PTO after passage of the America Invents Act, the fact is that the measures in place insufficiently protect small companies facing predatory patent suits. The last thing the startup community needs to do is to give software patents a rest. At Engine, our community aims to lead the discussion on how to move forward.

Picture courtesy of Alan Kotok.