Patent ownership incentivizes innovation and technological advancements that support U.S. economic growth.
Background: Patents are critical as the U.S. becomes an increasingly high-technology economy. Patent rights are not self-enforcing, and individuals who wish to compel others to observe their rights often do so through litigation in the federal courts.
The issue: The proliferation of “non-practicing entities” (NPEs), often known as patent trolls, is one of the central factors driving debate around patent reform in recent years.
- NPEs do not manufacture products or provide services. Instead, the primary business model focuses on purchasing patents and then threatening or bringing patent infringement litigation against alleged infringers.
- Patent litigation is risky, disruptive, and expensive, and the majority of defendants settle regardless of the merits of the cases brought by NPEs.
- NPEs also set royalty demands strategically well below litigation costs to make the business decision to settle an obvious one.
The net result of this frivolous activity has caused a tax on innovation and undermines the incentives to invest in startup companies.
The big picture: Patents protect an emerging company’s innovative idea and deter competitors from stealing their idea, leading to significant venture capital investment. Without a strong patent system deterring infringement, further investment in patent-reliant technology will decline.
NVCA supports patent reform legislation that would:
- End abusive patent litigation practices.
- Recognize faults in previous proposals that would have unintended consequences and discourage investment in startups working on breakthrough technologies and lifesaving cures.
- Protect investment in patent-reliant startups and the entrepreneurial ecosystem.
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