Tuesday, August 10, 2010

Let's Get the Patents Flowing!

10 August 2010

Bill Fleckenstein posted this thoughtful reflection on the need to foster innovation and creativity on August 9. I am reproducing his words here with his permission:

"I certainly have spent plenty of time over the last decade pointing out the problems and potential problems that the country faces, with none more severe than the protracted nature of the unemployment problem. As the financial crisis was unfolding in late 2008 and early 2009, I actually thought for a while that the incoming administration might try to do something intelligent regarding incentivizing jobs. That was 100% incorrect. The only incentives they have created are ones not to hire more employees, which has only made a bad situation worse. (See the op-ed in today's Wall Street Journal, "Why I'm Not Hiring," to see how the math stacks up against employers.)

"Thus, it is with great pleasure that I can point to something positive. In Friday's New York Times I read about an absolutely brilliant idea described in an article headlined, "Inventing Our Way Out of Joblessness." In it Paul Michel and Henry Nothhaft discussed the potential for breaking the logjam at the patent office and what that might mean. Not being an inventor, I certainly had no idea that the patent office was in quite such a state of disarray. Though I'm not knowledgeable on the subject, one of the authors to me has enough credibility that I think we can take him at his word, that being Paul Michel, who is former chief judge of the United States Court of Appeals for the Federal Circuit, which handles patent appeals.

"Their case is that, apparently, in the venture capital community 75% of startups require some sort of patent to get financing, according to a study they cite. Therefore, it's easy to see the connection between patents and new businesses. The sad, though not surprising, problem is that the patent office can't get enough funding to do its job. According to the authors, since 1992, Congress "has diverted more than $750 million in patent fees to other purposes," which has created a backlog of -- get this -- 1.2 million applications awaiting examination, over half of which haven't even been looked at yet.

"Michel and Nothhaft propose spending $1 billion -- which, when it comes to government these days, is chump change -- to get the patent office streamlined and staffed up so that it can process applications at a reasonable rate. The authors estimate that out of the backlog of 1.2 million applications, based on historical patterns, about 60% of those would result in issued patents, and perhaps as many as 137,000 would go to small businesses, with of course a more efficient patent office processing more patents in ensuing years.

"The net of all that, they feel, would be something on the scale of between 700,000 and 2 million jobs created, depending on what sort of estimates and variables one wants to use. Taking the midrange of their guess, or 1.5 million, that would mean that each job cost the government about $660, which obviously would be a mere pittance relative to the hundreds of billions dollars wasted on government programs that are useless.

"In addition, they suggested that, "Congress should also offer small businesses a tax credit of up to $19,000 for every patent they receive, enabling them to recoup up to half the average $38,000 in patent office and lawyers fees spent to obtain a patent." I would imagine there could be other incentives given on the tax front to help this process along, and I don't see any reason why a patent issued couldn't be fully reimbursed, assuming it ultimately met some sort of sales requirement.

"With so many massive problems staring us in the face, it is damn near criminal incompetence that a problem like this is allowed to fester. I can't see why anyone would be against this, as no one's ox needs to be gored."

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