Patent reform has been stalled on Capitol Hill for years. Nearly everyone agrees that reform of the system is needed to some extent. From patent fees being diverted away from the United States Patent and Trademark Office (USPTO) for better, more innovative operations, to great concerns over how damages in lawsuits are apportioned, there is room for improvement in this critical area.
Yes, critical. According to the Bureau of Economic Analysis (BEA) about 40 percent of current U.S. economic growth tends to be attributed to intangible assets. As a result, in part, the Department of Commerce has had an innovation metrics committee, which along with BEA, has tried to identify the value of intangible assets. In absolute terms, intangible assets have accounted for approximately 4.5 percent of gross domestic product (GDP) during the post-WW II era, but in the last few years have swelled to between 6.5 percent and 8.5 percent of GDP.
Not only are the patent industries critical to our global competitiveness, but they are also critical to those who drive our economy. Whether an entire product based on one or a few patents, such as a typical pharmaceutical, or a product designed incorporating dozens or hundreds of patents, such as many information technology products, the owner of any particular patent justifiably sees the value in their invention and deserves to reap the rewards from their idea and labor.
Unfortunately, sometimes litigation is involved in determining precisely who should be rewarded, and how much, for their innovation. And while there are certainly “legitimate” cases with critical contentions to be resolved, the fact is that the incentive now, in a world of cloudy and inconsistent valuation, is to take a shot in the courts to see if a “jackpot valuation” can be won. And while this has been a boon for the legal community of Marshall, Texas, it has been much less helpful to the future of innovation.
What we need is a means of valuing these assets—a means understandable by creators, investors and the courts. A clearer understanding of the value of any particular intangible asset leads to better decision-making, including in litigation.
A number of private initiatives, such as auctions and the development of “invention portfolios” are helping to lead to better valuation of intangible assets. But much more thought and action is needed in this area, including by Congress, by accounting boards and by owners themselves.