Thoughts on Entrepreneurship & Life by Sam Huleatt

Patent Reform: Boring but Important

 

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Patent reform is an under-discussed topic among bloggers and entrepreneurs, likely because it is so complex, esoteric and costly. According to some VCs, patent defense is so improbable that they consider patents the most “overvalued assets” trumpeted by startups seeking funding.

While most people understand the need for reform stemming from patent trolls, less well understood are the other issues embedded in the proposed new legislation reforms. In this weekend’s New York Times, John Markoff does a decent job of covering some of these controversies…

“Passed by the House of Representatives with relatively little debate, the Patent Reform Act of 2007 faces a bruising Senate fight this year. As it now stands, the bill would shift the balance of power in the legal quarrels between patent holders and possible infringers by significantly limiting damage awards

Under the proposed law, what are known as the “Georgia-Pacific factors,â€� a set of 15 guidelines that courts now use for determining damages in patent cases, would be boiled down to a single concept of “apportionment.â€� Damage calculations would be based on an economic analysis to ensure that a royalty damage award captures only the economic value attributable to the patent’s specific contribution over previous inventions.â€�

In response to the above, Mark A. Lemley says it best, “I can’t think of a straight-faced argument that you as a patent owner are entitled to more than your invention has contributed to a product.â€� Totally agree.

In summary, the main issues covered in the proposed legislation:

– Making the US code more similar to other countries
– First to file versus Original Inventor (Not covered in the article)
– Stopping patent trolls who profit on damages while contributing/advancing nothing
– Recognizing entrepreneurs do not have deep enough pockets to go into litigation
– Limiting damage amounts (willful infringement)

Still, one of the biggest issues for entrepreneurs in web-tech is one not addressed in the reform: what can be patented? For example, ridiculously broad patents have been handed down in recent years to companies such as Blackboard and Friendster, covering architectures such as social networking and streaming media. Brad Feld, a well know VC blogger, goes as far as to say “all software patents should be eliminated.” Not sure I agree totally with Brad, but I’m not well informed enough to really have an opinion.

Though the Times article leaves out a few germane issues, on the whole, it’s a worthwhile read and deserves to be talked about more.

Update: Though I beat them to the story, Techcrunch is chiming in :)

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