The type of innovation matters – lack of patents cause a shift to innovation in consumer services rather than next-gen development
Mark Deem, 2024 – Operating Partner at Lightstone Ventures, a Menlo Park-based firm that invests in innovative biotech and medtech companies. Questions for the Record from Senator Thom Tillis, Senate Judiciary Committee “The Patent Eligibility Restoration Act – Restoring Clarity, Certainty, and Predictability to the U.S. Patent System” 1/23, https://www.judiciary.senate.gov/imo/media/doc/2024-01-23_-_qfr_responses_-_deem.pdf //DH
The current state of patent eligibility inhibits the development of next generation technologies in several ways. First, not knowing whether a patent will be struck down arbitrarily by some judge, years after it is issued and following lengthy and expensive litigation, has eroded inventor and investor perception that patents are reliable assets around which to build a business. This is a marked changed from a few years ago, when we could be reasonably sure that patents gave innovators and investors the incentive to take outsized risks because they lowered the opportunity for larger companies just to steal a new idea, which is what is now a major problem for startups. Although patent eligibility is a significant part of this problem, it is not the entire problem; numerous other legal issues that surface in patent litigation are also having much the same effect, most prominent among which are the loss of the right to obtain an injunction against infringement and the completely untethered freedom for judges to recreate inventions in hindsight using highly questionable prior art.
Second, the growing loss of investor confidence in the integrity and reliability of patents over the last 15 or so years has led to a shift in the types of investments and technologies that entrepreneurs and investors are willing to tackle, with less capital and human resources going into longer term and higher risk development of strategically critical technologies and more going into consumer products and services with quicker exits and less risk. Third, the lack of reliability of patents has forced many companies to look to trade secret protection as their best alternative for protecting their IP, which means that other inventors and the public in general are denied the informational benefit from creative work, which has been one of the primary public benefits of the patent system since it began (but often is not discussed or even recognized).