The patent system was established by our founding fathers as a tool to promote innovation and invention. But too often, America’s most creative, forward-thinking startups find themselves interacting with the patent system in a less-than-ideal way: on the receiving end of an infringement suit or a letter threatening as much. Bad actors that have amassed hundreds and thousands of overbroad, low-quality patents (colloquially known as “patent trolls”) target businesses, using these patents as proverbial weapons with the goal of forcing companies into costly settlements. This behavior disproportionately harms startups: 82 percent of so-called patent troll activity targets small and medium-sized businesses, and 55 percent of troll suits are filed against companies with revenues of less than $10 million.
Fortunately, a number of recent court victories have given startups new tools to fight back against patent trolls. Perhaps most significantly, in 2014, a case called Alice v. CLS Bank significantly tightened the standard for what is and is not patentable. Under Section 101 of the Patent Act, a patent may not be granted for an abstract idea (or a law of nature or a natural phenomenon). However, patent trolls often present an idea (like one-click shopping, simple math, etc.) and argue that, because it is executed on a computer or other hardware, it is more than an idea and therefore patentable. The Supreme Court pushed back against this, ruling in Alice that just because an abstract idea is tied to a software or hardware, that does not somehow make that idea patentable.
Yesterday, Engine submitted comments to the U.S. Patent and Trademark Office (USPTO) lauding Section 101 and Alice v. CLS for the important protections they provide for our nation’s startups. “Alice and its progeny have provided startups with a crucial new tool to push back on spurious claims of infringement that otherwise might have proven to be a real threat,” writes Julie Samuels, President of Engine’s Board. “Indeed, multiple startups in our network have reported that counsel now often recommends that they fight back against those spurious claims since, for the first time, Section 101 provides a viable tool to get out of a lawsuit early, before costs become unbearable.”
Section 101 and Alice v. CLS are important because, when they work, they ensure that our patent system remains at least somewhat balanced. Absent Congressional action on comprehensive patent reform, they provide a critical tool for startups in the fight against patent trolls and the low-quality, abstract patents they rely on. We are hopeful that the USPTO will recognize this and abstain from advocating for any legislative efforts to roll back Section 101 or the Alice ruling. Alice and its progeny have been good for the development of the law, and critical for the startup community that we represent. Read our full submission here.
