The U.S. patent system impacts the lives and affects the work of every person and business across the country—including startups. But when the system becomes too complex or burdensome, when bad actors and invalid patents stand in the way of innovation, the system can block the progress it is supposed to foster. And oftentimes small businesses, the public, and even policymakers are in the dark about the system’s problems, frustrating our ability to solve them. That’s why during our second annual Patent Quality Week, Engine and the Developers Alliance hosted a conversation with startup leaders across the country about the various, sometimes harmful, ways they experience the patent system. This panel reflected a spectrum of companies in multiple industries:
Todd Moore is the CEO and Founder of Florida Keys-based TMSOFT, a company that creates and publishes unique audio apps for mobile and desktop devices—most notably, the White Noise app that supports better sleep, focus, and more.
Shirley Paley is the General Counsel at Formlabs, a 3D printing startup based in Somerville, Massachusetts that makes affordable, high-performance, industrial-quality 3D printers, that develops and manufactures the materials used in those printers, and that develops the software to power it all.
Jie Qi is the Co-Founder and CEO of Chibitronics Inc.—a Tampa-based company that makes circuit stickers, blending programming with arts and crafts, and supporting tools for educators, artists, and more to create and design electronics. They are making circuit boards that feel like arts and crafts, to make engineering, coding, and circuitry more accessible. Jie is also the Creator of PatentPandas.org, a platform that shares resources about the patent system, stories, and directions to law clinics and pro bono resources.
During the panel, several themes emerged. This group of startup leaders have patented inventions and worked at companies that own patents, but each has also experienced the patent system in different and very frustrating ways. For Jie Qi “engaging with the patent system was not at all intuitive.” She spoke about how in graduate school “we had a crowdfunding campaign to get circuit stickers out into the world. But I found out two years later, after my company was all set up, that my LED stickers had been patented by someone else. That someone was one of our crowdfunding backers who filed the patent two months after we shipped our product, when they had it in hand. I was so scared—I had research papers, our product had gone viral, and we were featured in Wired—and I thought all of that confirmed our work already existed and no one else could patent it. But they did. I wondered if I would even be allowed to keep doing my work.”
Todd Moore spoke about the time a non-practicing entity (“NPE” or “patent troll”) accused TMSOFT of infringement. He first got a demand letter and “harassing voicemails and emails,” which he ignored for a year, until TMSOFT and at least 70 other organizations were sued for infringement. The NPE claimed his White Noise app was in violation of their patents because it used a hyperlink to the app store. He explained: “at the time, we were a very small, three-person company. . . . I was fortunate to find a lawyer who would represent me pro bono, though. He filed a single, initial response to the lawsuit where we laid out our case and why the court should dismiss. It probably would have cost me upwards of $200K if we had to pay for that. I knew the suit was ridiculous, completely frivolous. But in order to fight back, it would have taken a war chest. Since I had a free lawyer, I was able to fight back and I refused to sign a non-disclosure agreement with the troll.”
Similarly, when one of Shirley Paley’s startup clients was sued by an NPE, they did not want to set a precedent that they would fold or compromise in the face of this behavior. After Florida passed its Patent Troll Prevention Act, Shirley’s company “quickly used the law and it turned our case around. Basically, that law is trying to prevent bad-faith assertion by NPEs. And for us, it resulted in quick settlement, we paid zero dollars, and we did not sign any confidentiality provisions. Once we came to the NPE with claims under Florida’s new law, they came to the negotiating table and wanted to get rid of us very quickly.”
The panelists highlighted the toll these experiences can take on a new company, as well as the challenges of trying to fix the problems. Todd explained “I spent an incredible amount of time educating myself about the patent system, how the process works, why so many cases were going through one judge in Texas. But I was being pulled away from my development work.” Not only that, but wanting “to try and fix the patent system, I also spent a lot of time advocating on Capitol Hill, sharing my story. I even got invited to testify to Congress, and took a week off of work to prepare for that alone. It was a really important issue, but sadly I haven’t seen any real solutions from Congress.”
Each of the panelists proposed solutions and paths forward, though. Jie noted the inherent challenges of patent examination, which create barriers to patent quality. She explained how “the patent examiner has to basically search through a haystack to see if there’s a needle in it. That’s a hard job, especially in the 20 hours they have to review an application. Can we make it easier for prior art to be submitted to the examiner? Can we give more time for those applications to be reviewed?” Relatedly, when Todd was applying for his own patents, he was told the strategy is: “you just keep appealing, and ultimately the patent office runs out of resources and gives you the patent. While I couldn’t believe that, it seems the strategy is still being used today, and that is why we have so many low-quality patents. One easy fix is to put a limit on continuations, appeals.”
Shirley went on to discuss how the patent system can get twisted after a patent issues. “When the PTO gives you a patent, they think they are giving you something narrow. . . . But then the NPE manipulates it to something completely different.” Which also opens doors to the patent troll business model that Todd and Shirley explained as “low risk and high reward.” Policymakers need to find solutions that make the business higher risk. That could include, for example, passing a strong, federal anti-troll statute that creates penalties for bad faith patent assertion and gives victims leverage. Shirley explained how “the ultimate solution there needs to be well thought out on the federal level. State anti-troll laws are nothing fancy, but they do one thing well: they create a cost for the troll.” As Shirley explained, state lawmakers drafted these laws, which focus on unfair and deceptive practices, to avoid preemption issues. But the laws continue to be challenged in court using the argument that patents are enshrined in the Constitution, making them the domain of the federal government. A strong federal law could resolve those sorts of challenges to valuable state laws and provide more consistent opportunities for small businesses targeted by NPEs nationwide.
Finally, one piece of advice Jie got was not to “let the legal stuff distract me from my work, my innovation.” And with her PatentPandas.org project, that is what she is “trying to share with others. I share my stories, and all the emotion involved. But I wanted to make a resource—I know how scary this is. We use panda comics and humor to illustrate how the patent system works. The legal side of innovation is important, and we want to make sure the next generation of innovators is equipped to understand that, too.” And from that perspective, Jie also closed with the reflection: “Maybe there can be more collaboration between artists, designers, engineers and policymakers and lawyers. The patent system is all about innovation. Why not collaborate on innovations to improve the system itself? If we bring in more perspectives, we can come up with more solutions together.”
Every startup leader on this panel, although coming from different perspectives and innovative spaces, all experienced abusive sides of the patent system, which should only reiterate to policymakers that these are not isolated problems. A successful, thriving startup ecosystem and innovative economy requires startups to be able to keep their time, resources, and capital focused on growing, hiring, and getting back to their work. Hearing directly from these startups should be part of charting that course to a better patent system that works for everyone. Learn more here.
