The Big Story: Patent policy discussions resurface in D.C. this week
This was an active week for patent policy conversations in D.C., with the Senate, House, and Patent and Trademark Office (PTO) all weighing in. Procedures for reviewing low-quality patents took center stage, with many focused on the role the Patent Trial and Appeal Board (PTAB) plays in the startup and small business ecosystems. It is imperative that policymakers who want to understand the full impact of the PTAB—particularly in regards to U.S. startups—ensure startup voices have an equal seat at the table when the topics are discussed.
As we have explained, the PTAB is authorized to take a second look at patents—for example in an inter partes review (IPR)—and assess whether those challenged patents were (in)correctly granted. If a patent fails to claim a truly new invention, but instead claims something that was already known, something that was already written down in the “prior art,” then the PTAB can weed out those invalid patents so that they do not stand in the way of innovators and startups. These proceedings were designed to improve patent quality, and they offer a more efficient and affordable defense to startups facing improper accusations of patent infringement over weak, low-quality patents—so entrepreneurs can steer their resources and time towards innovating, hiring, and growing.
On Wednesday, the Senate’s IP Subcommittee held a hearing about the PTAB, and concerns about startups and small businesses dominated much of the discussion. But unfortunately there were no startups in the room who could share their first hand experiences about the benefits of PTAB. On Thursday, the House’s IP Subcommittee held a similar hearing to delve into how the PTAB has impacted innovation and small businesses. Of note, the hearing included testimony from Kirupa Pushparaj—General Counsel of Step, a fintech startup focused on improving financial literacy in the next generation. He spoke about the value of patent ownership to startups and how the PTAB “is the best forum to address and resolve patent validity issues, especially for startups.” He emphasized how the steep costs of litigation and the pervasiveness of low-quality patents wielded by non-practicing entities (NPEs) are big problems for startups, and can be a death knell for some. Which further hammers home the value of low-cost, PTAB alternatives to clear out those bad patents.
Beyond Capitol Hill, the patent office also released a memo about PTAB practice, which could bring more certainty to these review proceedings. The agency announced guidance, which will be subject to further rulemaking, about policies that allow the PTAB to ignore likely-invalid patents for purely procedural reasons, leaving them in place to be used in lawsuits. Of note, under the new guidance if there is compelling evidence a patent is invalid, the PTAB should review those arguments; and the PTAB is no longer expected to rely on theoretical (and usually incorrect) trial schedules when evaluating the merits of a patent challenge. This will hopefully free the Board to focus on economically important patent validity issues.
As Engine, ACT | The App Association, the Consumer Technology Association, and the Developers Alliance noted in letters to the House and Senate this week, “ensuring meaningful access to [PTAB] proceedings promotes patent quality and benefits the nation’s startups and small business innovators.” Startups need the best possible chance to succeed, free from the threat of faulty litigation that could cost startups capital or force them to close up shop all together. If policymakers want the U.S. innovation system to thrive, it is essential that they prioritize keeping the PTAB as a process that supports entrepreneurship, and learn more from founders and business owners who experience the patent system each day.
Policy Roundup:
House subcommittee advances privacy legislation. This week, during a markup of the American Data Privacy and Protection Act (H.R. 8152), a subcommittee of the House Energy and Commerce Committee voted to advance a bipartisan, bicameral privacy bill. As we have noted, the legislation would, among other things, set a national set of rules for data privacy. But there are remaining disagreements among lawmakers about at least two key issues: whether and under what circumstances individuals could file suit against companies directly and to what extent the federal privacy law would preempt state laws. The bill will next be considered by the full House Energy and Commerce Committee, but the Chair of the Senate Commerce Committee has signaled that her committee will not move the bill in tandem, citing concerns about the bill’s enforcement provisions. Although, the bill will go through a series of edits moving forward, policymakers made some significant changes to the original draft. One significant change under the small business exemption increases the amount of individual data accounts businesses can collect or process before no longer being considered a small business. With this increase from 100k to 200k accounts, more startups will be covered under the exemption. Engine applauds the bipartisan lawmakers behind the bill for taking this landmark step in creating a much-needed federal privacy framework, and we hope the perspective of startups continues to be a priority in considerations moving forward.
Policymakers may move the ball on competitiveness, funding legislation. Following months of negotiations, Congress may be close to reconciling the Senate’s United States Innovation and Competition Act (USICA) and the House’s America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (America COMPETES) Act. While the final package could stand to benefit U.S. startups through investments in the innovation and technology ecosystems, policymakers have indicated an intent to significantly trim the legislation to largely focus on funding for chip manufacturing. Contentious provisions, including immigration proposals that would bolster STEM talent and provide for a startup visa, may end up off the table. And, as we have noted, this bill is a poor fit for problematic provisions like the SHOP SAFE Act, which would make it harder for e-commerce related startups to launch and compete.
FTC considers rulemaking around privacy, AI, algorithmic decision-making. The Federal Trade Commission (FTC) recently announced that it is considering a rulemaking this summer in privacy, data security, and algorithmic decision making This rulemaking could also signal the FTC’s interest in developing more regulations governing the development and use of artificial intelligence (AI)—and area of technology that touches many startups, and as such an area where increasing regulation could have an impact on startups that both develop advanced AI innovations and those that deploy AI in their work.
Biden administration takes on student loan relief. The Biden administration this week announced that they are “nearing a decision” on student loan relief measures and that a final decision is expected this July or August. White House officials had previously discussed canceling $10,000 in federal loans for borrowers who earn less than $150,000 per year, though final details have yet to be confirmed. As we’ve stated before, student debt is a major burden on the startup ecosystem, keeping potential founders—and in particular underrepresented founders—from taking the leap to launch a startup. We urge policymakers to consider startups when addressing the student loan crisis, particularly the risk and capital needs associated with entering the startup ecosystem, in order to achieve a more inclusive innovation system.
Biden nominates new lead for Office of Science and Technology Policy. This week, President Biden announced he would nominate Dr. Arati Prabhakar to serve as the Director of the White House’s Office of Science and Technology Policy (OSTP). If confirmed, she would be the first woman, immigrant, and person of color to head the Office. In this role, Prabhakar could play an important role in advising the administration on a wide range of tech policy issues.
Startup Roundup:
#StartupsEverywhere: Philadelphia, Pennsylvania. Availyst is a customizable delivery management platform that allows consumers to find and sort through local grocery, takeout, convenience, and spirit options. Mandy Poston, CEO of Availyst, spoke with us about her company, what policymakers can do to help bolster the success of new businesses, and the difficulties startups face trying to navigate American privacy law.
