Strengthen patents to boost family businesses

Which company is more innovative? A corporate giant, or a family-owned business?

More often than not, it’s the family-owned firm. A recent study found that for every dollar invested in research and development, family businesses generate more patents, new products, and revenues than their non-family-owned peers. These companies drive economic growth and support millions of jobs.

Unfortunately, family firms face serious headwinds. Across the nation, courts are undermining firms’ property rights, making it difficult for families to sustain their businesses. Congress can safeguard family firms’ property rights by passing the STRONGER Patents Act.

The right to own property — whether it’s land, a business, or an idea for an invention — has been central to Western culture ever since 25 barons and the King of England signed the Magna Carta in 1215. The document explicitly prohibited the King from appropriating another person’s property.

The miracles of modern capitalism, from iPhones to cutting-edge medicines, wouldn’t be possible without strong property rights — especially patents.

Without IP protections, any rival could create knock-off copies of a smartphone or a drug formula. These rivals could undercut innovators, who spend enormous sums of money to turn their ideas into marketable products. Soon, nobody would spend money on research and development, since rivals could simply steal the fruits of their labor.

IP drives the economy. IP-intensive industries comprise 38 percent of our GDP and support nearly 58 million American jobs. IP-related service exports have increased by more than 80 percent over the last two decades, totaling $130 billion in 2014.

Unfortunately, there are plenty of firms that try to infringe on innovators’ IP. And many of them get away with this theft because innovators — especially smaller family-owned firms — lack the legal resources to halt this infringement in court.

The STRONGER Patents Act would fix this problem.

The bill, officially the Support Technology & Research for Our Nation’s Growth and Economic Resilience Patents Act, affirms that patents are a form of property. This means that patent owners can ask a court to issue a permanent injunction to halt a rival from infringing on his patent.

Currently, patent owners have to file a new lawsuit every time a repeat-offender infringes on a patent. Small, family-owned businesses often can’t afford to repeatedly go after these thieves.

The STRONGER Act would also rein in the notorious “Patent Trial and Appeal Board.” This branch of the U.S. Patent and Trademark Office exists to review patents that are allegedly too broad and vague. PTAB has gone out of its way to strike down patents, even ones that courts have found legitimate. PTAB has partly or completely invalidated patents in 84 percent of its final written decisions.

STRONGER would check this practice by giving federal courts the final say on a patent’s validity. So if PTAB’s decision differs from that of the court’s, the court’s ruling will win.

These reforms would encourage investment in IP-intensive businesses. Three-quarters of investors weigh the value of small companies’ patents when deciding whether or not to back them.

Passing STRONGER would give innovative family businesses the confidence they need to make investments that boost our economy.

Patten is President of the American Business Defense Foundation.

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