Patent Reform

STC, the New Mexico Optics Industry Association, and the New Mexico Biotechnology and Biomedical Association Invite UNM and Business Communities to Sign On to Patent Reform Letter

STC.UNM, the New Mexico Optics Industry Association, and the New Mexico Biotechnology and Biomedical Association encourage the University of New Mexico and New Mexico business communities to sign on in support of a letter encouraging the U.S. government to keep our patent system strong. The letter has been written in response to continuing efforts in Congress to reform the U. S. patent system. The current reform legislation before Congress could weaken U.S. innovation and economic growth--the two key elements in a strong U.S. economy--without a reconsideration of it's impact on technology-based small businesses.

Please support our efforts to strengthen the patent system by adding your name below.

New Mexico Optics Industry Association Letter to New Mexico Delegation Regarding Patent Reform Legislation

The New Mexico Optics Industry Association will be sending a letter to the New Mexico congressional delegation regarding patent reform. To become a signer on behalf of your company, organization, or yourself, of the letter (see below), please contact Ed Spivak, Director and President, New Mexico Optics Industry Association, at 505-280-5280 or ed@nmoptics.org.

April 2009

Senator Jeff Bingaman
Senator Tom Udall
Representative Heinrich
Representative Teague
Representative Lujan

RE: S515

We write today regarding the importance of the United States patent system to our high technology economy and especially to New Mexico. Our New Mexico companies and those we represent are committed to nurturing the innovation pipeline and subsequent domestic manufacturing capacity that will build the next generation of high technology products and services, creating new and well paying jobs in the process. However, we are concerned with recent legislative proposals to make fundamental changes to the US patent system that we believe would weaken, rather than strengthen, patent protection, putting this innovation pipeline and subsequent American and New Mexico technology and manufacturing capacity at risk.

In this time of economic hardship America can NOT afford to weaken the patent system because this would make it more difficult for small companies to grow, compete and create jobs.

The patent reform legislation that has been introduced in the Senate and House Judiciary Committees would reduce penalties for patent infringement by changing the law of damages. This change would elevate the importance of one of the factors now considered in calculating patent damages. By giving this one factor – apportionment – a preeminent position in damage calculations, proponents of the legislation would have achieved the goal of reducing damage awards. This type of reduction in the value of intellectual property rights could adversely affect our future economy in three ways.

First, to meet the demands of growing our 21st century technology and manufacturing requires large investments in research, equipment, capital and highly trained people. Our ability to rapidly innovate requires many components, including a fair and balanced patent system. A weakened patent system will harm startups and young companies because much of a young company’s ability to raise capital rests on a valuation of patents and the future revenue stream derived from patented devices and processes. Patents protect a young company so it can grow rapidly and payback the cost of research, experimentation, and development. Without a fair patent system a young company’s idea, creativity and innovations could easily and cheaply be stolen by larger firms. Startups and young companies provide almost 80% of the new jobs in the United States, hence a weakening patent protection will effect job creation and weaken this country’s position in the world economy.

New Mexico has a strong base of small businesses that form its industrial and economic backbone. New Mexico had almost 36,000 small employers in 2005. Small businesses created almost 55% of the state’s net new jobs from 2004 and 2005. The growth in the number of New Mexico small businesses was 5.2% vs. 0.3% for large businesses from 2000 to 2005. Clearly, small business growth is critical to the growth of the New Mexico economy and the American economy, and the current legislation would severely limit the ability of these very same small businesses to thrive or even survive.

Second, weakening the patent system will greatly devalue innovations developed by our research universities and national laboratories. The legislation will also deprive universities and national laboratories of much need cash from royalty payments. Also, if the United States weakens its patent laws, we can expect other countries, such as China, to simply “take” the cream of this country’s technology without paying royalties. Many professors and researchers that now enjoy royalties earned from their hard work may decide to leave their fields or maintain their research in trade secret form, further weakening the economy and the overall state of education and technology in the United States.

Third, we anticipate that our economy will flourish as innovation in high technology industries drives the creation of jobs. Our companies and our members create these jobs as we manufacture and market our patented products and technologies to domestic and international customers. If the current patent system is modified making it less costly to infringe on existing or future patent rights, we anticipate that our competitive advantage in the global marketplace will be reduced, impacting the creation of high tech jobs and economic recovery.

As proposals are made to change the UnitedStates patent system, we encourage you to take into account the impact of these proposals on the viability of our burgeoning high technology economy and its associated jobs, as well as our ability to attract the capital required to innovate at the necessary pace to effectively compete globally. Drastic changes, such as reducing penalties for patent infringement, will only discourage innovation, resulting in reduced investment and lost jobs at a time when the country can least afford it.

Proponents of Patent Reform state a goal of reducing nuisance infringement suits and eliminating the so-called patent “trolls.” We share this same goal, but we believe the solution must start by improving our patent system so that “poor” patents are NOT granted, patents are awarded in a timely manner (today the average is 34 months) and that all of the patent fees collected are used by the Patent Office to improve its functioning, rather than being diverted into the general government fund. It is important to remember that the fundamental right granted by a patent is itself a negative right—the right to exclude others from practicing the claimed invention. By design therefore, it is the case that not all patent owners can practice their invention, either because such practice might infringe another’s patent rights or because the patent owner is a non-commercial entity such as a research laboratory or university. These inventors and innovators should not be punished for the litigious nature of those few so-called trolls.

We also have serious concerns about the venue limitations in the bill that require that a defendant be sued in its principle place of business. This puts smaller companies at a severe disadvantage in any litigation. Moreover, many foreign companies don’t have a principle place of business in the United States; they may just import products through a import/export company (shell). Given that this is the case, a patent owner might not be able to sue a foreign company at all for patent infringement, but would have his or her remedies limited to blocking the importation of the product through the International Trade Commission, again, placing an unfair and unreasonable burden on small companies.

We believe the American patent system is the best in the world and we look forward to working with you to ensure that it becomes even stronger. Thereby we can continue to encourage the kind of investment, product creation, and job creation that has been the hallmark of our economy for decades. Thank you for considering our views on an issue of fundamental significance to innovation in America.

Would you please let us know your position on this very important legislation and provide us with any manager’s amendments that are offered. A small group of the undersigned would like to meet with you to further explain our position and answer questions. Please provide this information to Mr. Ed Spivak, New Mexico Optics Industry Association, 505-280-5280, ed@nmoptics.org.

Copies to:
President Barack Obama
Senator Patrick Leahy, Chairman, Senate Judiciary Committee
Senator Arlen Specter, Ranking Member, Senate Judiciary Committee
Representative John Conyers, Jr. Chairman, House Judiciary Committee
Representative Lamar Smith, Ranking Member, House Judiciary Committee

An open letter to our U.S. government regarding potential patent reform:

At this time of economic uncertainty for the U.S., innovation is a key element in our recovery. Investment in innovation requires a proprietary advantage and patents are an important way for companies to gain a competitive advantage. There are efforts to reform the U.S. patent system, which are resurfacing in the current congressional session. It is important for us to understand the connection among small business, patents and economic development.

Small businesses in the United States also provide much of the economic growth of the U.S. economy. The U.S. had 6 million small employers in 2005, representing 99.7% of the nation’s employers and 50.4% of its private-sector employment (http://www.sba.gov/advo/research/profiles/08us.pdf). Small businesses created 78.9% of the nation’s net new jobs from 2004 to 2005. Our nation is very dependent for its future growth on the health of our small businesses.

Patents are critical for small businesses. According to a November 2008 Small Business Administration Report entitled, An Analysis of Small Business Patents by Industry and Firm Size (http://www.sba.gov/advo/research/rs335tot.pdf), "Small businesses develop more patents per employee than larger businesses, with the smallest firms, those with fewer than 25 employees, producing the greatest number of patents per employee. Furthermore, small firm patents tend to be more significant than large firm patents, outperforming them in a number of categories including growth, citation impact, and originality. Finally, small firms tend to specialize in high tech, high growth industries, such as biotechnology, pharmaceuticals, information technology, and semiconductors." A strong patent system is critical to the health of the New Mexico economy, as well as to the growth of the U.S. economy, especially important in these challenging economic times.

Patents are important to our technology-based small businesses, the source of the highest paying new jobs in our economy. U.S. university research transferred to the marketplace result in the development of over 500 new start-up companies each year. These new companies are highly dependent on strong patents (http://www.autm.net/about/dsp.pubDetail2.cfm?pid=41). Investors in new start-ups rely on a proprietary position, often based upon patents, in their decisions to finance new firms. New Mexico research institutions have contributed many new companies and jobs to the state's economy. Weakening the patent system would cripple this process for the state and the nation.

In addition, a recent study released on January 14, 2009, entitled The Likely Adverse Effects of an Apportionment-Centric System of Patent Damages, was commissioned by a group of U.S. manufacturers to study a key aspect of proposed patent reform. The research was conducted by Scott Shane, Ph.D., Professor of Economics at Case Western Reserve University in Cleveland.

The study sought to answer the threshold question of whether and how much average damage awards would be reduced by apportionment legislation. The following estimated effects of apportionment legislation included:

1. Reduction in value of U.S. patents of between $34.4 billion and $85.3 billion.
2. Reduction in value of U.S. public companies of between $38.4 billion and $225.4 billion.
3. Reduction in R&D of between $33.9 billion and $66 billion per year.
4. Between 51,000 and 298,000 U.S. manufacturing jobs put at risk.
5. Favoring industries employing fewer people over those employing more people.

The paper is provided by the Manufacturing Alliance on Patent Policy (http://www.mfgpatentpolicy.org/home.html), and a PDF copy of the study may be downloaded (http://www.mfgpatentpolicy.org/images/Apportionment_of_Damages_Adverse_Effects_Jan14_09.pdf).

Current efforts to "reform" the U.S. patent system would likely weaken the system, creating fewer patents which are more easily challenged. At the same time, the courts have ruled on a number of patent cases which have addressed many concerns originally raised to support the case for patent reform. Finally, patent reform could seriously damage the US economy.

We encourage you to consider the impact of patent reform and use the opportunity to strengthen our patent system for the benefit and recovery of the U.S. economy.

The following have signed in support of this letter:

By providing the information below, I support STC.UNM's, the New Mexico Optics Industry Association's, and NMBio's efforts to strengthen the patent system.