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Wednesday, Jun 7, 2023

Small Business Owners Tell Congress About Patent Woes

Small business groups asking for patent law reforms testified before a Congressional committee recently. But even as small business owners speak out in the long running debate over how the system might be changed, there is considerable skepticism that reform measures will truly benefit these same firms. Whatever happens in Washington, small businesses are still likely to face two major obstacles with respect to patent protection the time it takes to get a patent and the expense of protecting it. “Even though you know you have a patent that is totally defensible, it comes down to your bank account versus their bank account and how much are you willing to put on the line,” said Patrick Parker, chief development officer at Wi-Fi technology developer Xirrus, summing up the real problem most small businesses face in protecting their patents. It can take as much as three years to receive a patent and the cost, depending on the complexity of the patent, can run from $5,000 to $25,000. But those fees do not include other costs attorney fees and the cost of management’s time which, for many small businesses, can be far more expensive. The delays can directly affect the company’s business. “For a lot of companies, having a patent is a critical step to getting funding,” said Steve Sereboff, a partner at SoCal IP Law Group LLP who specializes in patent law. “I have several clients that have chosen to not start selling their product until they have their patent granted because the product is so simple, anybody can rip them off.” The backlog in the patent office jumped 33 percent between 2000 and 2005 and some reports suggest it may double again this year. Some business owners point out that, with technology moving so quickly, they simply can’t wait to get their patent approved. “By the time you brought your product out, it would be obsolete,” said Greg Peacock, president and CEO of VoiceBoard Corp., a telecom technology company in Camarillo. Peacock, a serial entrepreneur and inventor, said he has seen dramatic changes in the patent process over the years. “It used to be in the 70s if you got a patent, people would just infringe on it without compunction,” Peacock said. “I invented a whole new industry in the early 1970s and I didn’t even apply for a patent because I knew I wouldn’t be able to defend it. Now, it’s exactly the opposite. A patent holder can really hold up other businesses and if they’re issuing patents for things that aren’t innovative, it really restricts business and it’s hard for a small business to go into a new area of technology.” Today, patents themselves have become a big business in their own right, with so-called “patent trolls” acquiring patents and generating what may be their only revenue stream by licensing them. But the bigger challenge for small businesses is not so much the danger that their innovation will infringe on someone else’s patent. It is the likelihood that their patents will be infringed upon by rivals. “My experience representing mostly small to medium-sized businesses is that the small business’s patents are much more important than the risk of being sued on someone else’s patents,” said Wesley Monroe, an attorney with Christie, Parker & Hale LLP, a specialist in IP law and litigation. “The biggest risk to small business is often competition from large, well capitalized companies that can see their good idea, make another version that’s as good or better, and use their economies of scale to drive them out of the market.” The trouble is that having a patent does not really give a business protection against having its idea stolen. “We know that just about every competitor out there, and there are about 70 of them, is violating our patents,” said Dr. Robert Scheir, president and CEO of Steril-aire Inc., a Burbank-based company that develops and markets germicidal ultraviolet lamps for use in air conditioning systems. “They’re all depending on us not having the resources to pursue them all.” Steril-aire focuses on the biggest violators and so far has gone after three infringers, Scheir said. But even before these cases get to court, he said they can easily consume $25,000 to $35,000 a month. Should a company decide to litigate a patent infringement case, the cost jumps to several million dollars and more. “Patent prosecution, whether you are right or wrong, is terribly expensive,” Scheir said. “And small companies, individual inventors, they’re dead meat. They don’t have a chance.” Defending a patent involves not only a lot of time and money, it also demands the attention of the business’s key people because they must inevitably become the witnesses to show that the patent is defensible. “When you’re a startup you have only a certain amount of places where you can invest resources,” said Parker. “And one of the places you don’t want to invest is something that has no ROI.” Entrepreneurs say their best chance is to persuade the infringing company to license their technology. But that is not always successful, particularly if the infringer has more resources to spend on the battle. Many other times, the outcome is a swap of intellectual property. The company with the patent trades its rights in return for another technology from the offending competitor. “We had a company that was clearly infringing on our product when I was at Xircom,” said Parker. “They did everything but take the name and trying to stop them was a very expensive and long process. And at the end of the day, we weren’t able to stop them but we were able to compromise to get them to back off.” Some entrepreneurs believe the government can and should do more to keep rivals from infringing on patents. But others believe the situation is far more complicated. “One of the easy answers is the loser has to pay all the legal fees,” said Parker. “All it would take is a misfire on the part of the small guy and he can be out of business. So it’s a really complex issue. I’m not sure there are any answers.”

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