Will Breaking the Patent-Office Logjam Really Create Jobs?

President Obama signed a bill last Friday that will mandate the first reform of the nation's patent system in more than six decades. The President had pushed for the reform as part of his job-creation agenda amid claims that the changes could create as many as 200,000 jobs.

How would this work, and more importantly why would patent reform put people back to work?

The new law is supposed to assist the U.S. Patent and Trade Office (USPTO) issue higher-quality patents at a faster pace. It is widely accepted that a fix is needed, and there have been calls for years for a full reform and overhaul. Even critics agree that the reforms will ensure that USPTO gets badly-needed funding and support.

So where does the 200,000 jobs claim come from? Well, it is just another job-creation prediction, and as with many such predictions it is difficult to actually quantify the number – yet in this case once a number was thrown out it was hard to disown it.

According to CNN.com, “news reports have attributed that figure to Patrick Leahy, chairman of the Senate Judiciary Committee, and Majority Leader Harry Reid.” What is interesting is that Leahy’s aides had made it clear that the Senator did not actually want those numbers attached to the bill -- but again, it is hard for people to stop citing them.

This is just one part of the equation. The other is that patents continue to be a benchmark when it comes to startups securing funding from investors. The phrase “patent pending” says to the money people that an idea is worthy of investment.

Not Broken -- Just in Need of Repair
The truth is that the system isn’t so much broken as it is just backlogged. Wired.com noted that “More than a million applications are currently pending, and over a thousand are added to the pile each day. The result is that it now takes an average of two to three years for an inventor to secure a patent.”

President Obama said the bill he signed would “put a dent” into those applications, making it faster and easier to turn ideas into potential jobs and new businesses.

This is another part of the equation, because when businesses fail – and the sad truth is that many new businesses do in fact fail – the investors can recoup their investments by selling those patents. This brings us back to the point of how patents can help ensure funding. Without the patents many investors don’t see a way of minimizing the risk of investing in a startup – and faster patent approval could certainly help get investors on board.

This will, of course, spur innovation and in the process should get people working.

A few of those jobs will be created as a direct result of the process; the USPTO says it will likely hire 1,500-2,000 examiners, but that is a far cry from the 200,000 new jobs cited by the President. It is also a mere drop in the bucket compared to the “millions” of people that could find work as suggested by David Kappos, director of the USPTO, when testifying before House Subcommittee on Intellectual Property earlier this year.

So will it actually be innovators and new employees who get the jobs? More likely it could be patent attorneys who see the lion’s share of the new business. In the CNN.com story Jim Bessen, fellow at Boston University School of Law noted, “The patent bill will create jobs – jobs for patent attorneys, but not too many other people. In most sectors of the economy today, patents decrease jobs rather than increase them.”

And what about lawsuits? Over the years this reporter has noted that a game is played a lot among tech companies. Company A sues company B over patent infringement, and then Company B countersues Company A. Won’t a rush of patent approval just create more of this? That could certainly be the case.

As Wired.com also noted, “today’s patent applications are entirely two-dimensional affairs, consisting solely of written descriptions and intricate diagrams. But for most of the first century of its existence, the US Patent and Trademark Office required applicants to submit small models of their inventions.”

Of course in the digital age it is easy to create concepts and ideas. So obviously you can’t submit a model for Facebook or Google, and here we’re back to lawsuits -- lots of lawsuits.

Patent lawyers will see work, up to 2,000 people could get jobs approving patents, lawsuits will likely continue as there will no doubt be plenty of vague patents approved, and investors will be protected if innovative businesses fail.

That sounds a winning formula that sadly needs no patent.