Today a set of senators on both sides of the US political spectrum introduced the Startup 2.0 bill.  It’s a generally good idea…

Startup Act 2.0 would essentially create two new types of visas, one for foreign students who obtain graduate degrees in science- and math-related fields from American universities, and another that offers permanent residence to immigrants who start successful companies and create jobs in the United States.

But it’s built on a false premise; That by simply importing more “brain power” into the country, the United States will manage to “out innovate” the rest of the world, and thus “win” in the global economy.  The problem is, any innovation within the U.S., imported or otherwise, is being seriously hobbled by the U.S. patent system, particularly as it operates and interferes with software technology.

Naturally, “winning” in the global economy really means having happy, employed constituents in the eyes of Washington.  And given the current economic climate, “innovation,” is the favored path to creating those happily employed voters.  But as Vivek Wadhwa points out, many of those innovating jobs are being eaten by patent trolls.

In the smartphone market alone, $15-20 billion has already been spent by technology companies on building defenses, says Stanford Law School professor Mark Lemley. For example, Google bought Motorola Mobility for$12.5 billion—mostly for its patents. An Apple-Microsoft-Oracle-Nokia consortium bought Nortel’s patent portfolio for$4.5 billion. Microsoft bought Novell’s patent portfolio for $450 million and some of AOL’s patents for $1 billion. Facebook bought some of Microsoft’s new AOL patents for$550 million. Lemley estimates that more than $500 million has been squandered on legal fees—and battles are just beginning. This is money that could have been spent, instead, on R&D.

The larger players can afford to buy patents to deter the trolls, but the smaller players—the innovative startups—can’t. Instead, they have to settle out of court. Patent trolls take advantage of this weakness.

Invite all the innovators you want, few worth their salt will actually want to come into such an environment.  Meanwhile other nations, like Brazil and China have much more friendly policies for small start-ups seeking to navigate the tricky issue of intellectual “property.” At the very least, such countries have seen fit to limit software patents to specific methods of solutions to problems while software patents in the U.S. seem to manage to wield an umbrella over any solution to a given problem.  Innovators, the people who both have new ideas and actually build something around them, aren’t going to want the hassle. 

And more countries - already developed countries - will figure this out too.  The U.S. and “U.S. Companies” can exert all the pressure they want on countries in Europe and South America to “strengthen” their respective patent systems, but consider the turmoil in the Euro-zone today. Consider how particular European nations might begin to act if they see an opportunity to import technical talent as a means to a healthy economic end, particularly if a break-up of the Euro-zone were to occur. Then many 1000s of technically talented innovators will be faced with the choice of moving into the U.S. with its absurd software patents, or moving to a much friendlier environment in Europe.

The U.S. will lose that battle.

Tags: Technology, Patents, Tech