By John Neis
Managing Director, Venture Investors LLC
Calls for patent reform have been part of the national dialogue for several years now; yet astoundingly there is no meaningful data on the potential economic impact of proposed legislative reforms. Since the start of the recession, the U.S. Government has pumped almost a trillion dollars into stimulus and recovery packages of one form or another. If job creation is Congress's top priority, shouldn't U.S. lawmakers pause to assess the economic consequences of legislation that will profoundly affect America's most reliable stimulant of job growth, namely investments in innovation?
The innovation economy of the United States is the envy of the world. Our venture capital industry accounts for more than 85% of the world's venture capital. In 2008, venture capital-backed companies employed more than 12 million people and generated nearly $3 trillion in revenue. Respectively, these figures accounted for 11% of private sector employment and represented the equivalent of 21% of U.S. GDP during that same year.
Venture-backed companies outperformed the overall economy in terms of creating jobs and growing revenue and venture capital continues to grow entire new industries nearly from scratch. In recent decades, venture capital has played an instrumental role in creating high-tech, high-growth industries such as information technology, biotechnology, semiconductors, online retailing, and most recently, clean technology.
From my vantage point, nothing in the House and Senate patent legislation will stimulate investments in innovative startups and several of the proposed changes, including a much-expanded post-grant review system, will make these investments far riskier and potentially untenable for venture capitalists. As a venture capitalist on the front line of early stage technological development, I fear that Congress is poised to do serious damage to a patent system that, albeit imperfect, does a better job of encouraging private capital investments in innovative startups than any other in the world.
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