Entrepreneurial Innovation in the 21st Century

Under Secretary of Commerce & Director of the USPTO David Kappos

March 13, 2011

South-by-South-West (SXSW) Interactive

"Entrepreneurial Innovation in the 21st Century"

Draft remarks as prepared for delivery


Good afternoon everybody!

Let me begin by saying that I'm tremendously honored to be here addressing this year's South by Southwest (SXSW) Interactive festival. But I'm even further humbled to be participating in an event that pulls together the next generation of our country's great creators and thinkers, doers and makers.

This is my first time at SXSW-and while Austin itself is a dynamic city-I have been absolutely floored by the enthusiasm, the next-generation web 2.0 technology, the socially conscious mobile applications and the downright brilliant minds I've had the pleasure to engage with at SXSW. It reminds me of why we often say: don't mess with Texas!

And as we think of the powerful force this conference represents in connecting people and ideas, I want to especially thank Hugh Forrest, this festival's unrelenting and talented Executive Director.

Piecing together a gathering of this size is certainly no easy feat, but what really keeps this conference on the minds of entrepreneurs around the world, year round, are the participants themselves. Because, for all it's grandeur & scale, and for the nearly 11,000 registrants it attracts, SXSW-Interactive really goes a long way in leveling the playing field in technology by allowing small businesses, independent entrepreneurs and large enterprises alike, to showcase their services to one another and synergize their ideas with one another.

From social networking tools, to new API consoles, and from new Cloud computing techniques to smarter energy utilities-your cutting edge products are changing the way we interact with an increasingly digital world. By harnessing new technologies with socially conscious enterprises you're developing products that address everything from retargeted ad-marketing to SMS-based earthquake relief in Japan.

Now some might be inclined to call this a "Hipster's Haven" or "Geek Spring Break"-but I call it the next generation of job growth. In an increasingly globalized world, your innovations embody the source of American competitive advantage in the 21st century. Not only can your novel ideas move the pulse of an industry or transform the welfare of a community, they can also attract critical resources and capital for additional research & development, creating a host of new markets and new opportunities.

Now this is especially critical because we stand at a crossroads in our country's economic evolution. Determined to accelerate the pace of economic development, government and business alike strive on a daily basis to do more while working with limited resources. But the growth potential and vitality of the United States has been, and continues to be, deeply rooted in American innovation. This country was founded by pioneers who developed new ways to cope with an unfamiliar environment, who cured disease and connected a country, and who led the world into the age of flight. American innovators discovered the power of information technology and digital communication that brought unprecedented commerce, economic growth, prosperity-and even FourSquare.

Our economic security continues to be steeped in the ability to compete in an innovation economy. And time and time again the story of American growth is written by the daring drive of entrepreneurs, who are willing to roll the dice on a great idea: It's the story of online venture, Udemy.com which is transforming education by enabling anyone to build a curriculum of online courses. Through the power of three young entrepreneurial minds, Udemy is enhancing the classroom experience, increasing access to educational resources for communities world wide, and empowering small entities to support and create a business model with limited overhead, via the internet.

Innovation is also embodied in the story of ReTargetter. A site that provides large and small companies alike cutting edge tools to retain a target audience when advertising their products or services online. Now independent ventures such as these-and all the other entrepreneurs here this week-create 2 out of every 3 new jobs in our country. Your efforts, similar to the story of this country itself, represent the willingness to take a risk on a new cause, a new idea or a new invention. And that is the path by which the next chapter of American growth will be written.

To optimize the ability of entrepreneurs to thrive, the United States Patent and Trademark Office, the Department of Commerce and the Obama Administration are working aggressively to reduce barriers to development and accelerate success. First and foremost, the capacity for growth of any inventor or entrepreneur rests in her ability to attract funding, raise capital and spur additional research and development, and ultimately production. That's why our Administration is taking concrete actions to improve the environment for high-growth innovation through the Start-Up America Initiative.

By building partnerships with the private sector, the Department of Commerce and the Small Business Administration match up to $2 billion for private funds that invest in early-stage R&D, invest in businesses in underserved communities, and invest in small entities that face difficult challenges in accessing capital. These nation wide partnerships not only help break down barriers that independent entrepreneurs may face in seeking funding, they also encourage and incentivize direct partnerships between venture capital firms and small companies.

And further pivotal to toppling impediments to growth is a strong Patent and Trademark Office. Many patent-reliant industries, including alternative energy and green technology companies participating in SXSW, require timely and high-quality patents to foster research and secure resources. That's why the USPTO is working to create a more efficient and cost-effective patent system. Aiming to simplify the process of securing patent rights, the US Senate passed legislation last week that will allow small and independent inventors to move their ideas to the market place faster, while reducing the need for cost-prohibitive litigation, that all too often ties up ideas in the courts, stifling innovation.

Last year, the United States Patent and Trademark Office was described in Harvard Business Review as the "biggest job creator you never heard of." As our country seeks to regain the 8 million jobs lost during the recent recession, the USPTO is a great place to start. Countless inventions that can spark new businesses are right there-sitting in our backlog of unexamined patent applications. And reducing that backlog is one of our Administration's priorities and my highest priority.

Now in the area of software we can have a different discussion:

Because, many of the brilliant tech applications showcased at SXSW are rooted in open source development models, and there continues to be debate as to the extent to which patents are in the interest of your products or services. As a long time champion of open source software, and open development models more generally, I fully understand this issue. I've lived it, and in fact helped found a company to address it. But let me be clear: The patent reform legislation that recently passed the Senate last week recognizes business models like open source, where we can do with fewer marginal patents. In fact, it creates a new right for open source innovators to submit documents including code-directly to the Patent office and at no cost, over the Internet, to ensure our examiners are not granting patents covering concepts you have already put into practice. The legislation also makes it much easier and less expensive to challenge and remove patents we've granted by mistake.

And even beyond legislation we've already implemented improvements inside the USPTO to ensure we take a good, hard look at software-related patent applications. We are giving our examiners more time to carefully review these cases. And we recently announced and deployed a comprehensive set of examination guidelines specifically fine tuned to software related inventions. This is the first time in the history of the USPTO that we have put such extensive focus on improving our handling of software related inventions and we're doing it to ensure all software development business models will flourish.

So, I do think it's fair to say that this Administration gets it. And we are working on new, dynamic approaches in our patent laws-including the way we implement them-to enable all business models to thrive and nurture open development models, so they are not placed in conflict with the intellectual property system. We want startups of all nature, patent-oriented or not, to put their finger on the pulse of where American innovation is headed, and the social demands that are left to be addressed.

Beyond funding and a supportive intellectual property system, close collaborations and peer-to-peer partnerships are also essential for startups to learn best-practices and ascertain tricks of the trade. Groups like YCombinator and The Founder Institute offer forums to test new ideas and tap into a network of professional support. That's why Start Up America is expanding entrepreneurship education through additional mentorship programs that grow networks of support between large companies, investors and your businesses.

In truth, what these government collaborations, startup initiatives, patent reform efforts and funding programs strive to do, is keep up with a new reality. In a single generation, revolutions in technology have transformed the way we live, work and do business. Today, just about any company can set up shop, recruit talent, and move their products wherever there's an Internet connection. Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on math and science.

So, yes, the world at times can appear staggeringly different, and the competition for jobs is real, and it is global. But there is a resounding note of optimism and it is on full display this week here in Austin, Texas. Your creativity, passion, hustle and determination is employing more individuals than ever, in industries that just a few years ago we did not even know existed.

On the heels of an idea you are creating new ways to:

  • organize the information in our lives,
  • communicate with friends and family,
  • find a great place to eat,
  • and streamline the process by which we get our news.

And in perhaps the largest display of nobility, business has ever seen, many of you are harnessing the power of your technologies to serve those most in need. Mobile application after mobile application has been created to raise money for relief efforts in Haiti, Chile and now Japan. Microlending applications have been set up on Facebook to offer loans to small farmers in rural areas of the world at the click of a button. Families can share the all-too-missed experience of home with soldiers serving their countries overseas through web-chatting applications.

Thank you for your service to our country and our planet.

All such efforts must be lauded. The ability to develop tools in the name of cause-based enterprising is an endeavor that may still require investment capital, but leaves the rest of the world inspired through, human capital. That's why the USPTO is also proud to play a role in accelerating socially conscientious technologies. Under our Green Technology Pilot Program, patent applications pertaining to reducing greenhouse gas emissions, energy conservation and environmental quality are accelerated in their review and consideration. And at no cost to the inventor. By advancing a commitment to building a more sustainable energy future, the US Patent and Trademark Office is able to spur additional innovation and promote green collar jobs that provide our world with alternatives to harmful energy practices.

Ladies and gentleman, a changing world requires new partnerships and new solutions. As the government invests in the building blocks of innovation through new infrastructure and new research, we can establish an environment ripe for private sector investment and competitive markets. Boosts in R&D investment, public-private partnerships, and cause based technologies are all essential to 21st century business. And the Commerce Department and USPTO are ready to lead in making these improvements a reality.

As I've outlined today, we must provide an environment that allows small businesses to attract capital and grow based on their ideas. For these businesses to flourish, we must provide timely and high quality access to IP rights. We must also work together to make sure the entrepreneurial drive showcased this week is alive and well in startups willing to test new frontiers. Ongoing dialogues, expanded public-private partnerships, and a robust, balanced intellectual property system are vital to winning America's future.

All parts of the US innovation value chain must remain vibrant. And if amplified by good government policy, the current re-aligning trends can support one another to preserve American excellence in out-building, out-innovating and out-hustling our economic competitors.

Thank you.