[Tim Lee]
In my first two posts, I described how a property system is supposed to work and compared it to the actual performance of the patent system. I concluded that the patent system seems to work reasonable well as property for the pharmaceutical industry, while it fails miserably for other technologies.
So what went wrong? Patent law is a mind-numbingly esoteric subject, and one I'm still learning about myself, so I'm not going to try to attempt a definitive answer in a blog post, but let me make a few general observations.
I largely agree with Bessen and Meurer's description of the general problem: the patent system does an inadequate job of providing notice of patent boundaries. Real property has a variety of mechanisms—fences, no trespassing signs, regular property lines, records on file with the county—that make it easy for someone to figure out when he might be trespassing and with whom he needs to negotiate. Patent law has few, if any, comparable mechanisms. If a smart inventor gets an idea for a new (non-chemical) product and wants to find out whether it's already covered by patents, there's no practical way for him to do that. For any given product, there will be thousands of patents that are potentially relevant—one estimate says that the typical e-commerce site would need to check more than 11,000 patents, for example—and a patent lawyer will charge several hundred dollars per patent to do the necessary checks. Even if an aspiring entrepreneur managed to raise the several million dollars it would take to clear all the patents related to a new product, that wouldn't give him any real assurances because the opinion of any given patent lawyer isn't legally binding. The patent lawyer might tell the inventor that a given patent doesn't infringe, only to get sued and discover that the judge or jury disagrees with the patent lawyer. And of course even an exhaustive clearance effort wouldn't catch submarine patents (which don't surface until after the entrepreneur has started selling his product) or patents in other fields that are interpreted so broadly as to cover inventions far afield from the original patented invention.
A good example of this latter case is Patent 4,528,643, "System for reproducing information in material objects at a point of sale." The invention described by this patent is nominally a mall kiosk that can sell on-demand tapes of music stored at a remote location. "Point of sale" is retail jargon for computerized cash register, and almost everyone assumed that's what the patent covered. However, the owner of the patent, E-Data, began asserting the patent against e-commerce sites that didn't have "point of sale locations" in the conventional sense, and the court bought this broader interpretation. Suddenly, a patent for a mall kiosk became a monopoly over a broad swath of e-commerce technologies. Prior to the court cases regarding the patent, most patent lawyers would have told a potential e-commerce developer that the patent didn't apply to them. But they would have been wrong, and the developer could have faced millions of dollars in royalties.
As a result, in many high-tech fields, especially software, it's taken for granted that any non-trivial product infringes numerous patents, and that finding all the relevant patents is effectively impossible. So startups' standard strategy is to build their product without worrying about what patents they might be infringing, and hope to grow fast enough that they'll be able to hire good patent lawyers when the inevitable patent lawsuits arrive. Once the startups have some free capital, they begin a process of patent stockpiling, attempting to amass enough patents that they'll have some leverage against adversaries in patent litigation. Companies that fail to do this—that spend all their resources on engineers rather than patent lawyers—wind up in the unfortunate situation of Vonage. Vonage, the Internet telephony pioneer, was sued by Verizon, a far less innovative company by almost any measure, because Verizon had spent resources amassing patents while Vonage had focused on actually developing useful products. Vonage ultimately had to pay Verizon $120 million in damages. No one disputes that Vonage developed its technology independently, but independent invention isn't a defense to claims of patent infringement.
Bessen and Meurer's notice theory also explains the relatively better record of chemical patents. Chemical formulas provide a reasonably objective way to distinguish different inventions. Chemical and pharmaceutical patents can be indexed by molecular formula, and it's then reasonably easy to conduct a search to see if a particular chemical has been patented. There's no comparable way of describing inventions in most other fields, so the boundaries tend to be a lot less clear.
So what should be done? There are three broad reforms that I think could make a difference. First, the courts need to be much stricter about allowing patents on abstract concepts. Patents should cover a specific physical device, not a broad category of functionality. Where patent claims are broad or vague, they should either be given the narrowest possible interpretation, or they should be declared invalid altogether.
Second, the patent office should institute reforms to better define the boundaries of patents, and the courts should defer more to these determinations. Currently, the US Court of Appeals for the Federal Circuit, which oversees patent appeals, has a tendency to re-interpret the scope of patent claims without regard for the interpretations given by the lower courts and the Patent Office. Patent examiners should carefully record, in detail, what a patent covers, and then courts should defer to these descriptions. Bessen and Meurer also recommend that the Patent Office offer a service, for a few hundred dollars, of providing opinion letters on whether a given patent infringes a given invention. Unlike an ordinary legal opinion, a Patent Office letter would be giving weight in any future litigation. This seems like a good idea.
Finally, the Federal Circuit should end its unfortunate experiment with patents on software. Supreme Court precedents disallowed patents on software until the 1990s, and the software industry was plenty innovative. A series of decisions by the Federal Circuit eviscerated the rule against patents on software. Bessen and Meurer's statistics indicate that software patents have the lowest value and the highest litigation rates, and I don't think it's a coincidence that the surge in patent litigation corresponded with the legalization of software patents (although those certainly weren't the only bad decisions the Federal Circuit made in the 1990s). The Supreme Court has yet to rule on the Federal Circuit's de facto legalization of patents and software, and in my view they ought to reverse it at the first opportunity.
To return to the original theme of this series, I hope it's clear why I'm uncomfortable with the analogy between patents and traditional property rights. Outside the pharmaceutical industry—and especially in the software industry—the patent system is more like a rent-seeking operation for the benefit of the patent bar than it is a functioning system of property rights. It's possible that the reforms I suggest above (and others Bessen and Meurer propose in their book) could improve things sufficiently that patents will work as property. But until that happens, I think it's a category error to regard patents as a type of property right.
"and a patent lawyer will charge several hundred dollars per patent to do the necessary checks"
This work is usually hired out to outside search firms to find pertinent references, and much of the lawyer's analysis is done on a flat fee basis ... no one can afford to pay a lawyer by the hour for this. Searches are just to find the obvious things that would allow the attorney to inform the client that they are likely wasting their time putting together an application. Which is why there is no requirement for an applicant to perform a prior art search.
It is the USPTO's job to decide if there is prior art that reads on the application claims. That's what a Patent Examiner does. And if you saw how many goofs they make, you'd realize how difficult it is to know where those boundaries really are! I'm not sure the "opinion letters" idea is any different than an issued patent now ... just gives a presumption of validity, not a guarantee.
Presumably, an inventor in a particular field should know what's out there, and should have a feel for whether their idea is really novel or not. This patentability search should be ab initio.
I don't have much of a problem with your second and third reforms. I'm sure someone does. The first reform won't help much (assuming it isn't already the way the courts work) because by the time it goes to court, the litigation expenses are piling up. Kind of shutting the barn door after the horse has left.
Part of the problem has been big tech firms don't like to be bothered paying license fees and royalities to little inventors, and so they tried to steamroller them. Just take the idea and use it, knowing the victims don't have the resources to fight back. This led to the invention of the patent "trolls", who make a living buying the patent assignments and taking the big boys to court. And they're good at it!
BTW, nothing here should be construed as legal advice! :)
a patent lawyer will charge several hundred dollars per patent...
HA! Don't you WISH it was that cheap.
even an exhaustive clearance effort wouldn't catch submarine patents
Submarine patents, as traditionally defined (i.e. an application deliberately prevented from being issued until your product goes on sale), no longer exist. You can still get surprised, though.
most patent lawyers would have told a potential e-commerce developer that the patent didn't apply to them.
Have you (or anyone else) actually got an opinion letter that says this?
Patents should cover a specific physical device, not a broad category of functionality.
This makes patents virtually worthless given that it's easy to design something which is slightly dissimilar to a specific device which still takes advantage of the invention. Claim scope is a tricky area; the PTO is supposed to regulate it as part of the examination process.
Currently, the US Court of Appeals for the Federal Circuit, which oversees patent appeals, has a tendency to re-interpret the scope of patent claims without regard for the interpretations given by the lower courts and the Patent Office."
1) It's their job to disregard what lower courts say; that's why they're a "court of appeals," and 2) the PTO doesn't interpret patents, so there's nothing to disregard.
Patent examiners should carefully record, in detail, what a patent covers...
And here's the rub: how? What will they say, other than what's in the claims, which will make the claims clearer, but not at the same time generate a massive fight with the patentee over what this record says? So now an applicant an examiner will first have to fight over what the claims say, and then fight again over what the examiner says the claims say? And then when it goes to court, we can have a fight over what the court should say what the examiner said about what the claims say...I'm not seeing a benefit here.
On software patents, I broadly agree...except that it seems to me there is good subject matter there that should be patentable. Whoever came up with the FFT should have been able to patent it. I don't know if the few examples of good software patents justify all of the really bad ones.
An illustrative example of the patent system at work:
A long while ago the college dorm I later lived at wired up its laundry machines so that students could check when they were free over the internet. A few years after that (and I believe after our laundry servers had been Slashdoted once) an enterprising company patented the idea of hooking up laundry machines to a webserver.
They sent us a cease and desist letter to us but after we pointed out that we had documented proof that our system had been put in place long before they applied for their patent and that our university's lawyers were quite fearsome they backed down.
They still shake down other colleges who try to do the same thing we did, however, and charge millions of dollars for essentially the same system one of our dorm residents made himself as an undergraduate thesis.
They still shake down other colleges who try to do the same thing we did...
Why doesn't somebody send the patent to reexam with your prior art (especially if you were on slashdot)? It's not that expensive and if you're right, it would probably break the patent.
Presumably, an inventor in a particular field should know what's out there
"Knowing what's out there" doesn't get you anywhere near to knowing whether someone else has a patent that could torpedo your idea. Very rarely does a patent describe "a device that looks exactly like yours". More often, the core of the claimed invention may be, say, a series of operational steps that a another field of products could trespass upon while only being tangentially related.
In one instance, I recall a hardware failure monitoring device for computer servers. If certain conditions were triggered, the system would be forced into a shutdown and the device would log the error conditions. On next restart, it would provide the user with valuable troubleshooting information. The invention was a relatively unique application at the time, would be very valuable in the marketplace, and was obviously worth protecting. Hence, it had been patented.
Well and good -- but it turns out that most laptop computers have an overheat protection device that shuts off the system instantly when triggered. If the laptop was shipped with Windows, the operational claim of the patent could be replicated by overheating the laptop until the instant shutdown occurred, then documenting the standard "Windows was not shut down properly..." error message after reboot.
That really had nothing to do with the original invention, but the patent was written broadly enough to cover it.
Tim,
Do you have an opinion on "first to file" versus "first to invent"?
I fully subscribe to everything Rob Lyman said.
As an aside, Tim, I think it would be appropriate to point out that US 4,528,643 expired six years ago. The commentary on it invites the conclusion that it is still in effect.
anomdebus, not really. The Patent Reform Act being debated in Congress makes a lot of procedural changes that I don't expect to make a big difference one way or the other, and I suspect that's one of them. I want fewer, narrower, higher-quality patents, and I don't think the procedural details matter to anyone but the patent lawyers.
OB, that's a good point.
"Why doesn't somebody send the patent to reexam with your prior art (especially if you were on slashdot)? It's not that expensive and if you're right, it would probably break the patent."
Would that be profitable? It isn't as if they could patent the idea themselves even though they came up with it. If it was published in an open forum, the idea becomes unpatentable pretty quickly (immediately outside the US and in 1 year in the US I think). They'd be able to stop the shakedowns, but they couldn't demonstrate a right to the profits the shakedowns had produced. It would essentially be a public service to end laundry monitoring shakedowns - a noble venture I'm sure, but I'd put it pretty low down on the list of altruistic things to do today.
It would essentially be a public service to end laundry monitoring shakedowns
I was thinking of one of the targets of the shakedown doing it to put a stop to the shakedown at a lower cost than paying up. Or, for that matter, just threatening to do it to shut them up.
Presumably, an inventor in a particular field should know what's out there, and should have a feel for whether their idea is really novel or not.
Why would an inventor in a particular field know what's out there? The total scope of human knowledge in any one field of science is vast. I spent three years studying electrical engineering and knew at the end that I only had had an initial, cursory introduction to the field. There's millions of people working on electrical things around the world, no person can keep up with all of them. And that's to say nothing of the ideas in other fields that are useful in electricity.
I myself on occasion have spent ages solving some problem, only to discover my solution had been published in some academic article several years before I was born.
Expecting inventors to know what's out there is expecting too much.
You are missing a big point - patents aren't a system for allocating property rights, patents are a constitutional right. Article 1, section 8, clause 8 provides:
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.
As an example, the "experiment" in computer software patents is due to the recognition the "Discoveries" can be embodied in code and that those inventors have just as much right to secure exclusive rights to those discoveries as the inventor who discovers a new way to fold a box (the "box arts" are always an active field for the PTO).
I would argue that your "property rights" paradigm is inappropriate to analyze what is, at root, an individual constitutional right.
the "experiment" in computer software patents is due to the recognition the "Discoveries" can be embodied in code
OK, first off, sec. 8 lists the powers of Congress, not the obligations, so if Congress wanted to abolish patent and copyright, I don't see any reason why they couldn't.
Second, you can't patent code; it's "nonstatutory subject matter." You can only patent a "process, machine, manufacture, or composition of matter" (35 U.S.C. 101). Software patents are possible only by the laughable fiction that you're patenting a "machine." That's why they're always written with elements like "an information processing device, preferably a computer CPU" or some such.
I think the real problem is less the boundaries of patents--good lawyers can mark those out for you reasonably well--but rather just the shear volume of them. And the fact that many of them are for stupid things which, while technically novel, useful, and non-obvious, don't deserve to be called "inventions."
CBG: To further what Rob Lyman said, the powers under Article 1 Sec. 8 are granted to Congress (as against the other branches of federal government or the states), but give individuals no rights. You don't have a constitutional right to patent protection, Congress has a constitutional power (and not, as Rob noted, an obligation) to grant you such rights as it sees fit, and that only for a limited time.
And you will note that the rights Congress is empowered to grant to individuals in their IP are rather less than the rights (under state law) that I have to posess, say, my toaster, which I own not only exclusively but perpetually until I choose to sell it. The idea in that clause that any IP rights must be limited and IP must move into the public domain is at least as important as the idea that IP rights should be protected at all.