As I discussed in the previous installment of this series on reforming the patent system, a species of patent-holding companies, known as "trolls" to their adversaries, have recently won several patent infringement cases against sizeable corporations, the highest profile of which was NTP's $600 million-plus settlement with RIM, the BlackBerry maker.

These corporations, who play the "goats" to the holding companies' "trolls", have struck back, principally by seeking to restrain the trolls' ability to obtain injunctions against the goats' use of purportedly patented technology.

Since my last article appeared, the U.S. Supreme Court handed down an important decision, ruling that such an injunction cannot be "automatic" but declining to provide any further guidance. In a somewhat cryptic concurrence, Chief Justice Roberts observed that:

"From at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases. This 'long tradition of equity practice' is not surprising, given the difficulty of protecting a right to exclude through monetary remedies that allow an infringer to use an invention against the patentee's wishes."

Far from settling anything, the much-anticipated decision is sure to reignite the debate over the appropriateness of injunctive relief when the patentee doesn't "practice" its patent.

But while the previous piece discussed and gently rejected some of the goats' more ambitious proposals, it's always easier to tear down than to build up. Thus, I offer some suggestions for how we might best preserve the delicate balance between inventors' rights and economic efficiency.

First and foremost, as I argued in the first installment, we must take steps to ensure that issued patents are of the highest quality possible. This requires a commitment to fully fund the U.S. Patent and Trademark Office and to hire more examiners who can devote more time to each application. More thoroughly reviewed patents can better withstand -- and even deter -- litigation.

I spoke with Brigid Quinn, a spokesperson for the PTO, about bolstering the Office, as well as about several proposals that have been floated. She first updated (okay, corrected) some of the statistics that I offered in the first article. At the beginning of the current fiscal year, the PTO's backlog weighed in at 600,000 applications (not 400,000 as I indicated) and the average time from filing to issuance was 29 months (not two years, as I had stated). These are significant differences that reflect the burgeoning pool of applications.

At the same time, over the past two years (and, it is anticipated, in FY07) President Bush proposed -- and Congress approved -- not diverting PTO fees to other agencies. While, as Quinn notes, the PTO would like to see a permanent solution to the fee diversion issue, the Office has gratefully accepted its full funding and has put it to use in hiring new examiners. In FY05, the PTO retained the services of 1,000 additional examiners -- a 25 percent increase -- and new FY06 hirings are expected to swell to 1,200 by year's end.

Quinn observes that "because of this large-scale hiring, we must also experiment with the way we train examiners." Traditionally, a new recruit would be assigned to a more senior examiner who would review his work. Now, the PTO has begun to implement an eight-month-long "Patent Training Academy" for new examiners, a program that includes classroom instruction and more interaction with professors and practitioners of patent law.

The PTO is also committed to improving mechanisms through which examiners can access relevant "prior art." Recall that in patent litigation, a party sued for infringement can claim that the patents asserted against it are "invalid", or should not have been issued in the first place because materials existing at the time -- other patents, products, articles, etc., collectively known in the trade as "prior art" -- already disclosed the invention claimed in the patent.

However, to demonstrate invalidity during litigation, the accused infringer must furnish "clear and convincing evidence" while the patentee must prove infringement only by a preponderance of the evidence. Even if the defendant introduces prior art that the original patent examiner never saw, she faces the same heightened burden.

Thus, once the examiner allows a patent to issue, it is presumptively valid. This presumption requires great vigilance on the examiner's part to review appropriate prior art.

But the examiner can effectively rely only on his own searches of the relevant technical field and on materials provided by the applicant herself. There is currently no mechanism by which third parties can submit potential prior art directly to the examiner and explain why they believe those references render the invention unpatentable.

The PTO has begun looking at ways, short of a legislative fix, to allow third parties to "help the agency get the best art in front of examiners as early in the examination process as possible," as Quinn puts it. Without legislative change, any PTO proposal would have to include permission from applicants to solicit third-party submissions and comments. While at first glance this would seem to disadvantage the applicants by slowing or stifling the issuance of their patents, it may also strengthen them in the long run, much as a boxer hones his skills by sparring with a talented partner. The Office has additionally been working with the open source community to develop and maintain a catalog of publicly-available, pertinent prior art in various fields.

On a larger scale, the PTO has also formally announced its support for proposed legislation that would "allow protests or oppositions by third parties" prior to issuance of the patent. Undersecretary of Commerce and Director of the PTO Jon Dudas recently testified before the House Judiciary Subcommittee on Courts, the Internet, and Intellectual Property that such a mechanism would enable "interested parties to explain why the prior art would have a negative impact on the patentability of the claims. This process, which would provide the examiner with information he or she might not otherwise obtain, should result in a higher quality, more reliable patent."

In other words, the more and better prior art a patent is able to withstand, the stronger it will be. To this end, several bills currently under consideration by the IP subcommittee contain versions of such a practice.

Other parts of this legislation would go further by creating an opportunity after the patent issues for third parties to submit relevant prior art. This "post-grant opposition window" would provide another chance for any interested party to argue that a patent should not have issued. Such a proceeding would be limited to a number of months after issuance and would enable the challenger to invalidate the patent by a mere preponderance standard. As Director Dudas explained, this opposition procedure "would serve as a quicker, lower cost alternative to expensive litigation in reviewing patent validity questions."

Of course, such reforms are not without their demerits. These proposed opposition opportunities would likely raise the cost of the average patent application, perhaps dissuading small companies, universities, or individual inventors from patenting their creations. They would also lengthen the process even for large corporations. On the other hand, if these new processes are coupled to a commitment to properly fund and train examiners, costs to the inventing public can be mitigated and delays can be curbed.

If implemented, these sensible reforms will inure to the benefit of both the trolls and the goats, the former because their patents will be less likely to be undone at trial and the latter because they will have fewer frivolous patents asserted against them.

There are yet other reforms out there -- some creative, some radical, some counterproductive -- that I will address in the next and final chapter of this saga. In the meantime, these suggestions should please (almost) everyone.

[For more information, be sure to tune in on June 15 at 9 A.M. EDT when the House IP Subcommittee will hold a hearing entitled "Patent Trolls: Fact or Fiction?"]

Michael M. Rosen, TCS Daily's IP columnist, practices intellectual property law in San Diego.