Our patent system needs help.
On that, almost everyone in the field of intellectual property agrees. Where the factions part ways, however, is on the intensity of the need for change (is it a crisis? A blip?), on the reasons for making adjustments (are patentees too well-protected? Not protected enough?) and on exactly how to do so. The much-discussed eBay-MercExchange case, which went before the Supreme Court on Wednesday, and the BlackBerry controversy implicate precisely these concerns.
I fall somewhere in the middle on all of these issues: there are serious inefficiencies in the current system which, at times, is too favorable to patent-holding companies (also known derogatorily as "patent trolls") and, at others, stymies innovation. Changes to our system must be deliberate, meaningful, and yet reversible, since whatever tinkering we do will inevitably yield unintended side effects.
Thus, I'd like to dedicate my first piece as the TCS IP columnist to sketching the outline of a proposal for patent reform.
In future articles, I hope to explore further, more controversial areas. But permit me to start with an introduction to how the system works. Patent law breaks down roughly into two fields: writing patents (or "prosecuting" them, in the jargon) and litigating them; patent prosecutors present their arguments to the U.S. Patent and Trademark Office (PTO) while patent litigators appear before the courts.
Patent prosecution is an expensive affair, involving not only the filing fees required by the PTO but also significant (billable) attorney time in writing the general background and the specific claims of the patent. There is often a lengthy back-and-forth between prosecutors and the Patent Office examiners.
Once the PTO approves (or "issues") the patent, the inventor can then "assert" the patent, or use it as a basis for a lawsuit, against those who use, manufacture, or sell the invention without permission (or "patent infringers"); this is where the litigators come in to play. Accused patent infringers then have two defenses: (a) there's no infringement; and (b) there's no patent. In other words, "our products operate differently from the invention claimed in the patent and, even if they don't, the patent should not have issued in the first place."
This second "invalidity" defense -- which requires "clear and convincing evidence" that the PTO wrongly allowed the patent -- can rest on numerous grounds. Most typically, the party being sued will spend oodles of bucks looking for other patents, academic papers, and products that existed before the plaintiff's patent was filed and therefore render the invention "obvious" or "not novel", either of which would make it unpatentable.
Thus, the more carefully an inventor prosecutes her patent (read: the more time and money an inventor sinks into prosecuting her patent) by locating -- and distinguishing -- these prior publications and products, the fewer resources she'll have to expend in defending its validity; the reverse holds as well. So, generally speaking, if the PTO were to tighten its standards for issuing patents, inventors would spend more money on prosecution lawyers. And if the PTO loosened up, anyone asserting patent infringement would amass higher litigation bills in defending the validity of a weaker patent.
In fact, even if we elect to abolish the patent system altogether, inventors and companies would continue to sue each other over trade secret, antitrust, and other fields of law. In other words, no matter what happens, IP lawyers will continue to make money.
So if we can't, as Shakespeare wished, just kill all the lawyers, what can we do?
Well, first, as almost everyone involved in the patent reform debate acknowledges, we must fully fund the PTO. The Patent Office is the gateway to the inventive kingdom. It must be properly populated, furnished, and reinforced.
Sadly, the opposite situation prevails. There are not nearly enough examiners to review, revise, and recognize incoming patent applications. There is a backlog of approximately 400,000 such applications -- inventions just sitting around, gathering dust, preventing their inventors from exploiting the fruits of their labor. For the typical application, two years elapse from filing to issuance, a period expected to rise to four years by 2008 (most biotech and electrical patents already take four years to issue).
Delays like these stifle innovation, plain and simple. Would-be inventors are more inclined to throw up their hands, keep their inventions to themselves, and/or embark on the risky path of trade secret protection over their ideas.
Moreover, the filing fees paid by inventors are diverted from the PTO to fund other government projects. The Patent Office is one of a kind: a federal agency that actually produces more revenue than it absorbs, year after year. Unfortunately, as reported by a partner at my firm in this Boston Globe article, between 1992 and 2001, $500 million was siphoned from the PTO to fund the rest of the federal government. Many more hundreds of millions have been filched from the Patent Office's coffers since then.
Fee diversion hurts inventors twice over: first, their fees subsidize the entire federal bureaucracy, not simply the office to which they make their checks out. And second, the PTO is unable to put that extra money -- generally, 10-20 percent of its annual revenues -- to use where it's most needed: ensuring accurate and timely review of applications. While the Patent Office does its utmost to keep up with the times -- earlier this month it announced a new Web-based filing system -- it requires adequate financial support, not de-funding.
Thus, shoring up the PTO is the first step toward bolstering our patent regime. With sufficient resources, the Patent Office can weed out bad applications while inviting and hastening the approval of good ones.
The next, pressing question is how exactly the PTO, and the system as a whole, can most effectively determine and challenge the patentability of an invention. Stay tuned...
Michael M. Rosen, TCS Daily's intellectual property columnist, is an attorney in San Diego.