Perspective: Fixing a broken patent system

A patent is a powerful thing: it's a legal monopoly on an invention for up to 20 years.

In the past, patents were almost universally regarded as essential to the economy. By rewarding innovation, they created an incentive for inventors to invent more. Yet more than any other time in our history, the patent system now is under fire, and enormous change has been afoot to "fix" it.

How did we get here? One likely culprit is last year's BlackBerry case. The plaintiff there was a small holding company called NTP that had never developed any technology and never manufactured a product. It was in the business of collecting patents and extracting royalties from them, including some relatively unremarkable and dubious "wireless e-mail" patents.

I write unremarkable because they disclosed a technology nobody would buy on the open market and dubious because the U.S. Patent and Trademark Office recently has admitted that it mistakenly granted at least some of them. NTP sued Research In Motion--the maker of the BlackBerry--for infringing them. RIM took its chances before a jury, always an inherently risky bet, and lost. That gave NTP the right to shut RIM down, and we all almost lost our BlackBerry service. RIM settled for more than $600 million dollars.

It costs millions of dollars in litigation fees to show that a patent should not have been granted, and most big corporations have learned that the hard way.

Or perhaps it is because an overworked Patent Office has issued plenty of patents that never should have been. How about Patent No. 5,443,036--a method of exercising a cat with a laser pointer? Or Patent No. 6,960,975--an antigravity perpetual-motion device that defies the laws of physics? These examples may be harmless (and amusing). Far less harmless are the sundry patents that are just as infirm but are directed straight at the heart of American industry. It costs millions of dollars in litigation fees to show that a patent should not have been granted, and most big corporations have learned that the hard way.

Or perhaps it is that the system has been subject to clever manipulation leading to unfair results. A patent has two main parts: a disclosure, which contains the fine details of how to make your invention, and the claims, which define the boundaries of what you own.

It is common for inventors to file an application and then for years afterward file multiple "continuations"--subsequent patents based on the same disclosure but with new claims. Then, in the interim, if anyone creates a new product in the same technology space, you try to draft a new continuation claim to cover it. Never mind that you never envisioned that product. The patron saint of continuation practice was Jerome Lemelson, and based on continuations of an original 1950s "machine vision" application, he was able to capture hundreds of later-created products into the 1970s. Now there's an endowed Lemelson chair at MIT.

Or perhaps it is the Eastern District of Texas, where a combination of quick trials and plaintiff-friendly juries have drawn more patent cases to two towns, with a combined population of 125,000 people, than are seen in Silicon Valley, New York, Houston or Chicago. Companies often settle for princely sums rather than have a jury predisposed against big corporations, and with no technical knowledge, decide their financial future.

It's no wonder the pendulum is now swinging in the other direction, hard. First, the U.S. Supreme Court has stepped in. In the past two years, it has: ended the rule of "automatic injunctions" (the rule that allowed NTP to threaten to shut down RIM); loosened up the standard by which a judge or jury can find patents "obvious" and therefore invalid; and limited patent infringement liability for overseas acts.

Second, the Patent Office has announced new rules that encourage applicants to use greater precision in describing the scope of their inventions and seek to limit rampant "continuation" practice.

Finally, there is the sweeping Patent Reform Act of 2007, which has already passed the House. It contains provisions ranging from a first-to-file rule that would add certainty to the process, to a provision circumscribing infringement damages, to a provision meant to keep cases out of the Eastern District of Texas.

Of course, now there are loud voices complaining that the pendulum is swinging too far against patent holders. If that's the case, we can look forward to another round of equal but opposite reactions, and I can look forward to another column in CNET News.com's Perspectives section.

Biography
Alex Chachkes is a partner in the New York office of the global law firm Orrick, Herrington & Sutcliffe. He focuses on the litigation of complex patent, trade secret, trademark and copyright actions.

More Perspectives

[Dr. StrangeOne]

Disallow Patents Based on Existing Patents

Why should anyone be able to patent their latest, greatest tinker-toy model? If someone creates a great java script, or finds a away to improve some existing method, then they should be required to sell their idea to whoever might find the idea valuable. If they get no takers then you can pretty much conclude it is a worthless commercial idea.

[daftkey]

It would discourage innovation by small players

Small innovators would have a hard time trying to sell something that is hard to design but easy to reproduce (software and drugs both fall under this category) the idea would be stolen by larger players without recourse for the innovator.

Yours is the same argument that was used against patenting AZT's use to fight AIDS. Without the ability to patent a process involving an already patented drug, the knowledge of AZTs effect on AIDS patients would never have made it to the public domain - the company that did the research would never have published their findings and the production of AZT would have ended (it was no longer used for it's original purpose). No other research teams were researching a link between AZT and AIDS at the time, so the likelihood that someone else would have come up with the link is very slim (and still would have involved a patent).

Regardless of the greed involved in this company's insistence to sell AZT at market value while under patent protection, the alternative would have been worse. Now that the AZT/AIDS patent has expired, the world is a better place because of it.

[idsantos]

One Click Patent

Not to mention the most stupid non inventive patent "The One Click Buy Online Shop Patent" which was never an invention since the idea was already in use at the time.

Buying something from an online webshop is basically a two step process.

The first step is a webform on a website plus some server script at the other end to place all of the data on an database.
This step happens every time someone register at let's just say news.com website, where your data is placed on news.com's users database.

And the other step is to check if the credit card information is valid or not and that step has been in use for many years. What do you think happens when you go to the local supermarket and pay with you credit card!...

Just my 5 cent...

[chash360]

Patent Abuse

One of the worst things happening now is the way Patents are used to intentionally stiffle innovation and invention. Example: Little guy A invents and patents and truly useful idea, that produces a product X, that is much cheaper and better, and environmetally friendlier than Big Corperation B's current cash cow product. Big Corperation B buys Little Guy A's patent (because little guy A knows he can't afford to defend his patent against Big Corperation B, and they have already driven him to poverty) for a great sum of money that he can retire on. Sounds great except, Big Corperation has no intention of bringing Product X to market, they would rather bury it (with Patent protection) so that no one can make it, and they can continue to rake in profits off their obsolete cash cow.

[chash360]

The Patent System Fix

The way to fix this is to change the conditions under which patents are issued. The philosophy must change to protecting the innovation investment, and away from 'profit protection'. Patents should ensure that the resources spent to develope, produce and bring to market a patent are protected, but they are in no way a guarentee of profit. First, patent rights should be granted to individual inventors directly and not owned by their employing corperations, universities, etc. Purchasing or Licensing Patent Rights from the inventor(s) can only be done if the purchaser is going to actively pursue and develope the patent, and if they do not, all the rights return to the original inventor(s), their next of kin, or public domain, in that order. Infringement cases, the burden of proof lies upon the plaintiff to prove that it has spent significant resources, in good faith, to develope and market the patent, and that the alleged infringer has prevented the recovery of that expenditure, through unlicensed use of the patent AND upon notification of such infringement, licensed use of the patent was reasonably offered and refused by the alleged infringer. The Plantiff must also show that its developement expenditure is consistant with complexity of the patent. (A billion dollars to build a better mouse trap, that Joe Bob can make in his garage is not reasonable). The compensatory damages for infringement can only amount to what the infringed, has expended to develope, produce, and defend the patent, and is in no way a guarentee of profits on the patent. Patent protections last until the developement costs are recovered, or their specified duration expires, which ever comes first. Patents developed separately and independently that are esentially the same can be granted, and lisenced separately or merged by descision of the original inventor(s). Additionally in this age of energy crisis, Free-Energy and perpetual motion device Patents, that have a working model should be granted and not refused on the grounds that some idiot interprets the laws of physics to say its impossible. (Joe Newmans invention does work, I've seen it, and I know how it works) Patents should never be issued on theories that have no way yet to prove (the anti-gravity space ship, although the science could be perfectly sound, if you have not built something to test the method and provide evidence of its validity, no Patent for you). Patents are to protect the work and resources involved in developing them, and not just line the pocket of someone who mearly had an idea. I would love to get paid for the rest of my life for just the ideas I have already had, but sorry you gotta do some work too.

[daftkey]

Bad..baaaad example.

You've just described a scenario that "Big Corporation B" would have no reason to partake in.

Firstly, if Product X were cheaper than what big corporation produces, and it competes with big corporation's cash cow (presumably the reason they are buying the patent), there would be no reason why Big Corporation would not at least incorporate some design aspects of it into their cash cow product. - result: the product reaches the public, inventor gets paid, other inventor's are reassured their labours won't go completely unnoticed, innovation is rewarded, hence innovation is, in fact, encouraged, not stifled.

Now think for a second what would have happened to Little Guy A if he didn't have patent protection. Big Corporation B could just create a copy of his invention, most likely cheaper (they have the leverage, he doesn't) and leave him poor with no recourse.

"It's the worst system in the world.. except for the alternative"..

[JOHNNYLAROUX]

NTP

Your description of NTP clearly demonstrates that you don't know what you're talking about. Mr. Campana developed the technology and it worked. NTP offered RIM a license for $10M and was told to go pound sand. So they sued. And there patents were found to be valid and infringed. I guess you have respect for a jury verdict when it goes the way you want it to. Typical litigator.

[daftkey]

Very very true.

(as a Canadian who actually likes RIM as a company) THANK YOU! You actually get it.

This happens in the "Apple vs." camp as well when patents are being enforced. People tend to forget that, as you're designing something, patents are quite easy to look up and, if you're infringing upon one with your design, there's really no recourse by saying "I didn't know".

There are a good number of large corporations (and I really suspect RIM was one of them) that willfully infringe patents, expecting that the risk of losing a patent dispute is low enough that the expected cost of doing so is lower than actually inventing something innovative. RIM is likely one of these companies, and in this case their gamble failed. I suspect Apple (with the number of patent disputes they are engaged in) is another of these companies who may just now be realizing that they've been underestimating the risk.

[catalon12]

the NTP patents are worthless

I think you're missing the point. I know the NTP patents. No company in its right mind would use the technology disclosed in the NTP patents. The "value" of those patents wasn't in the disclosure, it was in the claims. Companies are forced to license patents, and settle patent lawsuits, based on patents that disclose nothing worthwhile or new, but that some clever patent prosecutor was able to turn into something dangerous -- by drafting claims that cover technologies that other companies created independently. And you can get those claims past the patent office easily.

NTP wasn't saying "license my technology for $10m." RIM already created its own technology. They were saying "avoid a patent lawsuit for $10m."

And how could someone not "respect" that jury verdict? Well, I guess you agree that OJ was innocent! And it's worse in a patent case -- you get a lay jury deciding highly technical issues that they couldn't possibly understand.

[The Kim]

Compulsory licence

What about compulsory licence? If the entire US Government apparatus is on the verge of breaking down (- as is the picture conveyed to me), then I'd believe that a compulsory licence would be appropriate.

Moreover, if patent holders are not working their patents, as it appears to be the case in the Blackberry case, a compulsory licence should be granted under TRIPS. I'm aware that the compulsory licence can only be granted after a certain number of years - four I believe. Perhaps the number of years should be reduced.

[dinnertime]

According to Mr. Chachkes the NTP invention is ?unremarkable and dubious?, yet after years of study and deliberation by our courts including testimony of expert witnesses RIM chose to payup rather than risk a debilitating injunction as RIM had been adjudged to have violated NTP?s patents. If RIM could not remove the offending technologies from their product and still have a viable piece the NTP invention and patents must have been quite remarkable, contrary to what Mr. Chachkes would have us believe.

Some attorneys represent defendants more often than plaintiffs. I gather from Mr. Chachkes? remarks that describes his practice. Apparently the gentleman represents either RIM or other parties who are now pushing what they call patent reform.

All this talk of a need for what is in fact patent ?deform? is but a red herring fabricated by a handful of large tech firms as a diversion away from the real issue...that they have no valid defense against charges they are using other parties' technologies without permission. It?s not about reforming the system. It?s about legalizing theft!

The objective of these large firms is not to fix the patent system, but to destroy it or pervert it so only they may obtain and defend patents; to make it a sport of kings. Patents are a threat against their market dominance. They would rather use their size alone to secure their market position. Patents of others, especially small entities, jeopardize that. For example, the proposed change to eliminate the use of injunctions would only further encourage blatant infringement. Any large company would merely force you to make them take a license. They would have little to lose. Everything would be litigated to death -if a small entity can come up with the cash to pursue. That's what these large multinationals are betting against.

Sadly, some legislators and other parties have been duped by these slick firms and their well greased lawyers, lobbyists (some disguised as trade or public interest groups), and stealth PR firms. Don't be surprised to find the Washington lobbyist scandal spreading into the patent deform proceedings. These companies are simply buying legislation.

When corporate America agrees to not use our inventions without consent, American inventors and small entities will agree to stop suing them.

[Sean_BRO]

Why not simply require patent holders to have actually created the item they are patenting before the patent is issued. The fact that someone can patent a device that ignores all known laws of physics highlights how much of a joke the system is.

Furthermore, a patent should apply to a device or a means, not a concept. Lastly, there should be stiff penalties for patent trolling and protections to prevent huge companies from crushing small companies with nuisance lawsuits.