Perspective: Fixing a broken patent system

perspective 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.

[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.

[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.

[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.