Patent system's problems defy easy solutions
By Michael Kanellos
Staff Writer, CNET News.com
August 4, 2005 4:00AM PDT
http://news.com.com/Invention+intervention--fixing+the+patent+system/2009-7343_3-5817175.html?tag=nefd.lede
In the early 1800s, the U.S. patent office was housed at a converted hotel
in Washington, D.C., and when applications were approved, a clerk would
ride the agency's pony across town to get the president's signature on them.
Reliance on the horse was a sign of the "primitive state of the country and
of the patent office at the time, where the quickest way to deliver
messages around the city of Washington was by a boy on a pony," according
to "The Patent Office Pony," by Kenneth W. Dobyns. He also writes that in
1835, the office issued 757 patents.
If only things had stayed so simple. In fiscal 2004, the U.S. Patent and
Trademark Office approved about half of the 376,810 applications it
received, according to preliminary data, and it expects a flood of new
activity this year. Although the office has raised application fees and
hired new examiners, by many accounts the agency is struggling with its
workload.
Lawyers, companies, inventors and politicians all agree that the nation's
patent system is in desperate need of reform. They cite concerns about
proliferating litigation, questionable licenses and a potential decline in
American competitiveness. The question is how to reform: For all the
complaints, little consensus has emerged on how to fix the system.
In the worst-case scenarios, misguided reform efforts could unleash
unintended consequences. For example, proposals to weaken the threat of
court injunctions are designed to help defendants and reduce the number of
lawsuits--but critics say this so-called reform could actually increase the
amount of litigation.
The issue is coming to a head in Washington, where committees in the House
and Senate are planning hearings on a host of proposals to change the
nation's patent law and how the Patent and Trademark Office operates. The
ideas being proposed run a wide gamut, from forcing patent holders to
license their inventions to others, to the elimination of software patents
altogether.
"Whether it's movies, music, software or telecommunications devices, the
intellectual-property industries drive our economy," Rep. Lamar Smith
(R-Texas), vice chairman of the House Republican High-Tech Working Group,
said in a statement. "Without adequate protection there will be no
incentive to create, and the economy and job creation will be hurt."
In June, Smith introduced the Patent Reform Act of 2005 (PDF file), which
could make it more difficult to obtain patents and reduce the damages a
plaintiff could receive. Even in its earliest stages at the House
subcommittee level, however, the legislation has already shown why patent
reform is a highly elusive goal.
The bill immediately generated controversy with a provision that would give
more discretion to the courts when it comes to ordering injunctions.
Under current law, most victorious plaintiffs win injunctions that prevent
companies from manufacturing products that infringe on the patents in
question. Smith's bill and other proposals would allow a judge greater
leeway on whether to issue an injunction. Instead of having to force a
product off the market, they would be able to require, for example, simply
that the defendants pay royalties on future output to the plaintiffs.
Reformers say injunctions often force defendants to settle, sometimes
unfairly, to avoid a court judgment. But lawyers, patent holders and former
patent agency officials say that, without the threat of injunction,
defendants would drag their heels and take more cases all the way to a verdict.
Attorney James Pooley, a partner specializing in intellectual property at
the Palo Alto, Calif., office of international firm Milbank, Tweed, Hadley
& McCloy, has proposed a compromise under which the courts would give
liable defendants a grace period after a verdict but before an injunction
is issued, during which they could change their products or cut a licensing
deal with the plaintiffs.
"Nobody volunteers to take a patent license," said Kent Richardson, vice
president of intellectual property at Rambus, which designs chips. "The
reality is that most people won't get to a deal without the threat of an
injunction. This makes it easier on fence sitters."
Targeting the court system
Reformers are also setting their sights on the appellate court process,
which sends all patent appeals to the federal circuit. Years ago, changes
in the court structure narrowed the number of federal courts that hear
appeals. These changes were supposed to ensure that judges on these cases
had experience; instead, by narrowing the number of appeals judges, some
say, the changes introduced elements of personality into the system.
"There is a sense among people in this business that certain panels believe
that certain facts should have preeminence," said Tom Duston, a partner at
the Chicago law firm of Marshall, Gerstein & Borun. Appeals court judges
kick back a relatively high 20 percent to 40 percent of the appeals for
claim reconstruction, he added. In such cases, the appeals court is
essentially saying that the first court misinterpreted some aspect of the
patent in question and that the case must be reheard.
Other reform proposals target the way patents are handled long before any
litigation comes. Many of the most strenuous complaints about the system
are directed at companies that obtain patents but never make products from
them, choosing instead to extract money from others who might be in violation.
Some reformers advocate a system that would force companies to make
products with their patents or at least license them for others to put into
practical application. But critics warn that this change would impose a
duty on an inventor to compete as an industrial conglomerate, which can be
difficult on individuals.
Besides, says former patent office director James E. Rogan, individuals and
companies have every right to do whatever they want with their
patents--including nothing.
"You can create it. You can sell it. You can license it or you can sit on
it," said Rogan, now a partner at Venable, a Washington law firm. "It is
not the job of the patent examiner to delve into the psyche of the inventor."
Intellectual Ventures CEO Nathan Myhrvold, former chief technology officer
of Microsoft, is equally blunt: "There isn't compulsory licensing in
essentially any other part of American life. The only thing that would be
similar to that would be eminent domain, where the government can
ultimately condemn your property and force you to sell it to them if they
truly need it to develop a new highway or something."
Another reform proposal would allow companies or individuals to file
objections to a patent application while the patent office is determining
whether to award the patent. As a result, questionable patents could be
vetted before any litigation begins.
Europe has a system like this, but only 5 percent to 10 percent of
applications are ever challenged, so it's clearly no panacea. Still,
reformers are looking to other continental measures that may hold answers
for the U.S. patent system, most notably the European Parliament's
rejection of the concept of software patents.
International patent standards in general are drawing more attention as the
U.S. system falls under increasing scrutiny. In the rest of the world, the
inventor is the person who files the application with the patent office
first, a so-called first-to-file standard.
In the United States, the inventor is the person who created the product,
which makes it a "first-to-invent" standard--a far more ambiguous
criterion. "Until 1997, we had company. But that January, the Philippines
went to a first-to-file standard," attorney Pooley said.
'Ordinary skill in the art'
Part of the reason that patents are so often disputed can be traced to the
definition of what can legally be protected. Patents are supposed to be
awarded for inventions that are both new and non-obvious to a person
"having ordinary skill in the art."
"The real issue is that we should only grant patents for truly new and
non-obvious inventions. Vagueness is another issue," said Adam Jaffe, dean
of arts and sciences at Brandeis University.
Unfortunately, terms like "non-obvious" and "vague" are themselves also
subject to wide interpretation.
"Have you ever read a patent claim?" Duston asked. "It's one sentence that
runs on for a half a page with all of this jargon in it. It is not in English."
In Myhrvold's view, the whole issue of "vagueness" is overblown. "Usually
it comes up from people who don't like patents already. It's a
rationalization for their position," he said. "The stock market has stocks
of companies that are flaky and questionable, right? But does that mean we
should just avoid all public security markets?"
Some reformers advocate a standard that would require patent holders to
show that infringers knowingly violated their protections. "In copyright,
they (the defendants) kind of know where they got it from. In patents, they
may have generally invented it, but it was too late," Rambus' Richardson said.
While patents protect an invention, copyrights protect the "matter and
form" of something, such as a piece of writing or music.
Reformers have suggested that liability applies only after the defendant
receives a letter warning them of the potential infringement.
Unfortunately, that could also encourage some to work quickly and kill a
product after the letter arrives.
In spite of such seemingly daunting obstacles, recent progress offers
reason for hope. In fact, some of the larger problems in the patent system
have already been curbed because of reform efforts in recent years.
Patent applicants, for instance, can no longer repeatedly amend an
application--a procedural peculiarity that let prolific patent collector
Jerome Lemelson amass a fortune in legal settlements and licensing fees for
products ranging from Velcro darts and wiper blades to medical equipment
and chipmaking technologies.
And as the broader patent policies are debated, at least the chronically
overworked and underfunded patent office is finally getting some relief. It
has hired 900 new inspectors so far this year alone, bringing its total to
4,000.
The agency will also keep the estimated $1.5 billion in fees it collects
from applicants annually. In the past, Congress often siphoned this money
off for other projects.
"This office is critical to the health of our economy and to the lives of
millions of Americans," Congressman Smith said in a statement. "From the
lone individual working in their garage to the small-business person with a
breakthrough idea to the large high-tech company that applies for hundreds
of patents, all rely on a responsive PTO."
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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