Thursday, October 21, 2004

Hal Varian in the New York Times on patents

A problem with economists viewing the patent system is their lack of familiarity with the patent system.

--> Superficial anecdotes are used to substitute for thorough analysis. Thus, one might get the idea that the patents on a method of swinging on a swing or on the sealed crustless sandwich are the rule, rather than the exception, at the Patent Office. Amazon's one-click patent is frequently brought up, but the fact that it sustained a validity attack in district court is rarely mentioned. Fictional anecdotes, such as the idea that the inventors of the transistor foresaw applications only for hearing aids, are presented as if they were fact.

--> Concepts such as "regulatory capture" are imported from other fields, where they might make sense, to the patent system, where there is no evidence that they have any relevance. Although some of the judges come from industry, it's hard to detect a pro-industry bias among the judges. Further, in looking at the scattered positions taken by corporations in the two recent cases on the doctrine of equivalents (Hilton Davis; Festo), it's hard to tell "what is" the corporate position on patent issues.

--> Discrete concepts, such as novelty (35 USC 102) and obviousness (35 USC 103), can be garbled. For example, in the much discussed re-examination involving the Eolas patent, the only issue has been one of obviousness, with no contention that the claims of the Eolas patent are anticipated over the prior art.

--> Broad-brush assertions, such as the presence of "a steady reduction in patent quality," are presented without proper documentation. In the Quillen/Webster studies, there is an assertion that "higher grant rates" directly imply a reduction in patent quality, although this has not been documented. Furthermore, the assumptions underlying the Quillen/Webster studies, which are the primary evidence for "higher grant rates," have been questioned.

from the New York Times, October 21:

by HAL R. VARIAN

Published: October 21, 2004


FEELING hungry? How about a peanut butter and jelly sandwich? But be careful how you make it - you don't want to infringe on United States Patent No. 6,004,596, for a "sealed crustless sandwich."

Well, maybe it is safer just to have some toast. But watch out for Patent No. 6,080,436 on a "bread refreshing method."

Not hungry anymore? Well, maybe you could just play with the cat. But even that's not safe. Patent No. 5,443,036, "Method of Exercising a Cat," protects using a laser pointer to amuse a cat "and any other animals with the chase instinct."

These patents, which might strike some as frivolous, are symptoms of the deeper problems with the nation's patent system discussed in "Innovation and Its Discontents," a recent book by two economics professors, Adam B. Jaffe of Brandeis and Josh Lerner of Harvard.

Most economists, including the authors of this work, accept the need for intellectual property protection. Patents provide necessary incentives for innovation by adding "the fuel of interest to the fire of genius," in the words of Abraham Lincoln, the only American president to hold a patent - for a device to lift boats over shoals.

However, any system of intellectual property protection requires balance. The law must offer enough rights to the inventor to stimulate innovation, while at the same time ensuring that the resulting temporary monopoly on the invention does not impose too onerous a burden on society.

A patent has a length, a width and a height: how long it is valid, how broadly it applies and how novel it is. Mr. Jaffe and Mr. Lerner are most concerned with the last issue.

A patentable invention must be "not obvious to one skilled in the art." This guideline is subject to interpretation, and in recent years it has seemed as if almost anything could be patented.

According to the authors, the deterioration in patent quality started in 1982, when Congress made two seemingly innocuous changes to the system.

First, it created a specialized Court of Appeals for the Federal Circuit. The motivation for this change was well intentioned: the district courts that heard patent appeals before 1982 applied widely varying standards, and the new Court of Appeals was supposed to offer a consistent policy.

Second, Congress tried to make the processing of patents self-sustaining: it was to be supported entirely from fees paid by patent applicants.

These reforms resulted in a tilt toward patent holders. Mr. Jaffe and Mr. Lerner assert that since these changes, a patent applicant is "much more likely to have the patent granted; the patent is much more likely to be held valid if challenged in court; and the party accused of violating the patent is more likely to be found to be an infringer and forced to pay a large monetary award."

The economists explain these changes as an example of what economists call regulatory capture. Regulators - in this case, judges who hear patent cases - are often drawn from the industry they regulate. Even in cases where they come in as outsiders, over time they tend to identify with the concerns of the industry they regulate rather than with the public at large.

The Patent and Trademark Office now views its constituency as patent holders - not surprising, given that they make up the group that provides its financing. As one patent examiner put it: "When I first started here, I was told, 'When in doubt, reject' and to try to reject. Now I am told, 'When in doubt, allow' and try to find a reason to allow."

Patent examiners are underpaid and overworked. Novelty is supposed to be judged relative to "prior art," but it is almost impossible for a single human being to root out all relevant prior art. One result has been a steady reduction in patent quality, with patents of dubious novelty being granted routinely.

The reduction in standards for granting patents has started an arms race among patent holders. The best defense against being sued for patent infringement is to hold a portfolio of patents that can be used to countersue. So every company has to build a "patent thicket": an arsenal of patents that can be used offensively or defensively, as necessary

0 Comments:

Post a Comment

<< Home