Patents discourage innovation - eh?

Great Debates
41

I discovered this during the peer-review process on one of my technical books. I thought the book would benefit from an overview and discussion of the extant patents in the field, so after much research I included a chapter listing 130 relevant patents and provided an overview of the most pertinent of them.

One of the peer reviewers said in the cover letter with his responses that overall he loved the book, but if I didn’t pull that chapter it wouldn’t be allowed in his building and he felt that most other engineering firms in the field would do the same. The publisher instructed me to take all patent-related information out of the book.

42

An attorney is not required. Patent applications are often filed without them. And for a “small entity” (an independent inventor, a small business, or a nonprofit organization), the fee for an electronically filed patent application is $75.00, the examination fee is $105.00, and the issuance fee is $720.00. Total, $900.00.
(Fees for design or plant patents are different.)

43

That’s really fascinating. I haven’t run into this problem in technical papers, but that is because, I suppose, the only patents ever referenced are those of the author. For the most parts the paper is out long before the patent issues, except in rare cases.

So I suppose the answer to the OPs question is that patents don’t discourage innovation, but only because researchers studiously avoid them.

44

Some more interesting reading: the tragedy of the anti-commons. This is what happens when a potentially valuable product does not get made, because so many different entities hold patent claims on the technologies needed to build it, that the transaction costs involved in obtaining all the necessary permissions are prohibitively expensive, even if all of those entities would in principle be willing to license their patent at a price that would be profitable for everybody. (Of course, if just one or two of the patent holders get greedy and demand a price for their license which is out of proportion to their actual contribution, then the product cannot be made profitably and everybody loses anyway, even if you ignore the transaction overhead and look only at the actual license prices.)

(Bolding mine. Can you see how this might have a negative effect on innovation?)

Note: before I get accused of selective quoting: I did indeed select the parts of the article that form “the case against patents”, because that is what this thread is about. Of course, there exist (partial) solutions to the problem, such as large-scale cross-licensing agreements. However, such agreements hardly constitute an argument in favour of the patent system, since they are actually an attempt to make the patent problem go away, at least for the big players in a given industry.

Indeed, as described in the MIT study I linked to earlier, it is common in young tech industries for all the players to form very generous cross-licensing arrangements with each other – e.g. a new company entering the industry may be offered quid-pro-quo patent exchange deals by the existing players, even though the new company doesn’t have any quid to offer for their quo yet. Obviously, a world in which everybody can license everybody else’s patents looks very much like a world with no patents at all – at least, until a few people get greedy and patent trolls start popping up to spoil the party.

45

Courts have recognized an experimental use defense to patent infringement but have construed it rather narrowly.

46

On the other hand, research into new medicines doesn’t need to be profitable. We can fund it directly by offering grants, rather than indirectly by running a patent bureau.

One might even argue that it shouldn’t be profitable: a profit-minded researcher would rather study impotence in wealthy middle-aged men (who have plenty of money to spend on such things) than leprosy in orphans (who don’t), and he has very little incentive to develop a cure for anything when he could instead develop a temporary fix that will be purchased over and over.

47

How well do these patents stand up, though? I wouldn’t have the first clue as to go about writing a patent application. I understand, perhaps mistakenly, that writing a patent application that is defendable is a specialised skill. $900 (£450) of my own money for a patent that may or may not stand up to legal scrutiny doesn’t sound like a good deal.

But then the application is just the tip of the iceberg, anyway. Actually defending your patents against megacorporations with departments full of rabid attack lawyers is a different matter entirely.

48

Smartphones Patented… Just About Everyone Sued 1 Minute After Patent Issued

49

That’s insane! How on earth can you get a patent for something that already exists? I thought one of the pre-requisites for obtaining a patent was that the invention be “Novel”; ie, not already in existence?

50

And this is why the patent office is so screwed up.

51

Because the patent application was filed before it existed - in 1997, to be exact.

52

Which is utterly screwed up.

First of all, while true smartphones may not yet have been on the market in 1997, any person of normal intelligence could take a look at the ongoing trends at that time, and see that they were coming. PDA’s had been common for years. Mobile phones, such as the Nokia 3110 which was released that year, were already getting quite smart with PDA-like features such as an agenda which could be synchronized with your PC. Digital cameras already existed. Mobile telephony had already moved to the digital GSM network (at least here in Europe) and everybody in the industry was giddy with delight over all the new possibilities this offered. The Internet was, of course, already mainstream among the public.

So it hardly took an exceptional visionary to realize, in 1997, that within a few years these different technologies would be combined into a single pocket-size device. The GPRS and Bluetooth standards were already in the process of being developed, for God’s sake!

But even if we were to accept that this idea was novel in '97, should we really award somebody a monopoly just for saying “wouldn’t it be nice if somebody built X”? How does it stimulate innovation to award a patent that may be worth billions (if they manage to win their lawsuits) for an ‘invention’ that probably took two people of average intelligence an afternoon of brainstorming?

Reading the patent, it does not go into any detail on how such a device was to be built. While it was obvious in 1997 to everybody in the industry that smartphones were coming, a lot of practical problems still needed to be solved, and the patent is completely silent on those details. It does not introduce any innovative ways of miniaturizing digital cameras and GPS receivers so that they can be combined into a pocket-sized device. It does not mention how they are planning to achieve an acceptable battery lifetime, or how they will deal with issues such as heat transfer and electrical interference. And it especially does not go into the question of how to mass-produce such a device at a price where it becomes attractive to consumers.

(It used to be that in order to get a patent on a physical invention, you needed to present an actual, working prototype to the patent bureau. Unfortunately that is no longer the case.)

To solve those issues, it took real engineers doing many years of real, unglamorous, tiresome engineering work. To produce the first real smartphone, it took millions of little decisions, most of them trivial and unpatentable by themselves, but that’s where the real research and development work took place. Undoubtedly, there were many setbacks and failures and last-minute panics and unpaid overtime. And now that all of that hard work has produced a viable product, a bunch of smarmy lawyers and third-rate “visionaries”, who I bet would never have been capable of doing such work by themselves, comes along and says, thank you for your work, now please give us a large percentage of your hard-earned profit to reward us for correctly predicting that you were going to build this.

How was the development of smartphones stimulated in any way by the granting of this patent? Does anybody seriously believe that ‘Minerva Industries’ made any kind of actual contribution to that development? Did they solve a single actual technical problem associated with getting the first smartphones to market? Is there any single step in the development of the first successfully released smartphone, which would not have happened, or would have been delayed by even one day, if Minerva Industries had not existed in 1997?

And how the hell did it take ten years between the filing and the granting this patent? I don’t know whether this was technically a ‘submarine’ patent or used some similar trick, but the effect is the same: thank you for doing all the hard work for us, now please give us whichever amount of money we ask for, or we will shut down your entire industry. Should the entire electronics industry have sat on their hands during those ten years, waiting to invest in smartphone development while the patent bureau was busy deciding whether or not to hand this company the keys to the kingdom? How does that stimulate innovation?

53

Patents aren’t supposed to be awarded in such a situation. If the patent applicant doesn’t actually know how to make the invention described, the application is supposed to be rejected for lack of enablement

There’s a controversial system called continuation practice through which an applicant can keep delaying final consideration of the application.

54

Perhaps the biggest problem with the U.S. patent system is that the P.T.O. is unable to handle the volume of patent applications. And because of various political reasons, patent examiners are pressured to issue patents rather than to deny them. The result is that the P.T.O. is overwhelmed and errs on the side of granting patents, hoping that any bad patents will be slapped down by the courts.

55

And the courts, which consist of nontechnical people, are likely to give a patent which has been accepted by the PTO a presumption of validity, and will be reluctant to throw it out unless it is really blatantly bogus. Meanwhile, the fact that there is easy money to be made through abusing the patent system attracts more trolls, which further increases the PTO’s workload…

56

What makes you think that that was entirely the fault of the applicant? There are a number of art units (and I’m pretty sure this is one of them) where the backlog for examination exceeds five years, and some where it exceeds ten. The USPTO treats its examiners like shit (this was not true when I started practicing patent law ten years ago, but the production requirements are dreadful now), and doesn’t pay nearly enough to be competitive in lucrative areas like network engineering and bioinformatics, especially when they have to live in or around DC. The management appears to believe that the correct way to reduce the backlog is to make it so difficult (and expensive) to file and prosecute applications that people will stop doing it, rather than, say, doing its job and examining them. I have no idea where the delay came on this case, but it’s not safe to assume that it must have been the applicant’s fault.

There are definitely structural problems, but they are on both sides. Before I went in-house, I had multiple clients that went bankrupt trying to make and sell a product while they were waiting for a first action from the PTO on their patent applications. I had a case where an interference was briefed up until final hearing, and then the administrative patent judge apparently stuck the boxes on a shelf for five years and never scheduled the actual hearing before he retired. That application issued fifteen years after it was filed.

57

I didn’t say it was. From reading the patent, I have little doubt that the applicant is a cynical opportunist trying to game the system and get rich undeservedly by claiming ownership of a technical development which they did not in any way contribute to. However, if the USPTO did its job correctly then it would not be possible to game the system so blatantly in the first place, so there’s plenty of blame to go around. In this specific case, the applicant seem to have used the practice of ‘continuations’, which acsenray referred to, in order to deliberately keep the patent submerged for as long as possible while the smartphone industry was taking off.
ENugent, you obviously know your stuff; now that this thread has been moved to GD, would you be willing to tell us about your own opinions on whether or not the patent system as currently implemented in the US, is a net benefit or a net loss for innovation? What do you think of the objections that have been mentioned by others in this thread? What’s your opinion on cases such as Minerva’s smartphone patent – would you agree with the people who consider this an abuse of the system, or would you consider their claim legitimate?

You mentioned to Rysto that you work for a company which has dealing in patents as its core business, but that your employer is “generally regarded as probably benign”. Could you describe what distinguishes your employer from the really cynical patent trolls, such as the case being discussed here? Or do you believe that Minerva actually has a legitimate case here, and would you have done the same thing? When you are trying to enforce a patent claim for your employer, do you consider yourself as contributing to innovation, or would you say that in most cases, the innovation would have taken place at the same rate if your company had not been involved?

58

Many think tanks, pure R&D companies, universities would structurally tend to be set up very well for developing technology and acquiring patents, much less well set up for commercializing the patented technology. Think PARC, Sandia, any number of universities. Or, think of companies that do “make stuff” based on some of their patents but also fund a lot of exploratory research in non-core areas (lots of what Bell Labs developed, for instance, had little to do with the landline retail telephone business that was Ma Bell’s bread and butter). But no one would deny that these guys were doing real research and providing some added value to the technical state of the art. So if Bell Labs (or Stanford) ends up with a patent to, say, a laser printer diode, and sues HP – are they really a troll? When you read about the “trolls,” it ends up being like defining obscenity, or art: you know one when you see one.

Someone mentioned that defending against a patent infringement allegation costs “hundreds of millions.” I’d think that was very rare. Millions, though, to be sure.

Finally, to return to the OP: India and China have lots of very smart, technically-adept people. You could figure this out by looking at the student body in any Western country’s engineering departments. Or, from the fact that they can set up really successful plants to make stuff.

But the stuff they are making is in most cases, old stuff. The smartest biochemists in India are running factories churning out very good, pure knockoffs of Viagra. They are not, though, developing new drugs. The smartest of China’s no-doubt-many smart computer science minds are hard at work duplicating bogus versions of Vista.

Take the exact same Indian or Chinese engineer, have him emigrate to the U.S., and he goes to work for a drug discovery or software coding company (who will patent the products of his labors).

The only difference I can see, apart from the general corrupt and inefficient general governmental and business policies of India and China, is that these guys see no incentive to do original work in their home countries. Why? It’s hard to escape the conclusion that the lack (until very recently) of any realistic or effective patent enforcement mechanism, and the governments’ refusal to punish copying of innovative technology, or provide any effective mechanism for its protection, plays a very large part in the cost-benefit analysis that means you should not look for a blockbuster drug or killer app software to come out of China in the near future.

59

Well, I don’t want to get into the details of my own employer, but I can speak a little more generally. One huge benefit that companies who buy patents can provide is that they can provide a marketplace for innovation by those who do not want to or are not suited to start companies and manufacture products. Many people out there have good ideas - some of them are commercially viable. But if they don’t want to make products themselves, there is really no good way to make money from their ideas - licensing as a single player with one or two patents is really difficult and expensive. Creating a secondary market in patents allows innovation by players who don’t want to actually make the stuff. When you take away the rights of licensors to fully monetize their inventions (as the Supreme Court did in Ebay last term), you reduce the incentive for anyone but big companies to innovate. I don’t think that’s a good thing.

Overall, I absolutely believe that the patent system contributes to innovation. Most of the people I see who don’t take this as axiomatic are involved in the software industry. Many people in that community seem to be reflexively anti-patent, but if you ask them if they have read patents or read beyond the press releases of the EFF about patents, they tell you that they’re not allowed to look at patents. I don’t think that’s really a correct legal strategy, but I understand why companies take it. There have been some rumblings that either the Federal Circuit or Congress might do something about the “willful ignorance” problem of companies burying their heads in the sand so that they won’t accidentally become guilty of willful infringement because they read a patent. In addition, the bar for what it takes to be found guilty of willful infringement has been being raised, which reduces the risk of looking at patents. I hope that these changes in the legal climate may change the overall attitude of that community, or at least their willingness to look at it rationally. A patent may be the only way for a small company to defend itself from the software giants - just ask Eolas.

60

Software can be protected by methods other than patents, which is what this thread is about. And I’ve seen several amazing apps coming out of China in an area I’m interested in. Written by hobbyists, who have no interest in getting paid by any means at all… they just want the approval of their peers. If they were American, they might well have been too daunted by patent worries to release those apps into the public domain.