There seems to be a lot of angst these days over the U.S. patent system. Generally, complaints come from those who feel they can’t do whatever it is they want to do and they want new rules.  Now, the Council on Foreign Relations has released a study, entitled “Reforming the U.S. Patent System: Getting the Incentives Right,” which blamed increased patent protection for a lack of new technology. “Over the past twenty-five years, American legislators and judges have operated on the principle that stronger patent protection engenders more innovation … this principle is misguided.”

The report, written by economist and University of Colorado professor Keith Maskus, claims the United States’ “overprotective patent system” has contributed to decreased competition among technology companies and has helped to stifle creativity and innovation. Basically, he argues that the oppressive burdens of the U.S. system are scaring away businesses. Maskus contends that increased litigation, overly broad patents and a laissez-fair antitrust policy regarding patents have all contributed to a downward spiral in competition. He feels that the recent increase in patent protection has not spurred innovation so much as it has impeded the development and use of new technologies. To support his views, he points to the fact that RIM agreed to pay $612.5 million to settle a patent suit that could have shutdown its Blackberry service.  Admittedly, the USPTO had preliminarily ruled that all five NTP patents were invalid but RIM faced an increasingly nervous user base that didn’t clearly understand all the issues. RIM needed to placate its customers and potential customers to prevent a mass exodus to other services. This doesn’t necessarily prove a stifling of competition.The report also points to Chiron Corp.’s assertion of its hepatitis C-related patent as a prominent example of this trend. Basically, since Chiron has aggressively enforced its patent, critics claim that its enforcement has held up research by other firms and agencies for years. Although, the right to exclude others would seem to be a basic tenet of patent law.To resolve these problems, Maskus recommends reforms that include:

  • Change domestic patent policy in order to return to basic patenting principles and restore the system to one that encourages innovation rather than extraction of payments from legitimate competitors;
  • Abandon the high-level harmonization agenda, especially in free trade agreements; and
  • Mount a stronger global effort to deal with enforcement problems in developing countries through a combination of incentives and disincentives.

This return to basic patenting principles would include the creation of a competition advocacy office within the USPTO, limiting the grounds of a willful infringement finding, and awarding patents on a first-to-file rather than a first-to-invent basis.

The office of competition advocacy would be an office within USPTO to consider the economic implications of broad patent claims before they are granted but would be restricted to “patent applications on technologies that would have significant market power, an approach similar to the antitrust role of staff economists at the Federal Trade Commission and the Department of Justice.” Not sure who gets to decide what technologies, at the application stage, will trun out to have this significant market power. Also left unsaid is why the current antitrust reviews by the DOJ are inadequate.

In a lot of ways, the report reminds me of Winston Churchill’s remark that “Democracy is the worst form of government except for all those others that have been tried.” Churchill wasn’t really saying that democracy as a system of government was really great, he took a pragmatic approach that it’s not exactly wonderful for everyone but it’s the best we have to go on.  If a better approach to the patent system comes along, I thing we should adopt it but it’s a waste of time to condemn the current system just out of spite.

Greg Aharonian weighs in on the matter stating:

One of the reasons the Patent Office is flooded with patent applications is that AMERICAN companies and universities, big and small, in every industry are in furious competitive races to beat out the competition, including inventing and patenting great and small. In one of the very few serious studies of software patents, Berkeley law and economics professors found no decrease in competition in the heavily patented software industry. Has RIM’s technology been stifled? No – just some of their money has been rearranged.

The current system only seems broken if the money is rearranged away from you.

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