Speaking of patent reform (see previous posting), I’ve run accord a new study that questions the efficacy of ever stricter intellectual property protection as a means of fostering innovation and creativity (recently reported in the New York Times: A Patent Is Worth Having, Right? Well, Maybe Not). In a forthcoming book, Innovation at Risk, James Bessen and Michael J. Meurer argue that the patent system fails to provide clear property right protection. The problems include:
1. Fuzzy or unpredictable boundaries. Surveying land is inexpensive, and the survey boundaries carry legal weight. While surveyors can plainly map the words in a deed to a physical boundary, it is much harder to map the words in a patent to technologies, as the E-Data patent illustrates. Not only are the words that lawyers use sometimes vague, but the rules for interpreting the words are also sometimes unpredictable. Although innovators can obtain expensive legal opinions about the boundaries of patents, these opinions are unreliable. There is no reliable way of determining patent boundaries short of litigation.
2. Public access to boundary information. The documents used to determine boundaries for both land and patents are eventually available to the public. However, it is possible for patent owners to hide the claim language that defines patent boundaries from public view for many years, a practice that is becoming increasingly frequent.
3. Possession and the scope of rights. Generally, tangible property rights are linked closely to possession, hence the classic phrase: possession is nine points of the law. Patent law also requires possession of an invention, but often this requirement is not rigorously enforced. Courts sometimes grant patent owners rights to technology that is new, different, and distant from anything they actually made or possessed. Not surprisingly, this practice makes patent boundaries especially unclear in fast-paced fields such as biotech and computer software. It certainly seems that E-Data was granted ownership of technology that was far removed from what Charles Freeny, Jr., actually invented.
4. The patent flood. Clearance costs are affected by the number of prospective rights that must be checked for possible infringement. Investments in land or structures rarely involve many parcels of land, and property law discourages fragmentation of land rights. In contrast, investments in new technology often need to be checked against many patents—even thousands in the case of e-commerce. Although the patent system has features that discourage patent proliferation, notably the requirement that an invention not be obvious, empirical evidence suggests these are not working well.
Thus, they caution against the straight line argument that economic growth relies on property rights and therefore stronger IPR is needed:
In summary, patents do not work “just like property.” While they do play some role in promoting innovation and economic growth, that role is limited and highly contingent compared to the role property rights normally play in promoting economic growth. The laws and institutions that implement property rights may be harder to get right for patents than for tangible property rights.
Their version of getting it right for patents requires improving patent notice:
We thus think it likely that effective reform will require structural changes, including, possibly, multiple appellate courts, specialized district courts and greater deference to factfinders. What other changes might improve patent notice? In Chapter 11 we consider many reforms, most of which have also been advanced by other people. These include:
• Make patent claims transparent. We recommend changes in the way patent claims are defined, published, recorded in the application process, and used for subsequent determinations so that innovators have clear, accessible, and predictable information on patent boundaries. This includes strong limits on patent “continuations,” a procedure used to keep patent claims hidden from the public for extended periods. We also consider a new role for the Patent Office where, for a fee, innovators can obtain opinion letters on whether their technology infringes a patent.
• Make claims clear and unambiguous by enforcing strong limits against vague or overly abstract claims. This includes a robust “indefiniteness” standard that invalidates patent claims that can be plausibly interpreted in multiple, fundamentally different ways. Also, we recommend reforms to limit overly abstract patents in software and other technologies. At the very least, patent law should prevent software patents from claiming technologies far beyond what was actually disclosed as the invention. If this proves inadequate, then we suggest subject matter tests to limit the range of software inventions that can be patented, tests similar to those used during the 1970s and 1980s.
• Make patent search feasible by reducing the flood of patents. This includes a strong requirement that patents should not be granted on obvious inventions, coupled with substantially higher renewal fees. Ideally, patent renewal fees should be set by a quasiindependent agency and should be based on empirical economic research. These reforms will help stem the patent flood by screening-out unwarranted patents and discouraging renewal of low value patents. Reducing the number of such patents should help notice by reducing the cost of clearance search.
• Besides improving notice, we also favor reforms to mitigate the harm caused by poor notice. These include an exemption from penalties when the infringing technology was independently invented and changes in patent remedies that might discourage opportunistic lawsuits.
But their conclusions are mixed with a good dose of skepticism:
In presenting this list of policy ideas, we admit that we really do not know what it will take to substantially improve patent notice. These policy reforms move us in the direction of an effective patent system, but we do not know whether they are sufficient to get us there.
All in all, an important and refreshing take on patent reform.