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March 30, 2006
Patents and property rights - according to the Wall Street Journal
The editorial writers at the Wall Street Journal got it right yesterday in "The Problem With Patents":
When the patent system works, it rewards entrepreneurs and inventors, encourages innovation and serves as a bulwark of property rights. The Founding Fathers considered patents important enough to provide for them in the Constitution. But the Founders left the implementation of patent rights up to Congress, which in turn vested patent authority in the U.S. Patent and Trademark Office and the courts. And there's the free-market rub.The Constitution grants Congress the power to protect the rights of patent and copyright holders, but only "for limited times" and to "promote the progress of science and useful arts." It does not, by contrast, grant Congress the power to confer the right to real or personal property "to promote the cultivation of land" or "the accumulation of wealth." This distinction is important because royal patents in Britain were often granted to provide the favorites of the crown with a legal monopoly, and the Founders did not want Congress in that business. Patent rights are good insofar as they are useful, and the analogy with real or personal property goes only so far.
A patent system, in turn, is only as good as the quality of patents that issue from it. If bad or dubious patents proliferate, they can have the opposite of their intended effect, which is to promote and reward innovation. Some of our free-market friends are so attached to patents as a vanguard of private property in theory that they ignore that the Patent Office is vulnerable to the usual failings and perverse incentives of any other government bureaucracy.
I have to note that the Journal's argument stands in sharp contrast to what the conservative wing of the Court seems to think - (as reported by the Journal's coverage of "High Court Hears eBay Patent Fight":
"You're talking about a property right here and a property right is the right to exclude," Justice Antonin Scalia said at oral arguments in eBay v. MercExchange. Justice Scalia wondered why the Supreme Court should rewrite patent laws. "Why can't we let the marketplace take care of the problem," he said.
But Journal editoria goes on to argue for real patent reform -- beyond what we hope the courts will do in the LabCorp v. Metabolite and the eBay v. MercExchange cases:
Neither case will fix what's broken with the U.S. patent system, however. Bruce Lehman, Patent Office commissioner through much of the 1990s, once summed up the problem when he said, "We are the patent office, not the rejection office."The Patent Office itself gets paid when it grants a patent, creating pressure on the staff to keep the money coming in. Patent examiners' bonuses are also based in part on the number of files they close in a year. But the only way to close a file for good is to grant the patent because an application that's been denied can always be modified and resubmitted, and frequently is. So examiners have a direct financial stake in closing application files by green-lighting the patent.
Today the Patent Office grants so many patents that half of the fees it generates are given back to the Treasury to spend on other things. Next month, Congressman Lamar Smith (R., Texas) will hold hearings on a patent-reform bill that has many good qualities, such as allowing third parties to submit evidence of "prior art" to show that an alleged innovation is not in fact novel -- before the patent is granted. It would also allow administrative review of questionable patents after they've been granted but before an infringement lawsuit is filed.
If this Congress wants to claim credit for doing something to help the economy ahead of November's elections, addressing the patent system would be a good place to start.
Amen to that!
Posted by Ken Jarboe at March 30, 2006 8:27 AM
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