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March 22, 2006
Supreme Court - take three (on patent trolls)
In addition to the Court's hearing of the case yesterday on what can be patented, next week the Court will hear arguments in the e-Bay case. That case involves the patent rights to the "Buy It Now" feature for on-line auctions. The case is generally thought of as a company versus a "patent troll." As the Financial Times - "Get it now from Ebay, hostage to the patent trolls" explains:
Is US patent law stifling innovation? Are low-quality patents compromising American competitiveness? What is the right balance of power between those who own intellectual property and those who want to produce goods in the digital marketplace without constantly being sued for trespassing on someone else's ideas?
"This case has profound implications for technological innovation," says Ted Olson, former US solicitor-general, in a brief filed on behalf of Intel, Microsoft, Oracle and other high-tech companies, one of a raft of high-profile submissions by industry groups to lobby the court with their different visions of the new economy.
"The patent system is the foundation for the United States' global leadership position in technological development," says Mr Olson, but he argues that over-broad patent rights are reducing incentives to invest in manufacturing, research and development. He says it is time to "restore the balance" between the rights of patent holders and the broader social good of encouraging innovation.
Patent trolls are become a standard business model. Take for example this profile of Forgent Networks, "Forgent Uses 'Trolling' As Business Model":
While most technology companies make money by developing software, building hardware or providing services, Forgent Networks Inc. has taken a different route: It produces threats and lawsuits that try to cash in on ideas.
Forgent and other companies with similar strategies - often called "patent trolling" by critics - amass intellectual property portfolios and file suits against other businesses, accusing them of infringement.
With a skeleton crew of 30 employees and the help of a law firm, Forgent has built a business out of suing - or threatening to sue - companies, even though it offers no related products and does no development of the technology itself.
Though critics say such tactics curb innovation and drive up costs for consumers, Forgent CEO Dick Snyder insists he's merely providing maximum value to shareholders.
The Wall Street Journal's Alan Murray has a good discussion of patent tolls and the basics of the problem in his column today - "War on 'Patent Trolls' May Be Wrong Battle":
There is a problem in the patent world, but it isn't companies that don't commercialize their own patents. Rather, it is bad patents. These days, too many are granted, too often for "inventions" that seem to the initiated to be as obvious as air -- such as one patent granted in 2002, and later rescinded, for an online restroom-reservation system
In part, that happens because the Patent and Trademark Office is understaffed and overwhelmed. A good first step would be to beef up the patent agency. This is one form of regulation that, if practiced properly, is clearly good for the economy, not bad for it. Second, change the patent laws to allow opponents of new patents to weigh in earlier. Right now, examiners often work in a vacuum. If patent applications were published prior to final approval and allowed to be contested -- a process that already occurs in many parts of the world -- fewer bad patents might be issued.
The end result may mean more work for lawyers -- the one group that unequivocally benefits from this patent mess. Nearly a third of the $612 million Research in Motion paid NTP ended up in the hands of NTP's law firm, Wiley Rein & Fielding LLP. Defining intellectual-property rights will always be a lot harder than defining real property rights. It is worth getting it right.
Worth getting it right - now where have you heard that before about patent reform?
I agree with that basic thrust of Murray's argument. Patents are important intangible assets. As we move more toward using these as investment vehicles, protection of the rights are important. However, I'm not sure that cleaning up the patenting process along the lines he suggests will necessary solve the problem. A direct approach to the problem of inadvertent infringement may also be needed.
Let's hope our lawmakers are listening.
Posted by Ken Jarboe at March 22, 2006 9:24 AM
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FYI - this is how one IP lawyer who works with the video game industy puts it. Next Generation - GDC: Beware the Patent Troll:
The patent system is meant to encourage true invention. What we're getting now with these method patents, is people are coming up with a description of a process that they haven't really developed, but rather just thought about; they're mostly self-evident thoughts. Then, the patent says that anyone that achieves the same result, even if they attack it in a different way, is infringing upon this particular methodology.
I think that is too great of a monopoly, for too little of an invention. That system has gone a little nuts in how far it's willing to go to say that something is inventive.
Posted by: Ken Jarboe ![[TypeKey Profile Page]](http://www.athenaalliance.org/weblog/nav-commenters.gif)
at March 22, 2006 11:28 AM
The US patent law does not know the concept of a "technical contribution". The effect is that also non-technical ideas get a patent and it is difficult to adjust the scope of patent law.
Posted by: Andre at March 22, 2006 8:07 PM