State of Innovation

Patents and Innovation Economics

Real Patent Reform

The present proposal for patent reform, will do nothing to increase innovation, and is built on a foundation of sand.  Pat Choate’s article, Patent Reform is ‘Anything’ But completely debunks the present patent reform proposals.  So what would real patent reform look like?  Here is my list of ten real reforms that will increase innovation and spur economic growth.

1. Double the Funding of the PTO

The absurd length of time and outrageous cost necessary to obtain title (a patent) to one’s invention is a national disgrace.  If it took this amount of time and cost to obtain title to real property, we would assume you were discussing some corrupt third world country.  The major goal for the USPTO should be an average time to a first office action of six months and average pendency of 1.5 years.  Doubling the USPTO’s budget would be a good start.  I suggest the funding be pulled from transportation projects.  This would be a drop in the bucket for the pork laden transportation federal budget.  An aggressively funded patent office results in real innovation and real increases in per capita income.

2.  Regional Offices for the USPTO

The USPTO is located in Arlington Virginia, next to Washington D.C., where the cost of living is expensive and the 9000 government employees have little significance to the state of Virginia.  By having USPTO west in Denver, Portland, Seattle, Austin, Minneapolis, etc. or some combination thereof, examiner retention rates are likely to significantly increase, since the cost of living is lower.  The pool of qualified, English speaking applicants for patent examiners would increase, since the USPTO has admitted they have a hard time keeping examiners who are not from the northeast.

The USPTO mission is about promoting technology and it makes sense that the USPTO should be located near the centers of technology, not the center of political power.  By having the USPTO near great centers of innovation, examiners are more likely to have a better understanding of the underlying technologies they examine.  Locating the USPTO in multiple congressional districts increases the likelihood it will remain fully funded.

3. Repeal the eBay and KSR decisions

The eBay decision denied patent holders their basic right to exclude others from using their invention as a matter of right.  Since the only rights a patent gives the owner is the right to exclude, the courts must enforce this or a patent is as valuable as a blank piece of paper.

The KSR decision overturned 20 years of jurisprudence developing an objective standard of patentability.  KSR’s subjective standard of patentability decreased the value of patents, increased the likelihood of litigation – since no one can objectively tell if a patent is valid, and increased the cost and time associated with obtaining a patent.  The KSR decision is inconsistent with the constitution purpose of patents to promote technological innovation and protect inventors from IP thieves.

4.  Patent Reciprocity

If you drive your car across the border into Canada you do not lose title to your car.  If you take your manuscript across the border into Canada you do not lose the copyright to your manuscript.  But, if you take your invention across the border into Canada, you lose your patent protection and anyone can steal the invention – not the physical embodiment, but the underlying invention.

Patent reciprocity would automatically provide patent rights in a foreign country when you obtained a patent in the US and vice versa.  This idea was first proposed by the US in the mid 1800s according to B. Zorina Kahn’s book “The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920“. Unfortunately, the idea died and since then patent rights have been part of the convoluted process of trade negotiations.

Patent reciprocity would significantly increase the value of patents and increase the value of research and development.  As a result, it would spur investment in innovation.  Reciprocity would increase the valuation of technology start-up companies in all countries that participated.  It would also increase per capita income.

5. Repeal Publication Requirement

The publication rule is a clear violation of the social contract between the inventor and society.  Under the publication rule, society gets the advantage of the disclosure of the invention even if the inventor never receives any property rights in his invention.  Before the publication rule if an inventor felt that the scope of the claims to his invention were too narrow or not allowable, he could withdraw his application and keep his invention a trade secret.  Narrow claims are easy for a competitor to design around providing little protection in exchange for the disclosure of the invention.  In other words if the inventor did not like the deal he was offered from the Patent Office he could reject it and keep his invention a secret.  Even for inventions that can be reverse engineered once the invention is marketed, this is a better deal than the publication rule.  Under the publication rule, it is easy for competitors to find the inventor’s idea on the World Wide Web and copy the invention.  Without publication, a competitor has to spend the time and money to reverse engineer the invention.  This is significantly more costly than reading a patent application that describes the invention in “enough detail that one skilled in the art can practice the invention.”  35 USC 112.  The publication rule is perhaps the most egregious anti-patent change in the patent laws in the history of the US.  It does not promote the useful arts, since it decreases the incentive to file for a patent, which also decreases the diffusion of knowledge by the patent system.  The ability to opt out of publication if the inventor promises not to seek foreign patent rights, does not restore the social contract.

The US should demand the repeal of publication from foreign countries if they want reciprocity under our patent laws.

6. Accelerated Patent Court

A new court similar to the ITC that has expertise in patents and accelerates the patent litigation process is needed.  The court should be sufficiently funded and have procedures that allow patent cases to be resolved in under a year.  Perhaps the court would be limited to issuing injunctions as a remedy as opposed to economic damages.  The goal of this new court is to establish the US as the premier arbiter of patent rights.  The US is the best positioned country to protect patent rights, despite our recent history.  This would increase the US’s standing as a technological leader in the world and draw innovative companies and people to the US.

7. Eliminate Maintenance Fees

Maintenance fees are a backhanded way of introducing a “working requirement” to patents.  Working requirements for patents have been always been rejected in the US.  These fees favor large entities and reduce the effective life of patents.  There are no working requirements or maintenance fees for copyrights.  Why should inventors be treated so poorly in relation to authors?  Copyrights do not require a complicated, overly formalistic application process and last forever.  There is no justification for treating inventors as less worthy of legal protection than authors.

A strong patent system pays for itself several times over in increased tax revenues from increased economic activity.  The supply side returns from a strong patent system probably exceed the return resulting from lowering the capital gains tax.

8. Gene Patents

No patent should issue for claims directed to genes that occur in nature.  However, those created by man clearly deserve patent protection.

9. Reduce Formalism in PTO, Doctrine of Equivalents, Restrictions

The patent system has become overly formalistic.  Restrictions are required for trivial differences that are embodiments of the same inventive idea.  The doctrine of equivalents has been dead for over a decade.  Formalism over logic rules in the realm of inequitable conduct.  USC 101 issues related to software inventions also place form over function that require absurd recitations to computer hardware.  All of these formalistic requirements favor patent thieves at the expense of real innovators.

10. Eliminate the allowance rate as measure of quality

The USPTO tracks individual examiner’s allowance rates.  Low allowance rates are correlated with more rigorous examinations by the patent office.  (see U.S. Department of Commerce Office of Inspector General, “USPTO Should Reassess How Examiner Goals, Performance Appraisal Plans, and The Award System Stimulate and reward Examiner Production”, Final Inspection report No. IPE-15722/September 2004).  As a result, examiners feel a perverse pressure to have a lower allowance rate than their cohorts.  Low allowance rates are the result of arrogant government bureaucrats, who want the patent system to be an elitist system.  This is not in keeping with the history and goals of the US patent system.  This elitist attitude does not spur innovation and retards economic progress.

May 29, 2009 - Posted by | -How to, -Law, Patents, Uncategorized

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