Wednesday, April 22, 2009

To Patent, Or Innovate, That Is the Question….

On my never ending march across the web, I came across an interesting blog post on CNET highlighting that patent filings so far in 2009 have dropped significantly from previous years. Matt Asay highlights that some reports see this as a clear indication of the bad economy and what a detrimental impact it will have on innovation. Matt and other reporters take the stance that in fact such a drop may help innovation; that perhaps significant number of patent fillings in recent years are simply not legitimate and pointless. However, factually, I’m not sure if that’s necessarily accurate; because there does not seem to be a system in place to quickly and easily analyse patents, their nature and their impact within an industry. So its difficulty to say the rising number of patents in previous years was simply the ever growing number of at-home inventors (or programmers) desperate to lock in a patent and their million-dollar dream.

But this got me wondering, why can’t we simply go through and look up as much detail as possible about patents or even patent fillings to better understand their impact down the road particularly as it pertains to licenses and royalties paid by companies down the line who use the patents; or litigation as disputes arise to the validity of the patent in the first place. So naturally where did I turn? Well I just put in two search terms Patents and Innovation and I was introduced to several articles and reports that look at the crumbling nature of the U.S. Patent System.

Now there are numerous FEI readers who are far more versed in IP matters, and I certainly welcome them to post their comments and links to points on both sides of the issue. But clearly there is a vocal community of corporations and individuals who are frustrated with the current patent process. The result has been recent legislation submitted in both Houses of Congress. The issue now is whether these reforms in fact benefit large corporations and their IP goals or actually create a flexible, streamlined system that clarifies the process and creates the necessary safeguards against wasteful litigation and summary judgements but ensures the rights of inventors and patent holders. A tall order indeed.

I began by reviewing the ever-worthy Patent Law Blog (Patently-O) that looks at the legislation on the docket. They highlight specific reforms including these:

  • First to File: Moving to a first-to-file system that credits invention based on the filing date of the patent application rather than on the date of actual invention.

  • Damages: Must look to the invention's "specific contribution over the prior art" to determine damages.

  • Expanded Reexamination Proceedings: Reexaminations may be requested based on published prior art, or evidence of prior public use or sale in the US.

  • Additional Post Grant Review: Within 12 months of issuance, a third party can file a cancellation petition based on any ground of invalidity (rather than simply prior art).

  • Patent Litigation Venue: "A party shall not manufacture venue by assignment, incorporation, or otherwise to invoke the venue of a specific district court."

From Patently-O, I moved on to recent articles on BusinessWeek and SF Gate (San Francisco Chronicle’s portal) that I thought were interesting because they seemed to look at the legislation from two perspectives.

In the first place, this piece in BusinessWeek, Are Patent Problems Stifling U.S. Innovation? has Mark A. Lemley, a professor at Stanford Law School, consider some particular issues and possible reforms that seems to look at the issue from the side of big business, or at least that’s my take. Now the article begins to highlight the issues mentioned briefly above; the sheer volume of patent fillings that has left a backlog of over a million applications – and their questionable nature/value; safeguards for patent filers against litigation and the particular issue the new legislation addresses, of focusing on who filed a patent first rather than who invented the item in dispute first.

In my mind, and maybe I’m reading into it too much, I definitely got the impression that the law has the significant backing of big business - and it clearly does. But the question that comes to mind of course; do the suggested reforms in fact hurt the patent system to the benefit of large corporations, or will in fact create an improved system to the benefit all?

Clearly not everyone thinks so. In this post on SF Gate, the position is raised about the failure of the legislation to meet the needs of smaller businesses and individuals and would in fact weaken the patent system to the benefit of large corporations:

“The current form of the bill, SB515, still contains features that would undermine the patent system. The proposed post-grant provision, for example, would create several new avenues for challenging a good patent's validity and endlessly blocking its enforcement. Moreover, the bill does not fix the central problem of the existing re-examination system: serial attacks that consume a patent owner's time and money by creating new and redundant proceedings. Those that request re-exam should meet a higher threshold and consolidate their concerns into one proceeding. This provision will harm independent inventors, universities and small companies whose valid patents would be attacked for strategic and commercial reasons as now happens in Europe.”

Where does this leave us? Well, it’s a guessing game. Clearly the legislation will be discussed and negotiations are going to lead to a comprised version of the bill between the Senate and the House’s own versions of the legislation. But there may be a growing constituency that will begin to lobby Congress to make broader changes to the legislation to the benefit of small businesses and individuals. Nevertheless, many of the most vocal advocates make a very clear point – the system needs fixing with too many patents leading to an exponentially growing backlog and a weak and never-ending patent re-examination process that forces patent holders into ongoing litigation battles that eat up precious time and resources.

So while patents may be down this year, it’s hard to say if in fact it’s a good sign or a bad sign as suggested previously. We simply have too many patents outstanding that are not moving through the process fast enough. Worse, we have several litigation efforts that seem to tie down valuable resources better spent on innovating rather than fighting in court. It’s a system that seems to be bursting at the seams desperate for fresh perspective and solutions to help innovators across the US. I welcome comments and links with other perspectives on the matter, and I will be happy to update my post with those valuable insights.

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