Monday, September 27, 2004

NYT THROWS ITS HAT INTO THE "PATENT REFORM" MOVEMENT - The NYT reprinted portions of Josh Lerner and Adam B. Jaffe's pending book entitled "Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What To Do About It," to be published in November by Princeton University Press. The article has some good points, but there are some generalizations made that are rather dubious. Two of these assertions are that the "breakdown" of the patent system has its roots based in the creation of the Federal Circuit (!) and the institution of fee-based funding for the USPTO:

Mr. Lerner, a professor of investment banking at the Harvard Business School, and Mr. Jaffe, a professor of economics at Brandeis University, trace this breakdown to the early 1980's, when a single federal appeals court was established to hear patent lawsuits, replacing 12 regional courts of appeal.

Then in the early 1990's, Congress changed the patent office's financing, so the agency could pay for itself with user fees.

From his home outside Boston, Mr. Lerner last week described the patent system, 20 years after the reforms, as mired in "the land of unintended consequences."

"Again and again in the patent system, we see people set out to do reforms with one thing in mind, but that have quite an unintended effect," he said. "The easier it became to get patents, the more people wanted to apply for them, and that led to a situation where examiners grappled with more patents to review, which led to them being pressed to do quicker reviews and a degradation in quality of patents

The patent agency has often struggled to keep up with the times. In recent years, the agency has confronted entirely new areas like biotechnology, software-related inventions, financial and business methods, Internet-based inventions and other information-technology innovations.

Some of the changes designed to deal with these occurred amid extensive public debate. Others got little attention because they seemed like innocuous administrative reforms - like the ones that made patents easier to get, Mr. Lerner said. But many of those patents caused a secondary reaction, he added.

"The ability to litigate and expect to get substantial award from litigation increased," Mr. Lerner said. "So as a result we've got somewhat of a vicious cycle. Once you get one firm in an industry beginning a strategy of aggressive patent enforcement, it creates an almost inevitable response - an almost arms-race dynamic - where everyone else in the industry says, 'We better be doing the same thing.' "

He suggested that these changes for the worse occurred because "there's a relatively small group of people in the D.C. patent bar, and they have a very powerful influence on how patent policy gets decided. There is a powerful incentive for them to keep a patent system that is complicated, and one that involves protracted, costly litigation."

Also, Mr. Lerner said, businesses often fail to understand the importance of subtle changes in patent law. "It is perhaps because of the complexity of patent issues, and because there is no long tradition of work by economists in this area, because a lot of corporations see it as second order relative to tax policy changes, for example, which directly affect their bottom line," he explained. "Patent policy has an indirect affect."

So patent practitioners are colluding to keep patent laws "complicated"? If anything, most of the changes enacted over the last few years were made to simplify the patenting process, and I think that there has been some measure of success in that regard. But these comments don't make sense on their face - you can't argue on one hand that patent practice is needlessly complicated, and then complain on the other hand that getting patents has become too easy.

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