Tuesday, November 17, 2009

How Not to Invent a Patent Crisis

F. Scott Kieff and Henry E. Smith authored a chapter in the book "Reacting to the Spending Spree: Policy Changes We Can Afford" which examines challenges the Obama administration faces today, and in the foreseeable future, and the administration’s planned responses.

Kieff and Smith's contributions deal with the topic of patent reform and the authors' view that in light of the rapid (and arguably excessive) changes that have already occurred in the courts, patent law needs "a tweaking of existing safety valves and processes" and not an "opening [of] the floodgates to more discretion and uncertainty."  Essentially the authors argue that ever-increasing discretionary power in the courts and the PTO will eventually gum up the innovative process.

For example, on the issue of obviousness, the authors discuss the early proposal to modify section 103 so that patents would be denied for inventions that were a “non trivial advance” on the state of the art.  Supporters of this modification argue that the change would be in line with the KSR decision.  Some supporters see the KSR decision as standing for the proposition that government decision makers, such as judges, now have increased discretion to pronounce what the prior art teaches and would like to extend such discretion to patent examiners. Kieff and Smith argue that this is a bad idea:
The proposed statutory changes would implement the same flexible approach urged by one side of the KSR debate. We think that flexibility can be carried too far and that the flexibility approach on offer relies on two false premises about how the system actually works. 
The first false premise is that beefing up the patent examiner’s resources would help her find the key prior art. Of course, our examining corps should have good access to Internet databases and ample time and training to peruse them. But no realistically available amount of time and training will help an examiner at his desk obtain the laboratory notebook of an individual researcher at some company or university or an obscure student thesis on the bookshelf of a foreign library, which is where the key prior art is often found.
The second false premise is that discretionary decision making, whether in court or the Patent Office, can be immune from political and other pressure. Asking a decision maker to use her legal or technical expertise as the primary basis for deciding what she thinks the state of the art was at a particular time in history gives her greater discretion than asking an ordinary jury whether a particular document or sample product existed at a particular time and what that document actually contains. By increasing the discretion of government bureaucrats, flexibility increases uncertainty and gives a built-in advantage to large companies with hefty lobbying and litigation budgets.

So what should be done in reforming the patent system?  Kieff and Smith have a number of proposals:
Remove the presumption of patent validity. [D]ialing down the present presumption of validity to something like the ordinary standard for civil cases would decrease the bad, in terrorem, effect [of aggressive patent litigation]. When litigation is needed, the carefully crafted Federal Rules of Civil Procedure govern the procedures for joinder, compulsory counterclaims, and against relitigating issues and claims decided in previous litigation, which are collectively designed to avoid abusive and repetitive process. The Federal Rules also provide streamlined procedures such as summary judgment, which avoids long trials where there is no genuine issue of material fact.

Institute symmetric fee shifting. Symmetric fee shifting would allow alleged infringers to collect attorney fees from a patentee who brings an infringement case after having been warned, for example, about a particular item of invalidating prior art. This practice of fee shifting when a patentee makes baseless arguments in defense of the patent’s validity would match the present rules in Sections 284 and 285 of the statute that allow patentees to get fees and (potentially) treble damages from infringers who should have known about their own infringement and have thus mounted baseless arguments in their defense. Such symmetry in fee shifting would encourage parties to exchange information and resolve disputes before undertaking expensive litigation

Equity in remedies. We think that the best way to implement eBay is to take this equitable approach seriously and apply it in the traditional (and sensible) fashion. Crucially, the equitable approach is a safety valve for those situations in which someone who is otherwise a good candidate for getting an injunction—such as a patentee whose patent has been infringed—should not get one because of some glaring injustice. The equitable approach is flexible but not boundlessly so, in contrast to currently proposed reforms that elevate discretion to new heights. Moreover this safety valve is probably all we would need.

The chapter concludes
The approach we propose will decrease slightly the average value of all patents because patentees will now have to fight harder on the issue of validity when they assert their patents in court. But this is not necessarily bad. The costs of arguing to the Patent Office to get patent rights in the first instance will be less than in a system under which the examiners have largely unfettered discretion to reject applications.
Most important, the approach we propose directly addresses the fears of those held hostage under the current system by the threat of litigation costs surrounding patents that are merely presumed to be valid. Under a decreased presumption of validity, such a terrorizing effect largely evaporates. With fee shifting, meritless suits against infringers will be discouraged, and the full traditional but limited use of equitable discretion will provide all the safety valves we need for good-faith infringers and those facing true patent trolls.
These approaches should be given time to work. The prudent course for the country is to embrace a strong patent system based on predictability and facts, which will benefit all players, large and small, in their contributions to American innovation and economic growth.

An excellent, concise paper (24 pages), worthy of a read for anyone interesting in reforming our patent system.

Read/download a copy of "How Not to Invent a Patent Crisis" here (link


More information on "Reacting to the Spending Spree: Policy Changes We Can Afford" (link)

10 Comentários:

Step Back said...

"An excellent, concise paper (24 pages), worthy of a read for anyone interesting in reforming our patent system."

The correct word to use above is "deforming", as in taking apart, reverting back to earlier or different inoperable state, etc.

The word "reform" is used as a code word for hiding true intentions.

Example: Tort "Reform" is actually The Forgiveness to all Privileged Wrong-doers Act

RegCheck said...

Reading only your blog post and not the paper, it would appear that the proposal is founded on a conventional (but rarely implemented) reading of the law & economics literature. To eliminate uncertainty, property rights must be clearly assigned. Giving government agencies discretion to assign them creates uncertainty. Worse, it establishes the environment in which rentseeking and corruption can flourish.

It is always the government's interest to maximize its discretion. Sometimes parties to a specific dispute find it beneficial for the government to be in this position. In the long run, however, they are likely to encounter situations in which governmental discretion works against them. That goes for both the PTO and the courts, btw.

It is better to devise efficient, incentive-compatible systems for private parties to resolve disputes.

Dale B. Halling said...

This book by Kieff and Smith has some bits of truth with many falsehoods about patents. On the positive side, they recognize that increasing the discretion of government bureaucrats will just increase uncertainty. But then they contradict themselves by suggesting eliminating or making the presumption of validity meaningless. Applicants for a patent spend more time and money to obtain title to their property than any other type of property. If it took as long and cost as much to obtain title to land or a car, we would think we were dealing with a corrupt third world country and we would be outraged. Weakening the presumption of validity under these circumstances, is neither fair nor rational.

At one point, according to the article, the authors recognize that certain reforms will just favor large companies and then they suggest weakening the value of patents. So they contradict themselves again.

The authors are either unaware of the work of modern economics on innovation or confused about the relationship between patents and innovation. Modern economics (http://hallingblog.com/2009/07/08/is-innovation-the-key-to-growing-the-u-s-economy/) clearly shows that innovation is the only method of increasing per capita incomes. Historical evidence (http://hallingblog.com/2009/10/26/foreigners-receive-more-patents-than-u-s/ ) shows that strong patent laws are consistent with increased innovation.

The authors provide very little insight to the patent reform debate.

BG said...

nice posting, i have downloaded the pdf.. its nice.

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nawabdera said...

INSHA ALLAH very attracting,an excellent relection of inventors.i deeply appreciate.It is for the patent office to ponder.

nawabikramullah khan said...

every effort to be made to provide ease for the inventors,the global assets in awarding timely patent awaeds keeping in front the aging factor

nawabikramullah khan said...

timely patent awards will promote more novels like a chain reaction by the true inventors

nawabikramullah khan said...

i do not see any remarkable protection of novelties due to prolonged processes

Richard Cauley said...

I honestly don't see the point of proposing radical "reforms" like the authors propose that have literally no chance of being enacted. Whatever your view on the merits of the legislation, patent reform has been proposed, with wide bipartisan support, in the last two Congresses and has failed and is likely to fail in this one, too. Rather than speculating over the effect of such massive changes eliminating the presumption of validity or fee-shifting, I think these authors' talents could be devoted to reforms that have some chances of actually happening.

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