The Politicization Of The US Patent System

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By Brian Kahin

The Washington Post story, How patent reform’s fraught politics have left USPTO still without a boss (July 30), is a vivid account of how patent reform has divided the US economy, preempting a possible replacement for David Kappos who stepped down 18 months ago. The division is even bigger than portrayed. Universities have lined up en masse to oppose reform, while main street businesses that merely use technology argue for reform. Reminiscent of the partisan divide that has paralyzed US politics, this struggle crosses party lines and extends well beyond the usual inter-industry debates. Framed in terms of combating patent trolls through technical legal fixes, there lurks a broader economic concern – to what extent ordinary retailers, bank, restaurants, local banks, motels, realtors, and travel agents should bear the burden of defending against patents as a cost of doing business.

The roots of polarization run deep, back to the drafting of 1952 Patent Act, which Congress in its wisdom outsourced to patent attorneys. The drafters tweaked the language to write the requirement of invention out of patent law, entitling the applicant to a patent, unless the examiner could show why it should be denied. There is no indication of this in the legislative history, but it is revealed in the words of the principal draftsman:

[W]e turned it into the positive statement “A person shall be entitled to a patent unless…” as it reads today. We just felt like slapping down the detractors of the patent system, many of whom were in the judiciary.

This secret history was voiced years later when the author was a judge on the Court of Appeals for the Federal Circuit, the appellate court for patent cases, speaking to his law clerks. The same judge also authored the infamous State Street Bank decision, which claimed that business methods had been patentable since the 1952 Act, even though there is not a word in the legislative history to suggest that the Act expanded the reach of the patent system. (In fact, the Act was presented as a mere codification of existing law on the floor of the Senate.) As recently stated by House Subcommittee Chairman Lamar Smith:

Business methods were generally not patentable in the United States before the late 1990s, and generally are not patentable elsewhere in the world, but the Federal Circuit (in what was an activist decision) created a new class of patents in its 1998 State Street decision.

The damage that insiders can do under the flag of special insight and expertise is also manifest in the agreement on trade-related aspects of intellectual property (TRIPS) incorporated into the WTO charter in 1994. In between standard treaty language on nondiscrimination based on origin, negotiators slipped in a provision prohibiting “discrimination” against technologies – “without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.”

The language is there because pharmaceutical interests were well-represented in the TRIPS negotiations and wanted to ensure that pharmaceutical products were protected. A reasonable concern given how valuable patents are in that sector, and not all countries allowed patents on pharmaceutical products. But the general language purports to straightjacket the entire patent system.

Should all technologies, present and future, be treated the same? Normally an overarching rule that one size fits all is something for legislators to decide.   In effect, backroom negotiations established blind uniformity as a constitutional limitation preventing thoughtful discussion and scrutiny. Any suggestion that software is different from drugs and should be treated differently is met by the mantra of “our international obligations.” Yet differentiation is not the same as discrimination, and empirical research along with 30 days of FTC-DOJ hearings in 2002 have brought out vast differences in how industries experience and view patents (see chapter 3 of the 2003 FTC report). The congressionally mandated 2013 report of Government Accountability Office squarely attributes the troll problem to low-quality software patents.

A low standard is no problem for pharmaceuticals since each compound must be clinically tested and subjected to costly regulatory approval, but in IT and software, a low standard facing the richness of innovation results in hundreds of thousands of patents, many trivial or invalid.

Other developments favoring insider decision-making include the centralization of patent appeals in the new Court of Appeals for the Federal Circuit in 1982 and putting the USPTO on a fee funded basis with internal incentives to award patents. More generally, the patent system lacks any means of gathering feedback to show how or whether the system is working to promote innovation.

Ironically, the success of the insiders in routinizing the granting of patents and hardwiring the system against evidence-based policy-making has led to today’s stalemate. What made prospective [USPTO director] nominee Philip Johnson look good to some is that he is the ultimate insider – a patent attorney representing the industry most dependent on patents.

Possibly someone in the Commerce Department had forgotten the strongly articulated position that three White House agencies promulgated one year earlier – the first presidential initiative on patent reform in 47 years. Or did not notice that under the tenure of the last Under Secretary the effective allowance rate jumped from 68% to 89% in three years (2009-2012).

Alternatively, patent insiders concerned about the vacancy in the position may have pressed very aggressively for one of their own. In which case, simply floating Mr. Johnson’s name after the dramatic failure of reform legislation might have revealed how unrealistic this was.

In either event, the uproar that followed saved everyone the embarrassment of a formal nomination collapsing in the Senate – and showed how difficult it will be to fill the vacancy. After this mini-debacle, staged or real, the only solution to providing leadership on patent policy may be to find a credible outsider willing to serve on a hot seat for the next couple of years. For this to happen, there needs to be public acknowledgment that the system has been politicized, indeed polarized, by cramming all of innovation into an entitlement box – and by a reflexive paranoia that sees everything in terms of pro- or anti-patent.

In the last month, the insular agency culture has again been on display in two management scandals. First, the hiring and long-term retention of paralegals who were not only kept on with very little work to do but were awarded performance bonuses by their managers. Then, the lack of accountability in the agency’s touted telework program was exposed, despite an aggressively revised internal report that looked like a cover-up.

Memories are short in Washington. None of the considerable reporting on the agency’s problems recalls that the USPTO was ranked number one out of 300 agencies in “Best Places to Work in the Federal Government” [p.4] for 2013. And that was the culmination of a meteoric rise from 172nd out of 222 agencies in 2007 under the previous administration, when Director Jon Dudas was urging tough scrutiny of applications. As shown in the research cited above, incoming Director David Kappos abruptly reversed direction, proclaiming that “quality does not equal rejection.” Semantically true, but, at least in the world outside Washington, rejection is the primary defense against bad quality. Inside Washington, the solution was to redefine quality in terms of adherence to internal rules (complied with “over 96% of the time”).

The noise surrounding the patent system has spread far and wide. Perhaps enough so that the challenge of reform may appeal to one of the established innovators in American business, someone who has a fresh perspective on how patents work – and don’t work – in different fields of innovation. And how to get beyond “business as usual.”

Brian Kahin is a Fellow at the Center for Digital Business at the MIT Sloan School of Management and a Senior Fellow at the Computer & Communications Industry Association (CCIA). He is a former Senior Policy Analyst in the Office of Science and Technology Policy.

 

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Comments

  1. says

    ‘Business methods were generally not patentable in the United States before the late 1990s, and generally are not patentable elsewhere in the world…’

    Little is generally patentable in elsewhere in the world, but what is the general state of the economies of those nations and how do they compete internationally?

    Kahin and his Computer & Communications Industry Association represent some of the world’s biggest invention thieves.

    Just because they call it patent “reform” doesn’t mean it is.

    Property rights and jobs in America are now hanging from a frayed thread. These changes are killing our small and startup firms and the jobs they would have created. When government fails to uniformly and justly enforce property rights they contribute to the wealth and the power of the well placed few, suppress the economic potential of the rest, and support giant monopolies that enslave the public. Some in Congress and the White House continue to follow the lead of their giant multinational campaign donors like lambs…pulling America along to the slaughter.

    http://sunlightfoundation.com/blog/2014/05/07/patent-cash-flows-to-senate-judiciary-committee-members/
    http://www.npr.org/2013/11/06/243022966/secret-persuasion-how-big-campaign-donors-stay-anonymous

    All this patent troll and ‘reform’ talk is mere dissembling by China, huge multinational thieves and their paid puppets. They have already damaged the American patent system so that property rights are teetering on lawlessness. Simply put, their intent is to legalize theft -to twist and weaken the patent system so it can only be used by them and no one else. Then they can steal at will and destroy their small competitors AND WITH THEM THE JOBS THEY WOULD HAVE CREATED. Meanwhile, the huge multinationals ship more and more American jobs to China and elsewhere overseas.

    Do you know how to make a Stradivarius violin? Neither does anyone else. Why? There was no protection for creations in his day so he like everyone else protected their creations by keeping them secret. Civilization has lost countless creations and discoveries over the ages for the same reason. Think we should get rid of or weaken patent rights? Think again.

    Most important for America is what the patent system does for America’s economy. Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity AND THE JOBS the commercialization of those inventions bring. For 200 years the patent system has not only fueled the American economy, but the world’s. If we weaken the patent system, we force inventors underground like Stradivarius and in turn weaken our economy and job creation. For a robust and stable economy America depends on a strong patent system accessible to all -large and small, not the watered down weak system the large multinationals and China are foisting on America.

    For the truth, please see http://www.truereform.piausa.org/
    http://piausa.wordpress.com/
    http://www.kentucky.com/2014/05/27/3260938/george-ward-patent-reform-could.html?sp=/99/349/
    http://www.hoover.org/publications/defining-ideas/article/142741

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