How to End Abuse of Patents and Help Restore Economic Innovation

A new paper from Lincoln Labs' Derek Khanna lays out a great way to move forward in tech.

Lincoln Labs

Writing for Lincoln Labs, Derek Khanna has a great paper outlining the sources, costs, and necessary reforms of the current patenting process. Here's a short version:

Our liberty and economic vitality is jeopardized when so many industries are calcified by government-granted monopolies for non-inventions stifling potential innovations, and when patent trolls sue inventors and small businesses for operating Wi-Fi or for having a podcast….patent reform is an essential part of restoring economic liberty….

Patent trolls are a problem, but big companies are patent trolls too. Real reform requires fixing the underlying problem….

Design patents can also slow innovation and the economic argument for them is also dubious. Apple has a design patent on "slide to unlock" and rounded rectangles, preventing any new competitors in the smartphone market from creating phones with these features. They even threatened to sue Google when Google sought to implement a similar unlocking process with a 3 by 3 grid, forcing Google to adopt a 4 by 4 grid. Designs are regularly copied throughout the economy; that is how competition functions and is the reason designs are rarely protectable (fashion has minimal or no protection for example)….

Low-quality patents can be easily addressed with a few simple reforms, some of which include:

1. Increasing statutory patent quality requirements;

2. Providing greater Congressional oversight of the Patent Office for poor-quality patents;

3. Reforming the incentive structure at the Patent Office to favor high-quality patents;

4. Instituting a "second-pair of eyes" rule;

5. Reforming the patent examiner "prior art search" by specifically implementing crowdsourcing;

6. Creating an independent creation defense;

7. And strengthening Section 112 to ensure that patents are an instruction guide for how to build the invention rather than deliberately vague.

Khanna stresses throughout 

Madison was clear that the U.S. Constitution banned monopolies—unjustified restrictions on economic liberty—except for in two cases where the "benefits" narrowly outweighed the "costs." Those were for copyrights and patents because those monopolies were worth the substantial "costs" to business and liberty. Madison himself referred to these monopolies as the "sacrifices of the many to the few."

Read the whole thing, which stresses the original constitutional purposes of intellectual property laws such as patent and copyright.

In 2013, Reason's Zach Weissmueller explored how patent trolls kill innovation:

Comments

[LynchPin1477]

I'm taking out a patent on comments about wood chippers. A bunch of you can expect to hear from my lawyer.

[Brett L]

Please see my prior art regarding discussions of Fargo.

[MSimon]

How about discussions of Farrago? What's the difference?

[LynchPin1477]

Are you admitting to a history of threatening statements? Careful. A threat against the king's men is no different than a threat against the king himself.

[FreeRadical]

Lately I've been in the market for a wood chipper. Lowe's has Troy Bilt and Brush Master models that I am considering. Do y'all have any insight or recommendations about which brand is better?

And, yes Lynch, your royalty payment is coming forthwith.

[John]

So the solution to poor oversight is more oversight? Color me skeptical. If the problem is that people are getting patents that are too broad in scope and then abusing them and stopping innovation via litigation, then the solution is to change the system to take away the incentive to do that. One way to help would be to eliminate statutory damages in patent suits. If a party can't show any real damage, then why should they collect? This would reduce the incentive to create dubious patents for the purpose of suing.

The second thing you could do is require patent holders to put their patents to some productive use before they can enforce them. The point of patent law is to make sure inventors can profit from their inventions. If an inventor is not actively attempting to profit from their invention, then what is the purpose of protecting the patent and allowing him to sue people who are?

Make those two changes in the law and a whole lot of the patent trolling would stop. It would also reinforce patent law as a way to encourage innovation. If the point is to encourage innovation, then there is nothing wrong with requiring patent holders to put their patents to some good use and to show some actual damages resulting from someone infringing on it. If I think of some idea and file a patent on it and never do jack shit to make that idea a reality, I fail to see how I should have the right to go and sue someone who does.

[LynchPin1477]

So the solution to poor oversight is more oversight? Color me skeptical

I thought the same thing. He identifies some good problems, and it's nice that he tries to come up with a more realistic solution than "nuke IP". But only a handful of his suggestions seem like any kind of real structural reform. Simple question for him: who/what defines "high quality"?

[John]

And how does a "second set of eyes" help? If the people at the patent office are incompetent, having two of them look is unlikely to help. I know several people who work at the patent office. They are not incompetent or looking to allow dubious patents. The problem is the law as it is currently written allows for such patents and creates an incentive to sue. Hiring more people at the patent office isn't going to help.

[wareagle]

The problem is the law as it is currently written allows for such patents and creates an incentive to sue.

increasingly, the cynic in me wonders if consequences like that - potentially foreseeable consequences, at that - aren't the point. Or at least part of the point like, hey..let's toss a bone to our fine donors in the bar.

[John]

The definition of what can be a patent, hasn't changed that much. I think what has happened is the law hasn't caught up to the change in circumstances. The law was written during the industrial age. Back then patents were about tangible things and processes and were pretty easy to define. With the coming of the digital age, patents have become less concrete and easier to abuse. The old system of statutory damages and broad ability to enforce doesn't work anymore. It is too prone to abuse. The solution is therefore change the system. I don't think you can change the definition of what is patentable. I am not sure how you could write an air tight definition that would eliminate the abuse without being too narrow.

I think the solution is to make a bit harder to sue. Only let people who are actively trying to profit from their ideas and can show actual damages sue and collect.

[sarcasmic]

The second thing you could do is require patent holders to put their patents to some productive use before they can enforce them.

What if someone has an idea for a better mousetrap, but lacks the capital to produce it? They're going to want to patent it before seeking capital. Otherwise someone could steal the idea. How would you stop the design from being stolen?

[John]

Sure. Make them show a good faith effort to produce it. If you are running around pitching your idea trying to raise finance and just haven't done it, I think that counts as "putting it to some productive use". Make holders show that they are making some effort to make money from it and have suffered actual damages as a result of the infringement.

[sarcasmic]

If you are running around pitching your idea trying to raise finance and just haven't done it

What if you lack the time and money to run around and pitch the idea? If I invented a better mousetrap tomorrow, there's no way I could afford to quit my job and run around trying to get someone to produce it for me.

[John]

If you invent that mousetrap and make no effort to put it into production, then why should you be able to collect from someone who does? The point of protecting patents is to give people an incentive to invent and produce. If you are not making any effort to produce it, what is the point of having the courts protect your patent?

Patents in my view are not like tangible property. You owning and having exclusive use of your car or your land doesn't in anyway infringe on my freedom. You owning a patent and having exclusive use does, however. If you own the patent on the better mousetrap, I can't make and sell one. I am not free to go into the Sarcasmic's better mousetrap business. For that reason, I don't think the courts have any obligation or reason to enforce your patent if you are not doing something with it. If you never want to use your car or your land, that is your business. I am free to do what I like with my land. But you owning an idea, directly infringes on everyone's freedom to do business. For that reason, you should have to be using the idea yourself and be able to show how my actions are damaging you before you should be able to sue to prevent me from using your idea.

[sarcasmic]

If you own the patent on the better mousetrap, I can't make and sell one. I am not free to go into the Sarcasmic's better mousetrap business.

Yes you can. You just have to pay me for the use of my idea. I may have put much time and effort into creating this new design. Why should someone else profit from my effort simply because I lack the means to produce the product? I'm an inventor, not a businessman.

[John]

If I have to pay you, I am not free to do it. And if I am not mistaken, I only get to pay you if you accept it. You can sue me for injunction relief and shut me down if you want to. Patents are different than tangible property. They are nothing but an affirmative injunction on everyone else' behavior. It doesn't matter if its my money and I am doing it on my land. I can't produce that mouse trap unless you tell me I can or I pay you.

That is different than tangible property. Sure, I can't come over and use your land. But I can go and buy other land just like it and do what I want. I can't do that with a patent. There is nothing that says we have to protect patents. For hundreds of years western countries did not and they still have property rights. We protect patents for a utilitarian reason, not because owning them is some inalienable right the way owning tangible property is.

[sarcasmic]

So you're saying you are opposed to allowing someone who tinkers with things in his basement, but lacks the expertise to run a business, from being able to earn a cent from his inventions.

[John]

No sarcasmic. I am not saying he has to run a successful business. i am saying he has to make some effort to put those things into wider public use. If he doesn't and just forever leaves them in his basement, why the hell should he have a right to the money people who do make such effort make? He is of course free to tinker and do what he likes. But I don't see how he automatically gets the right to tell me I can't do the same thing myself and make a business out of it just because he built it first. If he doesn't have the expertise or the interest in making a business out of it, then how is he harmed by my doing so? If I didn't do it, it wouldn't have ever happened. So he is no worse off. So why should he be able to collect any of the money I earned?

[sarcasmic]

i am saying he has to make some effort to put those things into wider public use.

You have to define "some effort" then. I can see your point about someone patenting something, never telling a soul, then suing when someone else comes up with the same idea.

But what if they try but can't find any takers? Not necessarily because of the merit of the idea itself, but because they're an introverted nerd who gets laughed out of the office. Or they don't know who to ask?

I'm not a fan of patent trolls, but on the other hand if you raise the bar too high then there's little incentive to try to invent or improve upon products.

[John]

The definition is simple, trying to sell it for a profit. If he has some invention and is selling them to his neighbors out of his basement, that is I think enough. Or if he shopped it around to various businesses trying to get them to produce it, that is enough, even if none of them wanted to. The point is that you should have to make some kind of effort to make money from the invention. You shouldn't be able to patent it and then do nothing and wait like a vulture for someone else to figure out a way to make money from it and go and take the money they make.

[sarcasmic]

As someone else said below, once they do that then it becomes public domain. How do you prove it was exclusively your idea unless you patent it before you try to sell it? Someone else with lawyers and political connections could lie and say it was their idea, and the poor inventor would have no recourse. That's why you need the patent first.

[sarcasmic]

A patent is supposed to be a set of instructions, right? So conceivably a company could look through some patents, see something they think they can make a buck from, and then go about licensing the idea. It's not like the idea is lost one it goes to the patent office.

[Heedless]

If you had the time to create and refine your design, you have time to go to an angel investor conference every once in a while. If your idea was a bolt from the blue, then that's not really the sort of thing we can encourage through incentives.

[DJK]

"If he has some invention and is selling them to his neighbors out of his basement, that is I think enough". Selling the product triggers a bar on obtaining the patent in the first place. Assuming that you're saying the inventor has to show this before obtaining the patent, this won't work. If it's a defense against infringement in a post-grant review, you're still stuck with all of the legal fees and whatnot.

[Zeb]

Keep it secret and hope no one else has the same idea?

For practical purposes, I'm not entirely anti-IP. But I have a problem with patents being enforced when two people independently come up with more or less the same idea.

[John]

I agree Zeb. And if I come up with an idea and never do anything with it and you later and independently come up with the same idea and make it into a going concern, what gives me the right to come and take a piece of your profits? What did I do? It would be one thing if I am out trying to do the same thing and you come along with better baking and blow me out of the water. Then clearly I had the idea first and you shouldn't be able to just take it and roll over me. But if I never do anything? I think that is bullshit.

[sarcasmic]

But I have a problem with patents being enforced when two people independently come up with more or less the same idea.

That wasn't the situation I was talking about.

[Medical Physics Guy]

This would be my problem. Someone in my shoes can't get contracts for IP licensing with the big HC companies unless I have a patent already filed with some Univ. seed funding from the U. patent facility. Then I have to get some big companies interest in licensing, then if they will put on paper that they are interested, the U. will spend the big bucks to get the global protection and the license will go through. From my vantage point, it's not too bad. But I am in a good position. People not at a big Uni with big leverage have no hope of getting protected.

[sarcasmic]

Yeah. I'd think that most ordinary people would have no hopes of raising capital on their own. The best they could hope for would be to patent the idea, then hope to sue someone for using it.

[Medical Physics Guy]

Patent search = $. Patent attorney, to make sure the language would enable enforcement of anything = $. And then suing someone = $$$ . Honestly if a big HC ripped me off, the U would think twice before committing to a lawsuit. They would have to win big. On the other hand someone in my field sued a big HC company, rightfully so, and did win quite big.

[DJK]

I think that Universities are only likely to duke it out on patent cases for things that will bring them huge amounts of cash or prestige. For instance, the University of California is more than willing to back Prof. Doudna on the CRISPR-Cas9 patents, which will win someone a Nobel Prize and could be worth billions. For most patents, they aren't willing to undergo the legal battle if someone infringes. Their in-house legal people aren't great and it costs a lot of money to retain Morrison Foerster or Fish Richardson.

The National Lab system is even worse at protecting IP. Seriously, if you want to infringe a patent and not worry about a lawsuit, just look at things coming out of Livermore or Los Alamos.

[DJK]

What would make you think that an independent inventor would have the financial means to sue if he lacks the financial means to patent? Legal battles are far more expensive than patent prosecution.

[John]

Again, I wasn't clear in my wording. "Productive use" doesn't just mean making a profit but can also mean actively trying to do so. If you are trying to build a business around your idea, then you are putting it to productive use even if you haven't yet raised or made a dime.

[Zeb]

I think those sound like good reforms.

Somehow getting rid of patents on software and purely design features, like the stupid Apple stuff, would be good too.

I have no idea how things happen in the patent office, so I could be wrong, but I could see how some of the reforms suggested in the article could help. Better prior art searches and clearer rules on what exactly can be patented seem like good ideas. And a second set of eyes is a pretty good idea, whether or not it is a remedy for incompetence.

[DJK]

The PTO examiners judge patents based on how their review board and the appeals courts rule. My general experience with PTO examiners is that they're predisposed to reject basically all patent applications; they're subject matter experts and, if left alone, would probably reduce the number of issued patents by 90%. But the Courts above them (the Fed Circuit and, to a lesser degree, SCOTUS) have been very friendly to patent owners over the past two decades. A second set of eyes doesn't help when the Courts have tied your hands.

[Illocust]

Just for your information, not making a point one way or the other.

Right now if you put the device you are trying to patent to productive use before filing the patent or even during the review process, your patent will be denied. The product gets considered public domain if you try to sell it before you get the patent.

[Zeb]

What if you write "patent pending" on it? I've never been entirely clear on exactly what that means legally.

[DJK]

It means that you've filed for a patent which you believe protects some features of your device. It's a warning that if someone else implements those features in a way that's covered by the potential patent (which they can't know, since the applications are kept secret for a period of time), they could be hit with an infringement suit if the patent ultimately issues. Basically, it's a warning that companies put out there so that they can collect damages for the period between patent application and patent issuance.

[John]

Again, I would say making efforts to do so should count. Beyond that, even by that rule, my rule still works. You get your patent but just can't enforce it until you start doing something with it, which can be making phone calls trying to get backing the day after your patent is granted.

[wareagle]

the article and paper make an assumption not necessarily supported by reality: that the political class is interested in either ending patent abuse or restoring economic innovation.

[Hyperbolical (wadair)]

...the political class is [not] interested in either ending patent abuse or restoring economic innovation.

This seems to be the main problem. Those with the means to hire lobbyists skew the system in their favor restricting the small players who are typically the innovators. But I do agree with John: remove the incentives for patent abuse rather than complicating the situation even more.

[Win Bear]

The political class, being largely composed of lawyers, likes complex patent laws for the same reason they always like legal complexity and dislike individual market-based solutions: legal complexity is in their interest and the interests of their peers and friends.

[dantheserene]

I've been on this site too much recently. I read the title as, "How to end the abuse of *parents*".

[Scarecrow & WoodChipper Repair]

I hate patents and copyright with a passion, but I once sat down and pondered what it would take for me to accept patents. I came up with the idea that a patent doesn't come into affect until someone has built a copy using your patent instructions (to make sure they do disclose everything to be patented) and the time from publication to reproduction determines the patent duration, say 10:1. Furthermore, everyone who reproduces the object automatically gets a license to reproduce, with royalties as set out in the patent. And the patent publication expires within some time limit, such as a year.

The incentives come out pretty well. The patent must be clear and complete or no one will reproduce it and the patent will never go into affect. The patent must be groundbreaking and novel, or it will be so easy to reproduce that the protection will expire too soon to be of any use. Copycats have every incentive to reproduce as quickly as possible to reduce how long the patent is valid and they have to pay royalties. The patent must also specify reasonable royalties or no one will see any point in reproducing the patent and it will never go into affect.

[Win Bear]

Your rules don't make a lot of sense to me: they add a great deal of uncertainty and complexity and cause even more legal hassles.

Short of dropping patent law altogether (and I think there are good arguments for that), reforming patent law really shouldn't be that complicated. We need to drop the presumption of validity so that courts can invalidate patents more easily, we should shorten the length of patents and make it dependent on the domain (shorter for software, maybe 5 years), and we should drop the legal requirements that lead to the bizarre and useless language in which most patents are written.

[Scarecrow & WoodChipper Repair]

What is unclear? Be specific or you are just blowing noise.

No one will patent stuff so obvious that reproductions appear within days or weeks, so goofy patents will disappear. Any truly novel patent will have to be clearly described or no one will be able to reproduce it and the patent will never take effect.

Copycats have to balance reproduction as soon as possible to reduce how long they pay royalties vs putting off reproduction in hopes of preventing the patent from ever taking effect.

It's self-enforcing. If a patent is intentionally unclear and vague or has such high royalties that no copycat enters the fray, the inventor might be tempted to help a friend create a reproduction at the last minute so the patent will remain in force as long as possible; but surely in that case others would be able to show the patent is unclear and that the sole copycat had help.

All government has to do is set a time limit to first reproduction and set the ration between time to first reproduction and expiration.

[Scarecrow & WoodChipper Repair]

But just in case, I'll explain it differently.

Anyone can publish a patent, with (a) clear instructions on how to reproduce the invention, and (b) a royalty schedule.

Anyone can reproduce the patented invention at the published royalty schedule.

The time from publication to first reproduction determines how long the patent lasts. 10:1 means a 6 month interval creates a 5 year patent. Whether that is measured from publication or first reproduction is a minor detail.

If no one reproduces the invention within some time limit, the patent expires. One year sounds reasonable to me.

The inventor could game the system with a vague description or excessive royalties to deter all copycats, then help a friend or business partner come up with a reproduction at the last minute. But competitors could probably demand the copycat show how he interpreted the patent and void the patent for fraud. Excessive royalties would be harder to self-police.

[Win Bear]

People really need to work on presenting this issue, because they keep confusing (1) companies that license intellectual property without making anything, (2) bad patents that should never have gotten granted, and (3) companies who use patents to blackmail other patents by staying slightly below the cost of litigation. Patent trolling involves all three aspects.

In particular, a company that just licenses its patents isn't automatically evil or destructive. Although the current patent system makes it unattractive for many inventors to run a business that way (since you mostly end up being a lawyer), in principle, a world in which inventors invent and manufacturers manufacture, as separate, small companies, doing business via licensing contracts, is not necessarily a bad one.

[adolphowisner]

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