Tuesday, September 4, 2007

Reforming patents, promoting innovation

Many of our nation's founding fathers (most notably Ben Franklin) were inventors, and from America's earliest days we've been a country that has promoted innovation. To protect and promote invention, those same founding fathers gave Congress the power (in Article I, Section 8 of the U.S. Constitution) "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Inventors have relied on the patent system to protect those rights (check out Google Patent Search to see for yourself).

Unfortunately, the patent system has not kept pace with the changes in the innovation economy. Google and other technology companies increasingly face mounting legal costs to defend against frivolous patent claims from parties gaming the system to forestall competition or reap windfall profits. The National Academy of Sciences has said the current patent system shows “areas of strain, inefficiency, excessive cost on one hand and inadequate resources on the other hand that need to be addressed now.” And the Supreme Court's consideration of several patent cases in the past two terms is evidence of growing consensus that patent law needs to be rebalanced in order to protect patent owners while ensuring that patent rights are not abused.

A growing chorus of business leaders and companies spanning the technology, financial services, and traditional manufacturing industries has joined with legal scholars, economists, consumer and public interest organizations, government institutions and major editorial boards in calling for patent reform.

Bipartisan patent reform legislation is likely to be considered by the full House of Representatives later this week, and is moving through the Senate as well. As a member of the Coalition for Patent Fairness, we support this legislation and have urged Congress to address these issues in particular:
  • Damages apportionment. Damages should be calculated based on the fair share of the patent’s contribution to the value of a product, and not on the value of a whole product that has many components. So for example, a windshield wiper found to an infringe a patent should not spur a damage award based on the value of the entire car.
  • Restricting forum-shopping. Certain district courts have become notorious for rarely invalidating a patent, and have tilted the balance too often in favor of plaintiffs. We support judicial venue provisions to ensure that patent lawsuits are brought only in district courts with a reasonable connection to the case.
  • Post-grant review. The patent system should include a meaningful second chance for the U.S. Patent and Trademark Office to review potentially problematic patents in a timely way, thereby promoting high-quality patents.
  • Willfullness. Patent infringers can be forced to pay triple the damages in cases where they are found to have "willfully" infringed a patent, but that standard has been devalued. Punitive triple damages should be reserved for cases of truly egregious conduct.
The product of six years of legislative debate and compromise, the bipartisan Patent Reform Act would achieve many of these goals in a fair and targeted manner. It clarifies the standard for calculating damages based on the value of the invention, establishes fair criteria for where patent cases can be brought, improves post-grant review and applies to patent law the traditional standard for punitive damages. These reforms will go a long way toward modernizing the patent law system to ensure it continues as an engine for economic growth and innovation.

Some have argued recently that reforms to the patent system would somehow make the U.S. less competitive in the world. That couldn't be further from the truth. Low-quality patents and escalating legal costs are currently hurting the ability of U.S. companies to compete globally, and that in turn hurts U.S. workers and consumers. Without a modernized patent system, U.S. companies are at a competitive disadvantage, spending resources on unnecessary litigation and unwarranted licensing instead of on innovation.

We'll be talking to House members and their staff this week to tell them just how important this is.


B said...

I wish you guys would put your weight behind solving the real problem: subject matter expansion. Until the mid-1990s, a patent had to have a non-trivial physical element, like a drug or a new machine; but at that time, a panel of former patent attorneys decided---without referring to Congress or other prior study---that non-physical objects like mathematical algorithms and business methods should be patentable. A few years later, all the "Patent System Broken" headlines started appearing.

I can't tell from your public statement here whether you in the public policy department support or do not support software patents per se, though I would bet you a dollar that if you surveyed your employees, the great majority would call software and business method patents an impediment. [The Google engineers I know all loathe software patents, though I may have a biased sample.]

Google holds patents, and its SEC filings indicate that those patents are important to its business, but that doesn't tell us anything about the official Google position on software patents: the authors of the SEC filing could be referring to holding patents for defense against other patent-holders, or to using patents for asserting claims against others implementing similar algorithms.

So given that many of your engineers find patenting a mathematical algorithm to be (as your founding engineers woud say) evil, I was hoping that you would put your weight behind something a little closer to the true root of the problem, such as a bill that would include some attempt to address what is patentable subject matter. Such a bill is not necessarily politically impossible, since most of the country's patenters of physical objects (pharma, mechanical, and everything in between) desperately want software patents to go away so they can go back to business before all those "Patent System Broken" headlines.

Why is Google supporting this tepid bill? Have you determined that it's time your engineers revise their ethical beliefs regarding mathematical algorithms? Or is a bill that would address subject matter problems just too unlikely to work?

Ben Klemens

Guest Scholar
Brookings Institution
author of Math You Can't Use: Patents, Copyright, and Software

James said...

It is Article I. Sect. 8 Clause 8 of the U.S. Constitution.

vikesfan33 said...

Actually, mathematical algorithms are not, and have never been, patentable. See Diamond v. Diehr, 450 U.S. 175, 186 (1981) ("an algorithm, or mathematical formula, is like a law of nature, which cannot be the subject of a patent."). The most telling statement in this post is:

"Google and other technology companies increasingly face mounting legal costs to defend against frivolous patent claims from parties gaming the system to forestall competition or reap windfall profits."

Patent reform that is designed only to help a certain type of business or a certain segment of the economy is not a good thing, as it advantages some and disadvantages others. Equally telling is the fact that the very employees of the technology companies that support this legislation, namely electrical and electronics engineers, have come out in opposition to it. Oh, and so has the AFL-CIO and the patent examiner's union.

Why? because it would not solve the underlying problems. In order to have meaningful patent reform, what has to change is the administration of the USPTO, not what happens after a patent is issued. The courts have already taken care of that (see KSR (making it easier to show patents are "obvious") and In re Seagate Technology (making it harder to prove willful infringement, and therefore to get increased damages)).

Of course, if patent infringement claims being asserted really are "frivolous," then Google (or any other defendant) would likely be reimbursed for its costs and attorney fees as a result.

As far as the damages apportionment provision, all this really does is shift the burden of proof. Right now, patent infringers can already show that damages should only be attributable to the amount of value the patent adds to the overall product. Many just fail to offer adequate proof, and as the infringer is the "bad actor," it is their burden to show that damages should be reduced once infringement is shown. Why reward those who infringe the rights of others? This provision would be like if someone trespassed on your property and took your best produce out of your garden to make a meal. In order to get damages for the theft, you would then have to use economists to show exactly how much better your produce made the meal over what could be bought at the grocery store. Of course, that's not really the point, is it? The point is that the produce shouldn't have been stolen in the first place.

As far as post-grant review, this always amazes me. There's already post-grant review available at any time during a patent's pendency: it's called reexamination. It allows anyone, at any time to request reexamination of any patent on the basis of any prior art publications. Why exactly do we need another, redundant procedure?

As to willfulness, that's already been taken care of by the Federal Circuit in the Seagate case as noted above. Now there must be a showing of "objective recklessness" in infringing the patent. If you're going to say that the standard has been "devalued," make sure you're up on recent law.

All in all, there is really nothing in the Patent Reform Act for non-big tech to like. Unless, of course, you're a foreign competitor. In the end, Congress has realized that by considering legislation like this, it can get millions of dollars from lobbyists from both sides of the debate, decide not to pass it, and then watch the money roll in the following year.

l said...

vikesfan33 comments are right on the money. These reforms are not needed. I sympathize with having to defend against nuisance lawsuits. However, I don't believe Google and other critics of this legislation has sufficiently considered the unintended consequences of this legislation, which will be to significantly devalue patents and stifle innovation.

David said...

The American Intellectual Property Association (AIPLA), the largest professional association of patent lawyers, rarely takes a position on legislation, but they issued a Legislative Alert (via the Practicing Law Institute) pointing out serious deficiencies in the Patent Reform Act and urging its members to immediately contact their representatives to oppose this legislation.

The AIPLA is comprised of patent attorneys in all areas of practice - plaintiffs, defendants, big company, small company, tech, pharma.

Who else opposes this legislation?

A very partial list includes:

The University of California system (including UC-Berkeley)
General Electric
Cornell University
Every Big Ten University
The National Venture Capital Association
Vanderbilt University and Medical Center

The list goes on and on and on. This is special interest legislation and the special interests are the big tech companies.

Robert said...

Sorry, David but the AIPLA is not "comprised of" anything. Rather, the AIPLA "comprises" the subsequent list.

jrmase said...

Those promoting patent reform including Google are increasingly resorting to poorly supporting statements that are little more than propaganda. This is a fine example in Shelton's and Lee's original article when the report the support of

....consumer and public interest organizations...

Searching Google News for "consumers groups" joining in on this fray pulls up only the Phoenix Center which released a paper on the topic the previous day, September 4th. Phoenix Center is hardly a mainstream consumer’s advocacy group. Following immediately we are finding news articles pointing out Shelton's and Lee's article showing the support of consumers group in patent reform legislation. The Chicago Tribune and Information Week for instance.

I have been a long time supporter of the services Google offers but I am rethinking this if Google continues to undermine my Constitutions rights to effectively patent and license my inventions.

I will point out one fallacy in the arguments shown in this article concerning intermittent windshield wipers. If this is a patented technology, you would need a license from the inventor to install it on your product without infringing that patent. If you refuse to license that technology and continue selling automobiles with intermittent wipers then you should be declared a criminal, not simply shell out a few dollars for this egregious example on willful patent infringement.

You can certainly sell an automobile without an intermittent wiper. It was done for many years until an inventor came up with the technology. This case drug out in the courts for years because arrogant corporations refused to acknowledge the contribution of this inventor to their products.

Rusty Mase
Austin, Texas

Hank said...

This guy, Ben Klemens, doesn't appear to understand the point. The outdated and critically flawed patent laws are cunningly exploited by many evil doers.

jrmase said...

Hank asserts there are evil doers. Name one and lets talk about that example. I will suggest that Hank start with Thomas Campana.

Do you want to take this one one, Hank?

Ken Smith said...

As a CTO at a small-to-medium sized Internet company, I can confirm that one of the chief barriers to real innovation is frivolous patent lawsuits. There simply is no rational way for an Internet company to do business when it comes to current patent law. The changes proposed by HR 1908 don't go far enough, in my opinion: but at least they point in the right direction.

See my blog post for more details.

moresault said...

While the proposed goals of the legislation are, to a degree, laudable they fail to in any part address overlong copyright terms.

Article I, Section 8 of the U.S. Constitution states:

"to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."

the purpose was to secure the rights of inventors, while at the same giving them rights over their works for "limited times." In the last century those rights were extended numerous times to their now egregious extreme of 120 years for works of corporate ownership.

I wish we could take some cues from the British and their sensible decision not to extend their own limits.

Perhaps google would be interested in throwing their considerable weight behind the kind of legislative effort needed to effect a change in this domain.

Sean said...

These reforms are not needed. I sympathize with having to defend against nuisance lawsuits. I don't believe www.google.com and other critics of this legislations including web design company has sufficiently considered the unintended consequences of this legislation

g-blogger said...

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zoobab said...

The only reason on why you have software companies complaining about frivolous lawsuits is software patents.

We don't need software patents to make useful products, we just need the freedom to sell them, which is what is forbidden by some software patents.

Software companies should consider getting rid of software patents, this patent reform is not gonna solve the problem of patent trolls in anyway. And reducing damages won't help our small internet companies, they don't have the money to go to court anyway.

Sai Bpo Services (UK) Ltd said...

very informative...


JR said...

As Ms. Lee and Ms. Shelton point to our founding fathers, another reference was missing. The founding fathers were familiar with the "English Rule" on prevailing parties - the loser pays the winner's costs.

Perhaps the solution lies in larger reform of the legal system to do away with frivous claims of all sorts, not just in pantent litigations.

Noel said...

I sympathize with having to defend against nuisance lawsuits. However, I don't believe Google and other critics of this legislation has sufficiently considered the unintended consequences of this legislation, which will be to significantly devalue patents and stifle innovation.

We are running a BPO service company and dealing a lots of clients all over the world. SO many people use to share such information with us.

Tensioncore said...

Someone should look into this: www.baidu.com ... sure as hell looks like Google to me and with the Patent thing...hmm