Another View On The Patent Trolling Situation: Patent Trolls Expose The Weaknesses Of The Patent System

from the things-get-worse-before-they-get-better dept

The post we had about patent trolls on Friday sure kicked off a lively debate both here and various other places in the blogworld. Over the weekend, James McDonough, a law professor student at Emory University, also wrote in to point us to his own paper on patent trolls. He sent a very detailed response, which I've included entirely below the fold (if you're reading on the front page of Techdirt or via an RSS reader, click "read more" to see his full response). His paper is very interesting and highlights a few important points. First, while he uses the phrase patent troll, he suggests a more accurate name would be "patent dealers." I'm not a fan of the phrase "patent trolls" (which is an unfairly negative phrase), and tend to use "patent hoarders" instead -- but patent dealers is a good phrase that has little that could be interpreted by anyone as implying anything negative.

McDonough does argue that "patent dealers" are a good thing -- but for a very different reason than the lawyer we wrote about on Friday. McDonough's argument is that the patent dealers are highlighting some fundamental flaws in the patent system, and that's a good thing. The problem however, is that so far the response has been to try to stomp out patent trolling, rather than fix those fundamental flaws -- something I completely agree on. McDonough sees the two fundamental flaws of the patent system to be: 1) the USPTO issuing questionable patents to anybody who wants one and 2) the incentives that companies have to patent first and ask questions later, thereby leading to a patent thickets problem. Patent trolling exposes both of those -- but it's not the fault of the patent dealers, but the system that allows those patents to be so valuable in the first place. McDonough is also correct that the solutions being presented to block patent trolls don't really address those problems. They do try to get at the first problem by making it easier to provide prior art and to challenge a patent after its granted. The Supreme Court may also help if they change the rule for "obviousness" in patent evaluation. However, the patent reform being proposed actually tends to make the second situation worse, not better.

Following this, McDonough then attempts to defend the process of patent dealing in the absence of those problems with the system, and suggests that they generally benefit society, by creating a market for something where no market existed before. This is a common response -- and an interesting one, but does not hold up under scrutiny. Just because you can create a market in something does not necessarily make it more efficient. As we've pointed out, you could create a market for air -- something that people find very valuable -- but that's not going to make the market more efficient. It's going to create quite a net negative on society. That's because air is abundant, and trying to falsely limit it creates a huge amount of waste. People will need to pay for air to survive, and that money could better be served investing in other scarce things. The same is true for ideas. As Thomas Jefferson famously stated:
That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.
The patent system is trying to take an idea and limit it, and the overall impact, even though it creates a market, is similar to trying to create a market for air. The net impact is negative, because people need to spend extra where otherwise there would be no need to. You can pass an idea around and no one is any worse off. We can all breathe the air and no one is any worse off. So the idea that just because patent dealers create a market that's a benefit is not a compelling argument.

Finally, McDonough, in his comment to Techdirt, takes issue with our complaint that often the patent lawsuits that most upset us are cases where the invention was developed independently. He falls back on the law, saying that's not a defense under the law -- which is true (and which we've discussed in the past). The problem, however, is that this seems to go against the very nature of the patent system. As we've discussed recently there are some very compelling arguments as to why independent invention should be a viable defense against patent infringement. If the patent system is only supposed to promote progress of arts and sciences where it wouldn't occur naturally in the market, then you only want to protect non-obvious ideas (in fact, the patent system clearly states that it's only for non-obvious ideas). If multiple parties are developing the invention simultaneously, that suggests no government protection is needed -- as multiple parties all saw the market demand for the product and moved towards developing it. They can compete in the marketplace for their reward. So, no, independent invention is not protected by the current legal system -- but it should be. McDonough's followup claim that it would be impossible to determine independent invention is also not compelling. As with any other legal standard, you can provide all kinds of proof and evidence so that a judge or jury can determine if it's likely that an invention was independently developed or not.




James McDonough writes "Your recent posting, "Patent Trolls Foster Innovation? from the excuse-me? dept," which comments on patent trolls and their relation to innovation, misses the point a bit, but only because the article you are critiquing focuses on the wrong ideas. In fact, a much better explanation of the positive benefits of "patent trolls" is found in an article called The Myth of the Patent Troll: An Alternative View of the Function of Patent Dealers in an Idea Economy (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=959945) that has been circulating around the internet for the past couple months.

The point the "Myth of the Patent Troll" article makes is not necessarily that patent dealers foster innovation, but that 1) they are good for the patent system and 2) the "problem" of patent dealers, which Corporate America is trying to fix by lobbying Congress and submitting amicus curiae briefs to the Supreme Court, is not the problem at all. Patent dealers have merely exposed systemic problems with the patent system. The real problem is a combination of 1) the USPTO issuing questionable patents to anybody who wants one and 2) the incentives that companies have to patent first and ask questions later, thereby leading to a patent thickets problem. Yet, if you read the transcripts of Congressional hearings these two problems are being conflated with patent dealers.

Here is the real deal: As the patent system becomes more and more important to the economy, the previously latent defects are now becoming very apparent. A formal market for patents is clearly emerging, and as it emerges, the faults with the system are becoming more and more clear. Picture a bike with a tire that is slightly oblong. When riding the bike at 3 miles per hour, the wheel is turning slow, and the problems are not noticeable. It may seem that the bike is riding perfectly. But, once the bicycle gets up to fifteen or twenty miles an hour, that tire is going to cause major problems. The bicycle will start shaking like crazy. This is exactly what is going on with the patent system as a formal market emerges. Patent dealers, acting as market intermediaries, are exposing the defective nature of the patent system. To identify the problem as patent dealers, and to subsequently enact legislation to try to fix them, is like trying to say that the problem with the bicycle is that it can't go above 15 mph, not that the tire is oblong. Fix the tire!

And the comment in your article that states that the infringer in these cases almost always come up with the invention independently confuses me. The law is fairly clear. If you are the "first to invent," you get the patent. Even if the law "first to file" is still wouldn't matter. There is nothing in the law about independent invention. This does not factor into an infringement suit in any country in the world. Taken to its conclusion, your argument would make the patent system useless. Can you imagine trying to prove that somebody did not independently invent something? It would be nearly impossible. There is a doctrine similar to what you advocate in copyright law, but not in patent law.

In this same vein, you say that it is a rarity that the infringer actually stole the original invention. I like your optimism and faith in the honesty of Corporate America, but the truth is that this happens every day. There is a long history of Big Corporations stealing inventions and using them to their commercial advantage (see the Ford windshield wiper incidence for one such example).

I love reading your site and your commentary, and I hope you continue to bring issues like these to the forefront. Have a great day."


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    misanthropic humanist, Mar 5th, 2007 @ 5:17pm

    new wheels

    Good stuff indeed. Firstly, "patent dealers" it is. A neutral, unpolarised vocabularly can only help. (although I'm sticking with "weasels" for the lawyers who chase these cases :)

    Strange how bicycles come up so often in IP metaphore, Einstein seemed rather fond of them too.

    But I couldn't connect the eccentric wheel and the "problem" to which James McDonough alludes. What are your interpretations? Is it a question of scale?

    James says that the insoluble obstacle to deciding simultaneous endeavour is a matter of proof. But that stance rests on a presumption of guilt. Would it not make more sense to assume that anybody claiming simultaneous invention within an acceptable timeframe (with evidence) does so honourably, and have the burden lie the other way?

    To me, this is where an open society (open source philosophy generally applied) and ongoing publication are very powerful. If we destroy the assumption that patents must be exclusively owned, ie they can be shared, and take for granted that modern technology (Google cache, archive.org etc) provide a legally binding record of publication dates, then the issue of "who shot first?" is eased.

    (Although George Lucas has proved to us that history can be changed Orwellian style, we all know that Guido would never have wasted the bounty that way.)

     

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  2.  
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    Noel Le, Mar 5th, 2007 @ 6:10pm

    Reply to Mr. Masnick

    Masnick, I don’t know why you cite one of your poorer posts to argue such tenuous positions. To take the Lemley article as arguing for an independent invention defense, where he discusses an independent invention defense in terms of “if ___, then an independent invenion defense may be valuable,” and offers 4 alternatives to an independent invention defense, is quite a stretch. You show your limited experience with Lemley, who has written in at least 3 articles that he thinks patents should be given for software inventions, in a least 2 articles that the non-obvious standard should not be raised (especially in software where “obvious” patents can give incentive for parties to undertake incremental improvemnets on existing innovations), and in 1 other article that a perfectly competitive market is not viable in most industries where patents are currentlyed granted.

     

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    DMM, Mar 5th, 2007 @ 9:04pm

    No need for independent invention exception

    This independent invention exception Mike continuously pushes is simply not needed. Let's face it, it is entirely possible for two people to have the same "spark of genius" when faced with the same need in the marketplace, but it is often more likely that when faced with a need in the marketplace, multiple inventors arrive at the same obvious conclusion.

    When multiple claims are laid to an invention, what should really matter is (1) is the invention really obvious and (2) which of the inventors actually brings the invention to market as a product the rest of society (or even a small segment of society) can use.

    The first issue can be taken care of by implementing more liberal rules for determining when an invention is obvious. Of course, maybe all we need is a better definition and method of applying the current standard for obviousness. It does appear as if we have a broken process, and whether the fix is in redefinition of the standard or a better way of applying the standard we currently have is an open question. The bottom line is that something definitely needs to be done about how obviousness is determined.

    The second issue can be dealt with by implementation of a "use it or lose it" type rule. Such a rule could give the patent holder a period of 5 years (this is a number off the top of my head) to bring the invention to market in an actual product or service. During this period, if no product exists, then infringement of the patent could be compensated by statutory damages. If no product is brought to market which embodies the invention claimed in the patent during that time period, then the patent lapses. We might also consider adding some sort of marketplace scope to this rule, where the inventor retains rights in the market defined by the product and closely related markets, but loses rights in all other markets after 10 years of non use in those other markets so long as a product was brought to the marketplace in at least one limited market.

    If a product is brought to market, then the patent should be extended for its full period, even if the product is discontinued. This should happen to reward the inventor who actually brought a product to market, even if the product failed, because it is more likely to spur additional invention by others in society by highlighting additional marketplace needs. Alternatively, if the product is discontinued because a better product is created, then the inventor should be rewarded for continuing to advance the state technology in the marketplace.

    Also, in my opinion, such a rule is good policy because society should provide the first to invent with an opportunity to bring a product to market, even if there is independent invention by a second person.

    Finally, such a rule would also eliminate the practice of hoarding patents merely for defensive purposes.

     

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    Mike (profile), Mar 5th, 2007 @ 10:31pm

    Re: Reply to Mr. Masnick

    Masnick, I don’t know why you cite one of your poorer posts to argue such tenuous positions. To take the Lemley article as arguing for an independent invention defense

    Noel, I'm not citing Lemley's reasons. I'm citing my reasons. Secondly, we discussed this in detail, and Lemley's paper actually brings up plenty of good reasons for an independent invention defense. I don't see any need to rehash that discussion -- but to pretend it never happened seems silly.

     

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  5.  
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    Mike (profile), Mar 5th, 2007 @ 10:34pm

    Re: No need for independent invention exception

    This independent invention exception Mike continuously pushes is simply not needed. Let's face it, it is entirely possible for two people to have the same "spark of genius" when faced with the same need in the marketplace, but it is often more likely that when faced with a need in the marketplace, multiple inventors arrive at the same obvious conclusion.

    Right, but the concern of supporters of the patent system seems to always focus on this fear that one company is "stealing" from the other. That's always the way it's discussed. Yet, an independent invention isn't stolen.

    The point of having an independent invention defense is backed up by simple common sense. You should not be stopped from building a product you came up with on your own. There's simply no rational argument to support having to pay someone else for coming up with your own idea.

     

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    DMM, Mar 5th, 2007 @ 11:18pm

    Re: No need for independent invention exception

    Right, but the concern of supporters of the patent system seems to always focus on this fear that one company is "stealing" from the other. That's always the way it's discussed. Yet, an independent invention isn't stolen.

    This is because under the current patent system, which awards an absolute monopoly over all aspects of an invention, it is stealing. Even a change to include an independent invention exception won't alter the perception of stealing that is already built into the system. It will merely provide a single instance where use of the invention is not considered stealing.

     

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  7.  
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    DMM, Mar 5th, 2007 @ 11:34pm

    Re: No need for independent invention exception

    The point of having an independent invention defense is backed up by simple common sense. You should not be stopped from building a product you came up with on your own. There's simply no rational argument to support having to pay someone else for coming up with your own idea.

    If you approach the problem from a pure marketplace/capitalism point of view, sure there is no reason to pay someone for an invention that is independently created. However, there are some policy considerations that point to not implementing such as defense.

    Consider the implications for the marketplace of ideas. If the defense exists, then there will be a rush to publish details of an invention in an attempt to negate the defense, and publication costs money. Corporations are generally the one element in our society with money that can be thrown at the effort to ensure wide publication. Small time inventors and small companies would have to rely on the patenting system for publication, then hope that courts interpret publication by the patent office as constructive notice to the public of the invention.

    The defense simply gives larger corporations with financial resources a huge advantage in the patenting system. Is this the type of advantage we want to promote as a matter of policy? To me, the playing field should be a little more level. It is already tilted to the advantage of large corporations. Why give them more advantage?

     

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    |333173|3|_||3, Mar 6th, 2007 @ 12:54am

    Proof of obviousness

    independent invention shows fairly conclusively that an invention is obvious.

     

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    Mike (profile), Mar 6th, 2007 @ 3:05am

    Re: Re: No need for independent invention exceptio

    Consider the implications for the marketplace of ideas. If the defense exists, then there will be a rush to publish details of an invention in an attempt to negate the defense, and publication costs money. Corporations are generally the one element in our society with money that can be thrown at the effort to ensure wide publication. Small time inventors and small companies would have to rely on the patenting system for publication, then hope that courts interpret publication by the patent office as constructive notice to the public of the invention.

    We have this thing called the internet that has made publication pretty much free. Your argument here isn't even remotely compelling. You honestly believe that the cost of publication is a bigger negative than stopping an innovative company and forcing it to pay a totally unnecessary license for an invention it came up with independently? I find that hard to accept.

    The defense simply gives larger corporations with financial resources a huge advantage in the patenting system. Is this the type of advantage we want to promote as a matter of policy? To me, the playing field should be a little more level. It is already tilted to the advantage of large corporations. Why give them more advantage?

    I don't see how this gives them any advantage at all. I also don't see the policy reasons for changing the playing field created by the market unless there's evidence of market failure. Are you claiming that there's market failure here, or are you just saying you don't like successful companies and think the gov't should punish them?

     

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  10.  
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    PT, Mar 6th, 2007 @ 4:57am

    Re: Proof of obviousness

    How so? Unless today's body of knowledge makes independent invention impossible, I'd like to hear what famous inventors in the past would think if they heard this statement.

     

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  11.  
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    Thomason, Mar 6th, 2007 @ 7:45am

    The Russian defense.

    During the Cold War & Space race years, didn't the Russians always claim that they had invented things before we did in the U.S.? Thus, I prefer to call Mike's "independent invention" defense - the Russian defense. That dovetails it nicely with that other tenet about negating patents - that the biggest, most efficient marketers should 'win' the right to sell innovations, and not be slowed by mere inventors, who can invent but fail to market their inventions as efficiently. After all, who'd be more successful in "delivering to the market" - Wal-mart with a knock-off made in some third-world shop, or the inventor with a webpage self-promoting the invention fabricated in a U.S. shop?
    One defect with the Russian defense is that it still requires proof of when this independent invention was really invented. To file a patent application, the inventor has to have practiced the invention - not just thought it up. The present law deals with the later inventor, under the rules of "interference," which determinee who truly had the invention invented, when.
    So, if you're a big & successful marketer, who fears getting run-down by some "patent dealer" over an invention that, in hindsight, seems obvious, then hope that reformers and abolitionists (like Mike?) can get the Russian defense added to the IP laws. That way, stealing will lose it's negative connotation - who would not rather be called an 'independent inventor' instead of a 'copycat infringer'?
    I love the stories and debates on TechDirt! Keep it coming!

     

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  12.  
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    Noel Le, Mar 6th, 2007 @ 8:15am

    Another reply to Masnick

    Oh OK, Masnick, if you're citing your reasons for an independent defense, using the factors that Lemley raises, than relying on his argument per se, then fine.

    I've written a lot on how an independent invention defense for patents may be valuable, so this is one of the few issues we agree with.

     

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    misanthropic humanist, Mar 6th, 2007 @ 8:28am

    Re: Re: No need for independent invention exceptio

    "...and publication costs money."

    How so DMM?

    This is the age of the internet where I can simultaneously publish in dozens of countries all over the globe with the press of a button, and have that transaction recorded in legally binding server logs.

    That is why I propse free and open publication is a better alternative to patents.

    All we really seem to be missing is a GPL/Creative Commons type equivilent to the patent system. But I'm sure characters like Lessig are already doing the groundwork and it's only a matter of time.

     

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  14.  
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    angry dude, Mar 6th, 2007 @ 9:21am

    RE: The Russian defense

    Russians did produce many wonderful and literally world-shattering inventions.... H-bomb for example.

    When Khrushev detonated 100-megaton bomb on Novaya Zemlya all seismic stations around the globe recorded the magnitude of this invention :-)

     

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  15.  
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    misanthropic humanist, Mar 6th, 2007 @ 10:01am

    Re: RE: The Russian defense

    Yeah, I'm with AngryDude for once. The "Russian defence" is a very blinkered, nay racist turn of phrase. Take a look at Soviet rocket engine design. NASA couldn't wait to get their hands on technlogy like the RD170 which employed such advanced pre-heat overburning they needed help from the designers after failing to successfully reverse engineer the ideas. NASA considered the design too dangerous to attempt, but the Russians managed to tame it. These days most US rockets employ a descendent of this design.

     

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  16.  
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    Thomason, Mar 6th, 2007 @ 11:50am

    I only offended non-inventive Russians.

    My apologies to all of Mother Russia, for co-opting their history of "firsts" into a thin metaphor.

     

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