We were just talking about the third attempt by someone in Congress to deal with some aspect of patent trolling, and already we have a fourth bill. Senator John Cornyn has introduced the Patent Abuse Reduction Act, which has a variety of provisions that would make life slightly more difficult for trolls. Some of what's in the bill has been seen in those other bills, like fee shifting (such that trolls need to pay fees if they lose a case) and identifying who is really behind the lawsuit. As the EFF notes, there's plenty to like about the bill, but like all of the other bills so far, it still seems somewhat narrowly focused, rather than taking on larger problems, like the granting of bad patents by the USPTO. Still, it's good to see that Congress seems serious about dealing with patent trolls, and is actually bringing out bills to deal with the issue. Now let's see if something comprehensive might actually get enough momentum to become law.

I've always liked the state of Vermont -- but mainly because it was a nice place to visit. But, now the state appears to be declaring war on patent trolls. A new anti-patent trolling law has been quietly enacted, H.299, which targets patent trolls. Or, as it says "bad faith assertions of patent infringement." It does this by amending the state's consumer protection laws, to give tools to judges to recognize when patent litigation is done in bad faith (i.e., for trolling, rather than legitimate reasons). Eric Goldman summarizes the law this way:

Vermont’s law (H.299, to be codified at 9 V.S.A. § 4195-4199) is entitled “Bad Faith Assertions of Patent Infringements.” However, it doesn’t define “bad faith patent assertion.” Instead, it enumerates factors to help judges distinguish legitimate from illegitimate patent assertions. Factors that suggest a bad faith patent assertion include not identifying the patent(s)-at-issue, the patent owner, and exactly how the recipient’s behavior violates the patent; demanding too quick a response or too much money; and making deceptive or meritless assertions. Factors that suggest a legitimate patent assertion include commercializing the patented invention; being either the original inventor (i.e., not having bought the patent for assertion purposes) or an educational institution; and having successfully enforced the patent in court.

The law would allow those threatened by trolls to sue back and seek damages, even if no lawsuit has been filed. In other words, it helps those who are being shaken down and don't want to settle. That's a nice feature, but there are some reasons to be skeptical. It also allows the state Attorney General to go after patent trolls. While the law may scare of some patent trolls, I think Eric Goldman is right that a state-based solution is neither a good idea for this, nor is it probably legal. Patent law is a federal law, and federal preemption likely means that state laws that impact patents aren't allowed. This tries to hide it as a consumer protection law, which is an interesting strategy, but I could easily see this law being tossed out.

Of course, even before the law was officially on the books, it looks like Vermont's Attorney General has already sued a patent troll under existing consumer protection laws (raising questions as to why the new law is necessary). In this case, the troll is one we've written about a few times. Remember the series of rotating shell companies that had claimed that businesses who had a networked scanner need to pay $1,000 per employee? Yeah, that one.

The Vermont Attorney General claims that many of the statements made in the threat letters sent out by the rotating set of shell companies include "deceptive statements" and "deceptive practices" that violate consumer protection laws:

Defendant engaged in unfair trade practices in commerce in violation of the Vermont Consumer Protection Act, 9 V.S.A. § 2453(a) including:

a. Stating that litigation would be brought against the recipients, when Defendant was neither prepared nor likely to bring litigation;
b. Using legal counsel to imply that Defendant had performed a sufficient pre-suit investigation, including investigation into the target business and their potentially infringing activities, that would be required to justify filing a lawsuit;
c. Targeting small businesses that were unlikely to have the resources to fight patent-litigation, or even to pay patent counsel;
d. Sending letters that threatened patent-infringement litigation with no independent evidence that the recipients were infringing its patents;
e. Shifting the entire burden of the pre-suit investigation onto the small businesses that received the letters;
f. Propounding burdensome information demands on any business that claimed not to infringe the patents; and
g. Using shell corporations in order to hide the true owners of the patents, avoid liability, and encourage quick settlements.

Defendants engaged in deceptive trade practices in commerce in violation of the Vermont Consumer Protection Act, 9 V.S.A. §2453(a), by making deceptive statements in the threatening letters which would likely lead consumers to believe the following:

a. Defendant would sue the target business if they did not respond within two weeks;
b. Defendant would sue the target business if they did not pay money;
c. Defendant had a reasonable basis for identifying the target businesses as infringing its patents;
d. Subsidiary Shell LLCs were exclusive licencees able to enforce the patents;
e. Target companies were within the sending Shell LLC's alleged area of exclusivity;
f. Defendant's licensing program had received a positive response from the business community;
g. Many or most businesses were interested in promptly purchasing a license from Defendant;
h. Based on prior licensing agreements, the fair price of a license was between $900 and $1200 per employee;
i. Target businesses were receiving a third letter, which refers to two prior letters, when in many cases recipients had received no prior letters.

The lawsuit also claims that lawyer Jay Mac Rust is really the person who owns the patents via the company MPHJ. As you may recall, last month we wrote about Mac Rust after Joe Mullin at Ars Technica interviewed him in connection with the case. At the time, Mac Rust claimed that he was just one lawyer working for the owner of the patent, but who handled the "irate" recipients. So it's interesting to see the claim that he's really the guy behind MPHJ. As we've noted, there's long been an assumption that the use of shell companies is often done to hide the fact that it's the patent lawyers themselves who own the patents being used.

The use of consumer protection law in response to patents is an interesting strategy. I'm skeptical as to how well it will actually work in court, but there's no denying that many of the claims made in threat letters are, in fact, untrue and could be deemed deceptive (this kind of thing might work against copyright trolls as well). No matter what, this is going to be a key case to follow.

So, a lot of people are talking about Kim Dotcom's latest gambit, which was to point out that he holds a patent (US 6,078,908 and apparently others in 12 other countries as well) that covers the basics of two-factor authentication, with a priority date of April of 1997. While interesting, he goes on to point out that he's never sued over the patent because "I believe in sharing knowledge and ideas for the good of society."

But... he says he may sue them now. Specifically, he's asking them to help fund his defense, in exchange for not getting sued for the patent. He points out that his actual funds are still frozen by the DOJ and (more importantly) that his case actually matters a great deal to Google, Facebook and Twitter, because the eventual ruling will likely set a precedent that may impact them -- especially around the DMCA. That's actually a pretty good reason for the tech industry to think about participating in the case even if they don't like Dotcom at all and don't want to be associated with him. Bad cases make dangerous caselaw, so having a good defense would be useful.

That said, the threat of suing over a patent if they don't fund his defense seems like a potentially poorly thought out strategic move that could backfire. Remember, Dotcom has been hit with racketeering claims, and I would think that anything that implies "give me money or I'll sue" isn't the best move for someone already facing racketeering charges.

We've talked in the past about how patent trolling operations love to use shell companies to hide who actually owns the patents. Intellectual Ventures has thousands of shells, but it's even worse in many cases when it's smaller trolls, where no one has any idea who's actually behind the trolling. You may remember a few years back, when Reddit, Digg, Fark, Slashdot and others were sued over a bogus patent held by a shell company called "Gooseberry Natural Resources LLC," and we wondered if the collective communities behind those sites might be able to figure out who actually owned the patent in question. But even those hive minds failed to turn up much of use.

Thankfully, Rep. Ted Deutch has introduced a bill that would require a true disclosure of the owners of patents that are being used in litigation. Specifically, the bill would require a much clearer accounting of who "any real party in interest" would be concerning any patent. Failure to do so would mean that it would limit the ability of those patent owners to collect on any damages. Specifically, patent owners can only collect on damages that occur after the true owners of the patent are disclosed. This would help a tremendous amount, since so much in the patent troll world today is done in incredibly shady ways. It is believed that a very large number of patent trolling operations are actually run by patent lawyers themselves, who saw how lucrative it was, but who don't want to be publicly identified with their trolling. Forcing the actual owners to identify themselves would be a big help in making sure that people actually understand what's happening with patent trolling.

It's interesting to see Congress suddenly interested in patent reform again, even if in a piecemeal fashion. After spending nearly a decade fighting over a "comprehensive" patent reform bill that became the America Invents Act (a watered-down, mostly useless, bill) we kept hearing people say that patent reform was "done" in Congress. But in the past few months, three key bills have been introduced, each targeting the patent trolling problem. There was Rep. DeFazio's SHIELD Act, which would make it easier to shift fees and make trolls responsible for the costs of bogus lawsuits. Then, a few weeks ago, there was Senator Schumer's bill to make it easier to get tech patents reviewed relatively quickly by the USPTO to see if we can throw out more bad patents. And now this bill, called the End Anonymous Patents Act, from Rep. Deutch.

So far, none of the bills has received much momentum, but it's good to see that more and more people in Congress are realizing that the patent system is incredibly broken, and that trolls are a big part of that.

We've written a few times now about Vernan Bowman's legal fight against Monsanto, concerning patents over so-called "Roundup Ready" seeds, which Monsanto has patented. Here's the quick version of the details from an earlier post:

The farmer, Vernan Bowman, bought official Monsanto seeds and planted his crops. Yet, Monsanto has rules that say you can't re-use "Roundup Ready" seeds, but you can apparently sell "second-generation" seeds to grain elevators for use as "commodity seeds," and doesn't require that there be any restriction on the sale. Bowman later bought a bunch of such "commodity seeds," which included some Roundup Ready seeds, and some that weren't. Bowman was able to determine which of the plants came from Roundup Ready seeds... and then saved those seeds for replanting. Monsanto claimed this was infringement, even though the seeds were legally sold to the grain elevator and then from the elevator to Bowman without restrictions. On top of that, while Bowman had signed an agreement for his original seeds, he did not with this batch (and, indeed, even Monsanto admits he didn't break the user agreement -- just patent infringement for using the seeds).

Note the key things here. Bowman did not break any license agreement over seeds that he bought. He also legally purchased other seeds that had been legally provided to grain elevators to be sold. All he did was plant those legally purchased seeds, for which he was not violating any license agreement, and then harvest and replant the seeds that came from them. And this, apparently, is illegal under our patent system.

Given the fire power that came out in support of Monsanto -- including the federal government -- it shouldn't come as a huge surprise that the Supreme Court just gave a complete and total victory to Monsanto. The key issue was whether or not this was a case of "patent exhaustion." There was a key case a few years ago that mostly said that once a patent holder sells a product, the patent is "exhausted" so that the patent holder can't demand licensing fees up and down the supply chain. However, they distinguish this case by saying that this is different because it's a "copy" of the legally purchased seed. I could see how that would make sense if we were talking about someone building a copy of a machine in a garage or something, but this is a seed. Copying itself is what seeds do. That's kind of their entire purpose.

Yet, throughout the decision, the court (with a decision written by Justice Kagan) acts as if Bowman just built a replica. But that ignores the fact that this is nature we're talking about seeds that replicate themselves naturally, because that's what seeds do. The court has no problem with this, but it seems somewhat ridiculous that someone can legally buy something, have it do what it naturally does (and has done for nearly all of history) and then be told that violates a patent. When addressing Bowman's point concerning the fact that seeds by nature, replicate themselves, they basically brush that aside by noting that Bowman then harvested them. As if he's supposed to ignore what's happening?

But we think that blame-the-bean defense tough to credit. Bowman was not a passive observer of his soybeans’ multiplication; or put another way, the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops. As we have explained... Bowman devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium.

The decision keeps restating the myth that patent holders wouldn't innovate if they weren't blocked from any and all competition.

That is because, once again, if simple copying were a protected use, a patent would plummet in value after the first sale of the first item containing the invention. The undiluted patent monopoly, it might be said, would extend not for 20 years (as the Patent Act promises), but for only one transaction. And that would result in less incentive for innovation than Congress wanted. Hence our repeated insistence that exhaustion applies only to the particular item sold, and not to reproductions.

That's a pretty bold statement, and one not supported by any evidence. There are plenty of reasons to innovate that have little to do with patents, and competition in the marketplace is a big one. The process Bowman used above may have created some competition for Monsanto, but hardly in a way that destroyed the value of the patent. Monsanto was still first to market and still could control various uses via licensing agreements. Furthermore, the process that Bowman went through was inexact and required a few years of harvests.

The one thing that the ruling does say, however, is that no one should take this ruling to apply to other self-replicating products, such as technology:

Our holding today is limited—addressing the situation before us, rather than every one involving a self-replicating product. We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose. ... (“[I]t is not [a copyright] infringement for the owner of a copy of a computer program to make . . . another copy or adaptation of that computer program provide[d] that such a new copy or adaptation is created as an essential step in the utilization of the computer program”). We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances.

While it's good that they acknowledge this, you can bet that this case will be cited heavily when the same issue comes up in court concerning self-replicating software and hardware...

Okay, we know that the Court of Appeals for the Federal Circuit (CAFC) has quite the reputation for mucking up rulings concerning patents over the years. In fact, there's a strong argument to be made that CAFC is a key reason that our patent system is so screwed up today. So, leave it to CAFC to issue one of the most bizarre and useless rulings ever concerning software patents. The specific case is CLS Bank v. Alice Corp, and we had noted this was a chance for CAFC to actually fix the software patents problem, though the oral hearings suggested a very conflicted court, and that's certainly what came out in the ruling. Or, rather, I should say: rulings.

The document is 135 pages... but the only part that actually matters is one single paragraph that was issued "per curiam" (i.e., by the whole court, but without anyone being named):

Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101. An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.

Basically, a majority of the court agreed with the district court that the "invention" in the patent in question -- about using a computer to basically do "shadow transactions" to net out a deal to make sure that all funds are available -- was patent ineligible subject matter. This is what the district court had found, saying that it was just an "abstract idea." The original CAFC appeal had overturned that, saying that it was patentable subject matter. This was a rehearing "en banc" with 10 CAFC judges. Notice that 10 is an even number. Meaning, you could have a split court. Or, you could have a court in total disarray, which is what came out here. Even though they (mostly) agreed that the specific claims here are not eligible for a patent, the court disagreed on why or how or what color the sky is, basically.

There are seven (count 'em) different opinions issued in the document, none of them meaning anything, because none of them -- other than that one paragraph above, have more than the majority in agreement.

Even where they agree, they disagree, and make something of a mockery of the whole system. Dennis Crouch at Patently-O summarizes it thusly:

All of the judges recognized that the test for patent eligibility under section 101 should be “a consistent, cohesive, and accessible approach” that provides “guidance and predictability for patent applicants and examiners, litigants, and the courts.” However, the judges hotly disagree as to the pathway that will lead to that result.

That's kind of funny (or ridiculously distressing) when you think about it. The court is saying we need a clear and consistent approach to figuring out what is patentable, and the court feels that it needs to give very clear guidance to everyone about it... and then goes on to absolutely disagree on every key point within that. The end result is that while they agree we need consistent, cohesive and accessible guidance, they fail to offer any, and actually do the opposite, providing a huge mess.

Five of the judges did make a fairly interesting ruling, which would greatly limit software patents. It notes that:

... simply appending generic computer functionality to lend speed or efficiency to the performance of an otherwise abstract concept does not meaningfully limit claim scope for purposes of patent eligibility.... At its most basic, a computer is just a calculator capable of performing mental steps faster than a human could. Unless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent eligibility. In short, the requirement for computer participation in these claims fails to supply an “inventive concept” that represents a nontrivial, nonconventional human contribution or materially narrows the claims relative to the abstract idea they embrace.

Basically, just adding "on a computer" shouldn't make a general idea patentable. That's good. If only they could have found a sixth judge to support it. Instead, you get the following table of contents:

Opinion for the court filed PER CURIAM.

Concurring opinion filed by LOURIE, Circuit Judge, in which DYK, PROST, REYNA, and WALLACH, Circuit Judges, join.

Concurring-in-part and dissenting-in-part opinion filed by RADER, Chief Judge, LINN, MOORE, and O’MALLEY, Circuit Judges, as to all but part VI of that opinion. RADER, Chief Judge, and MOORE, Circuit Judge, as to part VI of that opinion.

Dissenting-in-part opinion filed by MOORE, Circuit Judge, in which RADER, Chief Judge, and LINN and O’MALLEY, Circuit Judges, join.

Concurring-in-part and dissenting-in-part opinion filed by NEWMAN, Circuit Judge.

Dissenting opinion filed by LINN and O’MALLEY, Circuit Judges.

Additional reflections filed by RADER, Chief Judge.

And, basically, all of this means nothing. It doesn't help to wipe out or clarify software patents at all. It doesn't really help anyone. It probably doesn't make anyone on any side of this issue happy. It just leads to more confusion.

However, as Julie Samuels at the EFF notes, hopefully this will help make it clear to the Supreme Court that it finally needs to issue a clear ruling on software patents, after completely punting the last time it had a chance.

A couple of weeks ago, we wrote about the growing importance of investor-state dispute resolution in so-called free trade agreements (FTAs). One of the most troubling aspects is how potentially it can be used to undo the hard-won gains for important areas like access to medicines. The US law professor Brook K. Baker, whose work we discussed last year, has written an excellent exploration of this under-appreciated risk. After an introduction running through the recent wins in the field of access to medicines -- a topic that we've covered extensively here on Techdirt -- he explains how big pharma could employ investor-state dispute resolution to thwart these and similar moves to protect health:

Using loose and imprecise standards addressing "minimum standards of treatment," "indirect expropriation," and "national treatment," multinational pharmaceuticals might claim that denying patents, granting oppositions, revoking patents, issuing compulsory licenses, and registering generics while referencing clinical data or doing so before patent expiration all violate their legitimate expectations for profit. Although the "minimum standards of treatment" clause [used to justify recourse to investor-state dispute resolution] was originally designed to prevent grossly abusive and discriminatory courtroom adjudications totally outside the bounds of normative due process, it has morphed to decisions with a much more lenient standard that rewards investors even when they have been given a full panoply of due process safeguards. The expropriation standard, originally adopted to deter nationalization of businesses and seizures of real property has similarly morphed to prevent indirect expropriations, what we call regulatory takings in the U.S., where changes in government regulations -- many designed to protect public health, environment, and other legitimate public interests -- are challenged as having diluted the investor's expectations of profit. Finally, the national treatment standard, though originally adopted to ensure that foreign investors are treated equivalently to domestic investors, is also morphing in new directions.

As this makes clear, what started out as a series of measures for a few special cases in order to protect Western companies in countries with weak legal systems and a high risk of tangible investments being expropriated by the state, has been twisted to an entirely different use: enabling deep-pocketed multinationals to circumvent any kind of legislation they don't like, even in countries with fair and independent judiciaries.

Baker concludes by offering some advice for nations involved in FTA negotiations with clauses that that call for investor-state dispute resolution to be put in place:

India and other trade negotiators should heed the entreaties of trade, IP, and health activists who are warning against the inclusion of an Investment Clause in the EU-India FTA, the Trans-Pacific Partnership Agreement, and in the many other trade agreements that are underway or soon-to-be initiated. Preferably, investment chapters will be rejected in their entirety, as they are becoming a corporate sword of Damocles that hangs over the head of rich and poor governments alike. At the very least, IP should be totally defined out of "investments" and no investor claims whatsoever should be available for alleged frustration of IP-based expectations. IP right holders already have multiple forms of enforcement including private lawsuits, border seizures, criminal prosecution, and state-state dispute resolution. Enough is enough. Expanded and unbound investment rights for Big Pharma under the cover of underscrutinized investment chapters is a grave threat -- a threat with deadly consequences to millions of patients who rely on governments' rights to regulate IPRs and to use any and all TRIPS-compliant flexibilities to ensure affordable access to medicines for all.

Worrying, few are even aware that the investor-state dispute resolution option exists, let alone its unprecedented power to circumvent government policy and override judicial decisions. That makes it all-too easy for negotiators to agree to its inclusion in trade agreements as an apparently minor concession that can be used as a bargaining chip to obtain measures they care more about. Let's hope that Baker's excellent contribution to the debate will alert people to this crucial area, and encourage others to speak up about the very real danger investor-state dispute resolution represents to a wide range of public interest issues.

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Few patent sagas have been as fraught as New Zealand's attempt to revise its laws to exclude software. Techdirt first wrote about this move in March 2010, and again in June 2010, when it seemed that lobbyists had convinced the New Zealand government to reverse its position and allow software patents. Then, a month after that, word was that software would indeed be unpatentable. Things went quiet for a while, until a new version of the proposed law was unveiled by New Zealand's Commerce Minister Craig Foss, apparently weakening the bill once more:

His amendment has changed some crucial wording in the bill that some say has the government moving away from excluding software from being patented (as per select committee recommendations), to parts of the bill being sufficiently vague that software may indeed become patentable. Clause 10a of the supplementary order paper 120 was amended to read: "..prevents anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such"

The two words "as such" tacked on at the end there are precisely the same as those that are found in Article 52 of the European Patent Convention that also excludes software patents:

(1) European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application.

(2) The following in particular shall not be regarded as inventions within the meaning of paragraph 1:

…

(c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers;

…

(3) Paragraph 2 shall exclude the patentability of the subject-matter or activities referred to therein only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such.

As that makes clear, "programs for computers" are not regarded as inventions, and are therefore ineligible for software patents in Europe. But that only applies to programs "as such": the trouble is, nobody really knows what those two words mean in this context, which has allowed lawyers to obtain thousands of software patents in the EU on the grounds that they weren't software patents "as such".

The appearance of precisely these same two words in the draft of New Zealand's patent law was naturally deeply troubling for the local software industry, since they threatened to provide a way to circumvent the ban as they had in Europe. And so another round of lobbying began, as reported here by Guy Burgess in an informative post on the subject:

The local IT community mounted a concerted pushback on the unclear "as such" amendment. An industry petition (backed by key groups IITP, InternetNZ, NZRise and NZOSS) was set up and gained wide support. The petition called on the Government to remove the ambiguous "as such" language, and replace it with a simpler clause that clarified the underlying intention. Labour's Clare Curran adopted the petition's proposed alternative clause as an official proposed amendment to the Patents Bill, and other MPs and parties, including United Future MP Peter Dunne, also raised concerns about the lack of clarity in the Bill.

To its credit, and thanks to the concentrated efforts of many people and not inconsiderable political pressure, the Government decided to take another look at the Bill and has now put forward a new amendment.

The section dealing with software in the most recent version of the Patents Bill (pdf) still includes the vexed words "as such", but it now tries to clarify what exactly they mean here:

Helpfully, it adds two examples into the Bill - one for a software patent application which may be granted, and one which should be declined. Examples in legislation are a good way to demonstrate how a section is intended to be interpreted. The "valid" example is of a washing machine that uses embedded software.... The "invalid" example is of a software process for automating company incorporation. It includes the key comment: "The mere execution of a method within a computer does not allow the method to be patented."

Importantly, the explanatory note has been enhanced to make the intention of the Bill very clear, including the following comments: "... where the actual contribution of an invention lies solely in it being a computer program, it is ineligible for patent protection... it will not be possible to obtain a patent for an invention that involves or makes use of the computer program if the sole inventive feature is that it is a computer program".

Given all the problems with the phrase "as such", it would have been easier to omit it completely, rather than resort to well-meaning but necessarily limited attempts to clarify it through examples. Burgess offers an interesting explanation of why that didn't happen:

It appears that the concern was whether doing so would open New Zealand up for a legal challenge for allegedly not meeting its TRIPS treaty obligations. By aligning the law with wording from another jurisdiction [the EU] that hasn't been challenged, it provided some comfort that New Zealand would be safe. Whether or not this would have happened is moot now - it was a significant enough concern to the powers that be for the above approach to be adopted.

That's certainly a fair point; let's hope it means that the latest wording won't need changing again, and that the updated bill banning software patents finally gets passed.

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We've pointed out over and over and over again that patents are not a proxy for innovation. In fact, there's little to connect the two at all, except potentially for how patents can hinder and hold back the pace of innovation. A new study really helps to drive home how little patents have to do with innovation. Pointed out to us by James Bessen, the study looks at "R&D 100 Awards" from the academic journal, Research & Development from 1977 to 2004. As you might expect, the R&D 100 Awards are given out each year by the journal in an attempt to name the top 100 innovations of the year. If patents were instrumental in driving innovation, you'd certainly expect most of these innovations to be patented.

But you'd be wrong, as the reports authors, Roberto Fontana, Alessandro Nuvolari, Hiroshi Shimizu and Andrea Vezzulli, quickly discovered.

A stunning 91% of all of the technologies receiving the prize were not actually patented. That's covering approximately 3,000 technologies winning this award as the most innovative advancement of the year over a period of about three decades. What's interesting to me is that this actually matches very closely with one of my favorite studies on patents, from economist Petra Moser, who looked at historical patenting rates from the 19th century using data on products displayed at the Crystal Palace exhibition of 1851 and the Centennial exhibition in Philadelphia in 1876, which against showed very few of the "economically useful" inventions were patented. Over 80% were not patented. Of course, you might think that back in the 1800s there was less interest in patenting, but this new study suggests a rather similar rate to what Moser found from 150 years ago.

The R&D 100 certainly seems to be a good way to look at key innovations. It's judged by a distinguished panel of experts, looking at two key criteria: i) technological significance (i.e., whether the product can be considered a major breakthrough from a technical point of view); ii) competitive significance (i.e., how the performance of the product compares to rival solutions available on the market). Both of these would seem like significant indicators of innovation. And, as the authors note, many big innovations can easily be found on the list:

Throughout the years, key breakthroughs inventions such as Polacolor film (1963), the flashcube (1965), the automated teller machine (1973), the halogen lamp (1974), the fax machine (1975), the liquid crystal display (1980), the printer (1986), the Kodak Photo CD (1991), the Nicoderm antismoking patch (1992), Taxol anticancer drug (1993), lab on a chip (1996), and HDTV (1998) have received the prize.

Tellingly, even to apply for the award, innovators have to show just how much the innovation was an improvement on what else was available on the market, They have to submit a "competitive matrix" showing this. In other words, these prize-winning innovations tend to be actual innovations in the market that drive the state of the art forward. You could suggest that they are innovations that truly "promote the progress," as (unlike our patent system) to get this award you literally have to show how the innovation promotes further progress.

As you can see from the key findings, very, very little of the innovations that won the prize was also patented either three years before or three years after the prize was awarded: Even when you take out "non-corporate" innovations (which have less propensity to be patented), looking at corporate only innovations over 87% were not patented.

Of course there are some differences depending on what industry the innovation happened in, as well as where the innovation was originated. The researchers broke down all of that information as well: As you can see, the US actually has a lower patenting rate than Europe and Asia for the most part, which runs counter to the narrative often being told about how the US's leads the world with our patent system, and that Asian innovators have less respect for patents. Though, on that point, the researchers note that most of the patents in the "Asian" section are Japanese, so it's possible that other countries in Asia, mainly China (along with known tech hubs Taiwan, Hong Kong and Singapore) do, in fact have a much lower propensity to patent.

Of course the point that stood out as most interesting to me was the very low rate of patenting in the "chemistry" industry. This covers pharmaceuticals as well. And, of course, we're always told that this industry really "needs" patents because of the ease of copying as compared to the cost of innovating. That doesn't seem to be supported by the data at all. Yes, it's the highest percentage patented in the US, but still only 14% of such innovations are patented in the US.

All in all, this is a really interesting paper and a significant contribution to the discussion over whether or not patents are really a good judge of innovation. It would seem from the data available that the answer is a very loud "no." In fact, it would appear that very few of the most significant and important innovations are being patented. That should, at the very least, raise considerable questions concerning those who argue that our patent policy is necessary to encourage innovation, or those who argue that numbers from the patent system are a good judge of innovation.

We're still confused as to why Google has continued to have Motorola Mobility play the role of a patent bully ever since they bought it. Over a year ago, we suggested that Google could make a real statement on patents by stopping its aggressive patent licensing program via Motorola. After all, Google bought Motorola Mobility just a few weeks after the company appeared to be taking a strong stance against patent bullying. Ever since, it has seemed rather hypocritical for Motorola Mobility to have kept on being a patent bully.

And it seems to be backfiring all over the place. It was the one real area that Google got in trouble over with the FTC's antitrust investigation. And, the patent legal fight with Microsoft hasn't gone well for Motorola Mobility either. And, now, the latest bit of news is that the EU is coming down on Motorola Mobility for seeking an injunction over standard-essential patents as well.

Honestly, this whole thing has left me really confused. The patent aggression hasn't worked out at all for Google, is leaving them wide open to fines and complaints from various powerful government bodies, isn't doing much in the courts and (most importantly) is leaving the company itself wide open to charges of hypocrisy. Why not just do the right thing -- the same thing that Google itself has done in the past, and which it has spoken out about on numerous occasions: stop being a patent bully. It makes no sense that they company has continued down this path.