Andy Kessler has one of his typically insightful Wall Street Journal opinion pieces in which he says it's time for real patent reform
(rather than the joke of patent reform we had last year). His main concern is the toll that patent trolling is taking on innovation. He goes through a number of different lawsuits and shakedowns -- many of which we've spoken about here -- before suggesting a few potential changes to the patent system which he thinks should be in any patent reform effort:
Time. Reform should start with the phrase "limited Times." For patents, it was originally 14 years, until 1861 when it was lengthened to 17 years, and then in 1995 it was extended again to 20 years with a five-year extension under limited circumstances. That may seem fine or even a little short for pharmaceuticals or gas turbines, but in technology things move a lot faster. Even AT&T won't make you keep a phone for more than two years. Apple is on its fifth iPhone iteration in less than five years.
"Times" ought to float by product and industry, perhaps with expirations based on the half-life of the product. PCs and telecom equipment have about a three-year half-life, pharmaceuticals more like 10. Someone needs to bring a clever case to the Supreme Court showing that 17 years, let alone 25, is an eternity and damaging for a fast-moving industry like tech.
This is a good suggestion (and we've seen similar suggestions, of course, when it comes to copyright, where the terms are an order of magnitude more insane). However, given the Supreme Court's rulings in Eldred and Golan, it seems unlikely that it gives a damn about if the laws actually damage industries. The Supreme Court has basically said that it's Congress' prerogative to do what it thinks is best, even if what it thinks is wrong.
Still, though, it is important to keep focus on the "limited times" clause in the Constitution, because it really is key, even if the Supreme Court horribly misinterpreted it. Highlighting, repeatedly, how excessively long IP monopolies hinder progress is important, because eventually the message has to get through.
Value. We have to stop allowing juries to establish the value of patents. In just the iPad alone, I would estimate there are 50,000 to 100,000 patents covering the chips, display, storage, communications and other features. They can't all be worth $6 per patent per device. Money isn't mentioned in Clause 8, but the market rather than juries can determine value.
This is a problem. When you look at how much patent holders often demand, where they rarely take into account just how many other patents impact a product, it becomes impossibly expensive to do anything when you let juries come up with crazy rulings that have no basis in reality. But it happens all the time. It's why there's so much money flowing into patent disputes these days, and why the lawyers love it.
Exclusivity. It's time to require patent holders to actually make or sell products before citing infringement. Lots of people have good ideas. Patent reform has to define what are exclusive rights for "Discoveries." As if you "discover" an algorithm or gene splicing rather than pull a year of all-nighters perfecting your invention. The idea is just a start. The rest is the sweat of execution. Facebook's Mark Zuckerberg had the right idea, telling his accusers in a deposition (perhaps the only true dialogue in the fictionalized movie "The Social Network") that "You know, you really don't need a forensics team to get to the bottom of this. If you guys were the inventors of Facebook, you'd have invented Facebook." That's the most sane logic against patent trolls.
This is a popular suggestion that we hear pretty frequently. And Kessler is right that the idea is just the start (and often, the idea has little to do with the final product). That said, I'm not as convinced of this one -- with perhaps a caveat. If we assume that there is a way to create a reasonable patent system, then you could see situations where this doesn't make sense: for example, if you have a university that patents something. It's not in the business of making things, so it just wants to license. That seems reasonable (again, assuming you could first solve other problems with the system).
So I'd propose a modified version of this, which Kessler also hints at later in the column: you can only sue over the patent if you're making or selling a product or
if you've partnered with someone who is making or selling a product. That is, the patent holder has to be associated with actually bringing the product to market, even if it's through a third party. But if no such product is being made, then you have no ability to use the patent to sue those who actually are doing something.
Progress. Sane logic, however, rarely wins. Patent holders and even patent trolls have constitutional rights for their ideas. But the legal filter has always been "limited Times" or "exclusive Rights." Remember that the constitutional clause opens with "to promote the Progress of Science." Everything else follows.
Progress should take precedence over legal maneuvers and runaway jury awards. This is what James Madison must have meant. A smartphone is made up of thousands of interlocking pieces of hardware and software. Any number of them may violate a competitor's or troll's patents. Every time one of these is omitted, or worse, causes the final price of the end product to rise beyond its true economic value, the "Progress of Science" is seriously impeded. And progress is what creates jobs and increases our standard of living.
To some extent, this is related again to the first item. Actually paying attention to the part in the Constitution where it says that Congress is only able to pass such laws if they "promote the progress" seems important. If you're going to allow a patent system to exist, then why shouldn't it at least be a plausible argument in a patent dispute that allowing certain products is consistent with the "progress" argument?
Kessler then makes the key point, about just how ridiculously wasteful all this activity around patents has been lately:
Clearly we'd be better off having Microsoft, Apple and Google spending $1 billion on developing new products rather than buying up patents as an insurance policy so they and their partners can battle trolls and keep selling phones. How enlightening if we could see government actually promote progress as the Founders envisioned.
This is the key point that some people have significant trouble comprehending. Spending can go towards activity that expands the pie -- innovation, R&D, etc. -- or it can go to activity that does not expand the pie -- licensing, lawsuits, etc. This is an economic issue. Shouldn't we want more money going into non-zero sum games than zero-sum games? Yet the way the patent system is set up today, we get the opposite.
Of course, there's one other big reform that I think the patent system absolutely needs: an independent inventor defense
. If someone creates something through their own smarts and intelligence, it's downright insulting to then tell them they can't actually do anything with that idea that they came up with themselves
. For all the talk of the rights of individual inventors, it amazes me that patent system supporters aren't up in arms on this issue as well. Giving a patent only to whoever registered first is the most anti-inventor/anti-innovator concept around. Let people make use of their own ideas.