Techdirt. Stories filed under "expansion"

Why It Could Make Sense To Get Rid Of Patents Entirely, Even If They Work In A Few Cases

Mike Masnick — Tue, 2 Oct 2012 03:10:38 PDT

Over at The Atlantic, Jordan Weissmann has a great article covering the latest paper from economists Michele Boldrin and David Levine (names that, I hope, are familiar to Techdirt readers), which argues why it might make sense to abolish the patent system entirely, even while admitting that patents may have some benefits in some cases. You can read the full paper here (pdf) where it makes "the case against patents." While this may sound similar to Boldrin and Levine's earlier works, this one goes further, and is definitely worth the read. In effect, they argue that not only do patents rarely help innovation, but, even worse, the existence of patents (even where they help) will only lead to the system being expanded to where they do more harm than good:

The initial eruption of small and large innovations leading to the creation of a new industry -- from chemicals to cars, from radio and TV to personal computers and investment banking -- is seldom, if ever, born out of patent protection and is, instead, the fruits of highly competitive-cooperative environments. It is only after the initial stages of explosive innovation and rampant growth end that mature industries turn toward the legal protection of patents, usually because their internal grow potential diminishes and the industry structure become concentrated.

A closer look at the historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side-effects, strong patent systems retard innovation with many negative side-effects. Both theoretically and empirically, the political economy of government operated patent systems indicates that weak legislation will generally evolve into a strong protection and that the political demand for stronger patent protection comes from old and stagnant industries and firms, not from new and innovative ones. Hence the best solution is to abolish patents entirely through strong constitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.

The report does a good job highlighting how innovative firms and innovative industries almost never use patents (or use them sparingly). This should indicate that the basis of the patent system (that it's needed to encourage innovation) is shaky at best. But, they note that what little research there is on this tends to be ignored. They even highlight research that finds that IP strengthening almost always happens during times of "deregulation" where researchers (including Judge Richard Posner) struggle to figure out why that would be. Boldrin and Levine argue that the confusion here is mainly due to thinking of patents as "property" rather than as a monopoly restriction:

In fact, neither Landes and Posner nor, apparently, most industrial organization researchers, seem interested in figuring out why patents are either ignored or scarcely used in new and competitive industries while being highly valued and over-used in mature and highly concentrated ones. The point here seems to be that, being themselves strong advocates of the usefullness of patents in fostering innovations, the authors fail to recognize the intrinsic problem with the design of the institution itself. Being not a “property” right but rather a “monopoly” right, patent possessors will automatically leverage whatever initial rents their monopoly provides them with in order to increase their monopoly power until all potential rents are extracted and, probably, dissipated by the associated lobbying and transaction costs.

Boldrin and Levine also hit back at the charge that abolition of the patent system is too extreme given that it already exists. They note that other bad laws of a similar nature have been ditched as well:

Economists fought for decades – and ultimately with great success – to abolish trade restrictions. It will not escape the careful reader that patents are very much akin to trade restrictions as they prevent the free entry of competitors in national markets, thereby reducing the growth of productive capacity and slowing down economic growth. The same way that trade restrictions were progressively reduced until reaching (almost complete) abolition, a similar (albeit, hopefully less slow) approach should be adopted to “get rid” of patents. Moreover the nature of patents as time-limited makes it relatively easy to phase them out by phasing in ever shorter patent durations. This conservative approach has also the advantage that if reducing patent terms indeed has a catastrophic effect on innovation the process can easily be reversed.

They admit that the poster child for the patent system, the pharma industry, may have to face the biggest changes, but also suggest that there are plenty of ways to still create the necessary incentives, including both lowering the costs of clinical trials and using prizes to award key drug treatment developments.

It's an interesting read. I will admit that I'm not fully convinced that the argument makes sense -- but I find the argument a lot more persuasive than most others I've seen.

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The Rogue Court That Made Patents So Destructive

Mike Masnick — Mon, 1 Oct 2012 12:16:17 PDT

We've written many, many times about the problems created by the Court of Appeals for the Federal Circuit, CAFC, who (among other things) is the appeals court that has jurisdiction over all patent appeals. It's a court that has been around for 30 years as of this week, and in the opinion of many, has been an unmitigated disaster. Of course, if you're a patent lawyer or a patent troll, you might think the opposite. As we've discussed in the past, CAFC has spent the last 30 years massively helping patent holders by expanding the definitions of what was patentable, and generally being much, much, much more favorable to patent holders than appeals courts had been back when jurisdiction was split among the 12 difference circuit appeals courts. With its 30th anniversary this week, Tim Lee has written a post detailing how it "wrecked the patent system." It's a great read, covering a number of key points.

Lee kicks it off by pointing to Adam Jaffe and Josh Lerner's seminal book, Innovation and Its Discontents, published in 2004. If you want to see a patent system defender turn bright red, just bring up this book. They go absolutely ballistic about it, insisting that it's all myths and lies made up by critics who don't understand the patent system. You see, in the world of patent lovers, the only people who are allowed to criticize the patent system, are those who are patent lawyers. Everyone else, in their book, simply doesn't understand the facts. Of course, when you suggest that perhaps it does make sense that economists might be able to highlight how bad patents harm the economy, they have no reasonable answer. Either way, you can't get past facts, and Jaffe and Lerner's facts clearly show a massive shift in favor of patents due to CAFC. From their book, here is the rate in which patents were found valid and infringed upon appeal from 1925 up through 2000. Whether or not you agree with Jaffe and Lerner, there is no denying that there's a pretty massive shift at the moment CAFC is created. Lerner and Jaffe focus their reasons why on "judicial capture," specifically fingering Judge Giles Rich, an unabashed patent system supporter and a former patent lawyer who basically wrote the 1956 Patent Act, and then got to "interpret" his own work as a CAFC judge. Of course, patent system supporters argue that Judge Rich was just one judge, and even while there were some former patent attorneys on the CAFC bench, it was never the majority of CAFC judges. Lee's piece does a really good job explaining how a variety of issues have made it such that CAFC judges almost always favor expanded patent powers:

...the heavy load of patent cases on the court's docket means that the judges of the Federal Circuit are constantly interacting with patent lawyers. In addition to hearing their arguments in the courtroom, they read the same patent law publications as the lawyers, hire young patent lawyers to clerk for them, and are invited to speak at events organized by the patent bar.

Moreover, the prestige of the Federal Circuit itself is directly tied to the prominence of patent law in the American legal system. If the Federal Circuit had followed the stricter rules in place before the court was created, patent law might have remained a legal backwater, receiving little attention from either the legal profession or the general public. That, of course, would have made the Federal Circuit a less prestigious place to work.

[....] patent appeals are exclusively heard in DC by judges who live and breathe patent law. Unsurprisingly, this leads to insular thinking. For example, when we interviewed Paul Michel, who served as the Federal Circuit's chief judge from 2004 to 2010, he didn't seem to understand the problems facing small software companies. "If software is less dependent on patents, fine then. Let software use patents less as they choose," he said, seemingly oblivious to the fact that software companies don't have the option to opt out of patent troll lawsuits.

Lee also goes into detail on how CAFC effectively "overruled" the Supreme Court on various issues related to patents, in part because, historically, the Supreme Court ignored patent issues as being petty, "commercial" disputes, unrelated the the weighty constitutional issues that it was focused on. Thankfully, over the past seven or eight years, the Supreme Court has become a lot more interested in patent issues, almost always slapping down CAFC. Even so, as Lee notes, patent lawyers know that CAFC often seems to hold itself to a different standard:

This dismissive attitude toward Supreme Court precedents apparently survives to this day among patent lawyers. In the wake of this year's decision limiting patents on the practice of medicine, patent attorney Gene Quinn wondered, "How long will it take the Federal Circuit to overrule this inexplicable nonsense?" Obviously, the Federal Circuit can't "overrule" a Supreme Court decision. But with enough persistence, it can, and often does, subvert the principles enunciated by the nation's highest court. And when it does so, it almost always works in the direction of making patents easier to obtain and enforce.

These all represent real problems and the really bizarre thing is that it makes absolutely no sense for this single court to exist. Part of the reason that we have all of the different circuits is to create differing viewpoints from different courts, which then allow the Supreme Court to consider the different opinions and to point out which is proper. But without any circuit split issues to deal with, and with that form of "judicial capture" going on in CAFC, the results are a one-way ratchet, except in the few cases where the Supreme Court decides to step in, despite a lack of circuit split. Lee points out that we could see a lot more interesting rulings if we just treated patent cases (as we used to) like most other cases, and let each circuit decide the appeals separately:

The consolidation of the patent jurisdiction in a single appeals court has also deprived the judicial system of valuable viewpoint diversity. Consider Judge Richard Posner of the Seventh Circuit Court of Appeals. This summer, he threw out the entire patent lawsuit between Apple and Motorola, arguing that the patent system had descended into "chaos." Posner was able to hear the case because he was temporarily filling in as a trial court judge, but the Federal Circuit—not his own Seventh Circuit—will hear appeals in the case.

Under the pre-1982 judicial structure, Posner and his colleagues on the Seventh Circuit Court of Appeals would have heard appeals in some of the nation's patent lawsuits. If his comments in the Apple/Motorola case are any indication, Posner would sharply disagree with some of the Federal Circuit's precedents. This kind of disagreement among appeals courts, known in legal jargon as a "circuit split," would signal the Supreme Court that it needed to step in and resolve the dispute.

Posner's skeptical view of the patent system may be explained by the fact that he's an academic as well as a judge. This background may have exposed him to academic criticisms of current patent jurisprudence that aren't as well known to other judges. Similarly, if the Ninth Circuit Court of Appeals (based in San Francisco) were allowed to hear patent appeals, some of its judges might share Silicon Valley's skeptical attitude toward software patents. Such dissenting views would provide balance to the Federal Circuit's pro-patent rulings and give the Supreme Court the raw material it needs to fashion a sensible body of patent law.

This is a pretty big problem -- and one that is much more significant and troubling that the "problem" that the government was trying to "solve" with the establishment of CAFC. The issue then was that people would "rush" to different courts to file their patent lawsuits, trying to use jurisdiction shopping to find a favorable court. Of course, switching to a single federal appeals court didn't even do anything to fix that problem. Just ask patent trolls their opinion on East Texas to see why.

All of this matters quite a lot. Beyond just the fact that CAFC's various rulings have massively expanded patent law (such as by recognizing that software and business methods could be patentable, despite most people believing neither were prior to CAFC's rulings, or by establishing much more restrictive rules on when a patent could be invalidated), it's become unfortunately common for some (including people we otherwise agree with) to think that the solution to the problems with today's patents is because judges aren't that familiar with patents, and thus it would be best to set up specialized courts or even specialized judges, who focus mainly on patent issues. But, of course, that seems to be making the exact same mistake all over again. Such courts or judges become victim to the same pressures as CAFC has, creating the same broken incentive structure that has resulted in such problems in the first place.

On this 30th anniversary of CAFC, it seems only reasonable that one step towards fixing the broken patent system is a simple one: end having all patent cases the jurisdiction of CAFC and send those cases back to the individual circuit appeals courts.

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How The Patent System Is Rigged To Only Expand What's Patentable

Mike Masnick — Tue, 28 Feb 2012 20:03:37 PST

When the numbers came out showing that 2011 represented yet another record year for patents granted, it was such a non-surprise that I didn't even bother mentioning it. The number of patents granted just keeps going up. And yes, there were two small dips during the past decade, but they corresponded with the rare situations in which the Supreme Court finally took an interest in some element of patent law and pushed back on the Federal Circuit (the appeals court that handles all patent issues) and the USPTO. We've discussed at length in the past, the problems of having a single appeals court that solely focuses on patent issues, because you lose the diversity of opinions (made worse at times when some of the judges on the panel have been former patent attorneys -- or, most famously, when a judge at the court was the same former patent attorney who wrote the last major update to patent law...).

However, Steve sends over a fascinating Yale Law Journal review article by Jonathan Masur that notes this problem of the Federal Circuit can be explained structurally, in that the relationship between the PTO and the Federal Circuit combined with the fact that there's no "adversarial" party contesting a patent grant, means that the patent system is effectively rigged to only expand, even if that goes against the best interests of society:

Because of the manner in which patent cases make their way from the PTO to the Federal Circuit, the PTO has a decided institutional interest in granting more patents than it should. And because of this same interaction, the Federal Circuit is engaged in an unwitting expansion of the patentability rules. The key lies with the asymmetric nature of appeals from the PTO to the Federal Circuit. When the PTO denies a patent application, the aggrieved applicant may appeal to the Federal Circuit. When the PTO grants a patent, however, there is no losing party to appeal--the victorious applicant merely walks away with its patent. That patent is unlikely ever to see the inside of a courtroom, given how few infringement lawsuits are litigated. Like most administrative agencies, the PTO wishes to avoid appeals and especially reversals. In order for the Agency to accomplish this, it need only err on the side of granting excessive numbers of patents--even invalid patents--for which there is no appeal. This desire to avoid litigation is a source of the invalid patents now being issued by the PTO in vast numbers--the patent system’s first problem.

But, as he notes, that's not the only problem. There's also the fact that since the PTO will now only reject patents that are clearly outside the law, the Federal Circuit only has opportunities to expand the granting of patents, not to reign it in:

The second problem, the ongoing expansion of the rules governing what types of inventions may be patented, stems from the PTO’s proclivity to grant any plausible patent. Because of the PTO’s efforts, the patent applications that the Agency denies will predominantly concern inventions that are unpatentable under current law. When a disappointed patent applicant appeals such an application to the Federal Circuit, that court has two options. It can reject the patent under existing law, preserving the law as it stands, or it can grant the patent under a new, more expansive understanding of what is patentable. The circuit denies most of these applications. But when the Federal Circuit eventually decides a case in favor of an applicant, it creates a new precedent that enlarges the scope of what may be patented. The process then repeats itself, with the PTO denying more boundary-pushing patent applications and the Federal Circuit being presented with further opportunities to expand the limits of patentability. The result is a natural inflationary pressure on the law, generated entirely by the types of cases that the PTO sends to the Federal Circuit.

Is there a way to fix this? Masur suggests that awareness alone might create some pressure on the Federal Circuit to "create new, more constraining precedent." He also suggests that they might "vote strategically against self-interest in certain cases" such as by voting against a patent they think is a good patent "simply in order to forestall the law's outward momentum." That seems like significant wishful thinking -- which he admits with a bit of an understatement: "This would require a focus on issues with which circuit judges do not typically concern themselves, not to mention a surprising level of tactical shrewdness from a circuit that has not previously displayed any such inclination."

He also notes how Congress and the Supreme Court have the power to curb excesses, which the Supreme Court has done just a little bit (which, as noted above, explains the brief dips in patents). Separately, the executive branch could get involved and pressure the PTO to limit its approvals.

But, in the end, the key point that set off this problem is the lack of anyone to push back on a granted patent (until such time as they're sued, in which case a different series of issues are being dealt with). So of his key suggestions, one is to open up the ability for third parties to challenge patents -- even before they're issued. And to weigh against the inflationary pressure of the current Federal Circuit, he suggests that these challenges show up in the Federal Circuit too -- so that that court now also has incentive to curb excesses, rather than just inflate them. Definitely an interesting idea.

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How Much Is Enough? We've Passed 15 'Anti-Piracy' Laws In The Last 30 Years

Mike Masnick — Wed, 15 Feb 2012 12:04:00 PST

Last week, I spoke on a panel at Stanford Law School concerning SOPA. There were two lawyers representing the MPAA's views, and at one point one of them said that he hoped that Hollywood just wanted to "meet in the middle" with those opposed to SOPA and find "a solution" that worked. Lawyer Andrew Bridges got up and asked a rather reasonable question: when, in the past, has the entertainment industry ever been willing to "meet in the middle" on copyright issues? He began listing out every single expansion to copyright law from the past 30 years. In 1976, we got the Copyright Act of 1976, which flipped copyright on its head and expanded it massively. Not only did it switch from an opt-in system with registration and renewals to an "everything is automatically opted-in," but it also massively expanded the length of copyright. You might think that the industry would be satisfied from that point forward. In fact, as key SOPA supporter Steve Tepp from the US Chamber of Commerce recently claimed: "To me if I get what I ask for, I stop complaining."

So, did the entertainment industry "stop complaining"? No. Since the Copyright Act of 1976 went into effect (in 1978), we've expanded copyright law 15 times on issues related to "stopping piracy" (and many, many more if you look at all copyright law expansions -- beyond just anti-piracy efforts -- such as expanding coverage to semiconductor chip designs, boat hulls and other things). It really started in 1982, meaning that we've had 15 new anti-piracy laws in just 30 years. If SOPA/PIPA had passed, it would have been 16 -- or more than once every two years. Let's take a look:

1982: Piracy and Counterfeiting Amendments Act: Increased criminal penalties for infringing records, tapes and films from $25k & 2 years in jail to $250,000 and 5 years in jail. Also... made it so that first-time offenders could get the maximum.
1984: Record Rental Amendment of 1984: Outlawed music rentals (have you ever wondered why there were no Blockbusters or Netflixes for music?)
1990: Copyright Remedy Clarification Act: Allowed copyright holders to sue states for copyright infringement (before that, states could claim sovereign immunity)
1990: Computer Software Rental Amendments Act: Outlawed software rentals
1992: Audio Home Recording Act: Mandated DRM on certain digital audio devices (mainly DAT), added a royalty on such devices.
1994: Uruguay Round Agreements Act: Not only did it seize works out of the public domain and put them under copyright (this was what was challenged in the recent Golan case), but it made it a criminal offense to bootleg concerts (audio or video).
1995: The Digital Performance Right in Sound Recordings Act: Created a new "performance" right for copyright holders concerning digital "performances."
1996: Anticounterfeiting Consumer Protection Act of 1996: Expanded racketeering laws to include criminal copyright infringement, as well as "trafficking" in computer software, documentation or packaging, as well as trafficking in movies or audiovisual works. Also let the government seize property associated with these activities (precursor to domain seizures...).
1997: No Electronic Theft (NET) Act: Decreased the threshold for what counts as criminal infringement (such as taking out the monetary profit requirement).
1998: Sonny Bono Copyright Term Extension Act: You should know this one. Expanded copyright terms by 20 years.
1998: Digital Millennium Copyright Act (DMCA): Again, you may have heard of it. Created anti-circumvention rules and the notice-and-takedown system for online infringement, among many other things.
1999: Digital Theft Deterrence and Copyright Damages Improvement Act of 1999: Massively increased statutory damages for infringement
2004: Intellectual Property Protection and Courts Amendments Act: Set up penalties (civil and criminal) for counterfeit labels, documentation and packaging in association with copyrighted goods (yes, separate from the content itself). Also lowered the bar to show willful infringement.
2005: Family Entertainment and Copyright Act: Criminalizes recording of movies in theaters and also lets theaters detain people merely suspected of recording in theaters. Criminalizes releasing a work online before it's been officially released (if it's "being prepared" for commercial distribution).
2008: Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act: Increased civil penalties for infringement. Increased government seizure & forfeiture powers (which is how the government currently justifies its questionable domain seizures) and created a job in the White House to focus on greater enforcement.

But apparently we're told that the internet is a "lawless wild west" when it comes to copyright issues? I think not. All we've seen is expansion after expansion after expansion, always using questionable claims of rampant infringement that is supposedly destroying industries. Each time, the various industries would create a moral panic about why this law was absolutely needed. Forgive us for being a bit skeptical. We've seen this game pretty damn frequently. To claim that there are no laws, or that we need to "meet in the middle" seems pretty bizarre. As Bridges noted at Stanford last week, if they want to "meet in the middle," are they willing to give up half of these laws to get SOPA/PIPA?

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Copyright Expansion Through Misinformation Has Gone On A Long Time... And It Involved Pimps & Ferrets

Mike Masnick — Fri, 19 Nov 2010 18:33:04 PST

Nearly three years ago, we mentioned a dissertation by Eric Anderson, called "Pimps and Ferrets: Copyright and Culture in the United States," which looked at copyright in the US from 1831 to 1891 -- a little-studied period of time when it comes to copyright issues. There's plenty of coverage of everything from about 1900 onwards, starting with the debate around the 1909 Act. There's also a fair bit of research about the founding fathers initial intent with copyright. But not much attention has been paid to that in-between time.

Anyway, Alan Wexellat points us to the news that Anderson has now redone the paper as a book, and has released Pimps and Ferrets: Copyright and Culture in the United States under a Creative Commons license. He's using a non-commercial license, which we just discussed has some problems, but it really is a tremendously worthwhile read. It basically shows that, as we see today, many people don't really understand the purpose and intent behind copyright -- and that includes some of the folks in charge of making the law. That allowed some special interests to co-opt the process and expand copyright to their own benefit. Sound familiar? Well, history seems to repeat itself...

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Copyright As Emphysema: Bad To Begin With And Only Gets Worse

Mike Masnick — Wed, 19 Aug 2009 13:30:49 PDT

An anonymous reader points me to the comment section of a recent Doc Searls post discussing problems with the copyright system. The post itself is interesting (though covering ground familiar to those around here), but the comment in question has this rather unique analogy from Searls comparing copyright to emphysema:

I won't speak for Bill Patry, but I'm beginning to see copyright (and patents, at least for software and business methods) as emphysema of the marketplace: something that is bad to begin with and only gets worse.

To support that point, he then asks an interesting question:

Can either of you name a single legislative or regulatory instance (in any country) when the concept of copyright has been challenged successfully -- or the scope of its restrictions (in time or any other dimension) has ever been reduced? I can't, but I'm not a lawyer.

It's a good question. I left a comment pointing to the only one I could think of off the top of my head: which was the US's decision that federal gov't documents could not be covered by copyright. That, of course, is a tiny tiny minor push back on copyright, and many other countries haven't even gone that far, preferring to use "crown copyright" to allow governments to claim copyright on documents. In thinking about it a bit more there are two other possible points -- though both are again pretty minor. First is the fact that the 1976 Copyright Act codified "fair use." Before that it existed in common law, but was not directly in the law. However, considering that we basically gave up nearly the entire public domain on modern works, that Act was hardly a step towards less copyright. In fact, it was the single largest step towards copyright expansion in the US's history.

The only other (again tiny) pushback on expansionist copyright law was not from the legislature, but the recent court ruling (pushing back on a legislative expansion) that found a certain classification of works that were temporarily in the public domain couldn't be pulled back under a copyright regime. That case is going to be in appeals for years, and it applies to such a small class of works, it's barely worth mentioning at all.

But, of course, as we were recently discussing, the expansion of copyright has been quite massive during the entire history of the US. But, again, like Searls, I'm not a lawyer (or a historian), so perhaps we can get some others more knowledgeable on the subject to weigh in on Searls' question: what examples are there of legislatures actually decreasing the scope of copyright restrictions?

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