23 June 2012

Who’s Upset With the Patent System?

Buddy Crying. Image credit: 'AJ' via openclipart.orgIf you read articles and opinions from various online sources, or take notice of some of the recent coverage of patent-related topics in the mainstream media, you might think that criticism of the patent system is rife in the community.  However, this is almost certainly not the case!

There is a strong selection bias in the main sources of news and commentary about patents.  In part, this is because there will always be a certain level of public curiosity about any kind of legal dispute involving household names such as Apple, Samsung, Microsoft, Google, Motorola and Nokia.  And because these are all ‘tech’ companies, much of that curiosity is served by the technology media, with contributions by individuals and groups with a particular interest in the relevant technologies.  By its very nature, much of this discourse takes place online, where it is channelled via social media and other mechanisms directly to those with similar interests.

On the Internet, it is all too easy for any of us to become so caught up in our own little microcosm of views, interests and opinions that we lose sight of the wider picture.  Nobody should be surprised that, for example, the Whirlpool forums are full of people with opinions about whether or not Apple should be awarded an injunction against Samsung’s products – or vice versa.  But if you were to go out onto the streets and start asking randomly-selected people for their views on the subject, many would not even be aware that it is an ongoing issue.  Very little of the online coverage of the ‘smartphone wars’ is making it into the print or broadcast media, where it might be encountered by people who do not have an existing particular interest.

And while there may be strident criticism of the patent system among a sector of the subset of the wider community which is interested in digital technology, you would be hard-pressed to find anyone equally excitable when the courts issue injunctions against infringement of patents relating to fish-stunning equipment or a mobile lighting apparatus!  Yet, for the people involved in these cases, they are just as significant.

When it comes to broad-based community concern about the impact of the patent system, it is not ‘software’ or ‘business method’ patents that are most likely to be raised as an issue.  There are, however, many people concerned about social and ethical issues related to the patenting of medicines, medical therapies and genetic technologies.  These topics are far more likely to be covered in print, or in the mainstream broadcast media, or discussed by politicians seeking to gain political traction.   Yet the Australian and US patent authorities have repeatedly defended their practices of granting patents in these controversial fields, while generally making life more difficult for applicants with ‘software’ and ‘business method’ inventions (see, e.g., IP Australia’s Escalating War on ‘Business Methods’).

SO WHO ARE THE CRITICS?

In our observation, the strongest critics of the patent system – those who would call for its abolition, or for wholesale changes to its operation – fall into three main categories:
  1. those who are focussed unduly upon high-profile – but relatively insignificant – ‘abuses’ of the patent system;
  2. those with a particular commercial agenda to promote; and
  3. those who are morally or politically opposed to patents – or at least to patents in particular fields of technology, such as software.
Patent abuses
There is no question that the patent system is sometimes abused.  There really is such a thing as a ‘patent troll’ – a ‘non-practising entity’ which employs nefarious tactics to extract payments from companies which may or may not be infringing patents which may or may not be valid.

It is no coincidence (though it is a much bigger topic that will need to wait for another day) that trollism is a unique feature of the US patent system – and it is not just that the US is a big market with many available targets.  The US could eliminate patent trolls tomorrow, if it were willing to repeal its patent laws and replace them with something less troll-worthy, such as the provisions of the European Patent Convention, for example.  Of course, this is not going to happen.

These kinds of abuses are not a result of the general structure of the patent system – US and European laws are merely variations on a common theme.

In the scheme of things, however, patent abuses are rare.  In most countries, including Australia and New Zealand, they are virtually unheard of.  Even in the US, infamous cases are the exception rather than the rule.  The Court of Appeals for the Federal Circuit consistently receives around 400-450 appeal filings [statistics (PDF, 10 kB)] in patent infringement cases each year.  Data on first-instance infringement filings in the various US Federal District Courts seems hard to come by, but with over 400 decisions being appealed each year, there must be many times more than this number of patent infringement suits filed.

Of these, we hear about a handful each year which involve well-known litigants, and/or which attract criticism for some form of abuse of the system.  This is not strong evidence that the system itself is broken.  While it would be nice to stamp out all abuse, there is ultimately little that can be done about the facts that no system is perfect, and some people are abusive, selfish and greedy.

In any event, undue focus on a small number of abusive cases without looking at the performance of the entire system is not basis for significant policy-making or positive reform.
Commercial agendas
It should not need saying – though the world is full of gullible people – that any time a major company comes out with a statement critical of the patent system, or advocating change, the first questions you should be asking are: Why?  What’s in it for them?

It can almost be guaranteed that the answer is not merely that they want to make the world a better place.  If companies want to do good in the world, there are many ways they can do it – donations to charity, community volunteering programs, or environmental impact reduction, to name just three.  But the patent system is used by corporations as a business tool, and the primary justification for any patent-related statements, lobbying or activity is necessarily commercial.

So:
  1. when Intel’s Assistant General Counsel calls somebody a ‘patent troll’ – thus popularising the term – what it really means is ‘the President of the company does not like the way “extortionist” is playing in the media, and has insisted that I come up with something less likely to tarnish the company’s reputation’;
  2. when Google complains about ‘anti-competitive’ strategies based on ‘largely questionable’ patent claims, imposing a ‘tax’ on consumers for these ‘dubious patents’, what it really means is ‘we bid p-billion dollars for the same patents, but lost out, so now we’re going to heap blame on the winners, in the hope that this will weaken their position, at least in the court of public opinion’;
  3. when Microsoft nobly promises not to seek injunctions based on standards-essential patents, while pressing the European Commission to investigate Motorola for alleged anticompetitive use of its own portfolio, what it really means is ‘we do not agree with Motorola on what is fair and reasonable, we do not want to pay the license fees they are requesting, and we are hoping to deprive them of negotiating power in our dispute’;
  4. when Apple’s Tim Cook says that the system for enforcing standards-essential patents is ‘broken’ and that patent disputes with other companies are a ‘pain in the ass’ that he wishes didn't exist, what he really means is ‘we are really happy about the patent system when it stops our competitors from copying our stuff, but we do not like it so much when they bite back’; and
  5. when Twitter promises to introduce an Innovator’s Patent Agreement, which it calls ‘a new way to do patent assignment that keeps control in the hands of engineers and designers’, what it really means is ‘we know that Yahoo!’s use of its patents has really upset Andy Baio who’s, like, this really influential guy who might influence really clever engineers working for us, and we know that keeping these people happy is a great way to protect our own greatest assets’.
There is nothing wrong with any of this.  Business is business, after all.  But people with principled objections to the patent system do not have allies in any of these companies, even when they make statements that seem supportive of reform.
Political and moral opposition
There is not much to be done to specifically address the category of moral and political opponents, which includes organisations such as the various emerging Pirate Parties, the more strident members of the Free and Open Source Software (FOSS) movement, and the many individuals who have aligned themselves with such viewpoints. There are numerous sources of information and opinion – this blog included – providing facts and informed commentary supporting a contrary position, and everybody is entitled to their own opinion.

The main problem with politically-motivated opposition is that vocal and persistent lobbyists can have a disproportionate influence over decision-makers, even in democratic countries. A significant present example of this is the proposed exclusion of ‘computer programs’ in the current draft New Zealand Patents Bill. As we have noted previously (see Stakeholders Say ‘No’ to NZ Computer Program Exclusion), after a decade of consultation and development, this exclusion was added at the eleventh hour by a Commerce Select Committee following intense lobbying by representatives of the FOSS movement.

Despite a complete lack of any sound evidentiary basis for exclusion of software-implemented inventions from patentability, and subsequent submissions demonstrating widespread opposition across a broad spectrum of stakeholders, the current position is that the exclusion stands, with all formal opportunities for public comment and consultation having been exhausted prior to review by the Select Committee.

It seems likely that a similarly unfounded concern about the clout of a vocal minority opposed to ‘software’ and ‘business method’ patents is behind IP Australia’s current practice of rejecting many such applications. This is an extremely unfortunate outcome for the many innovative businesses who are directly impacted by the current policy of rejection.

The Electronic Frontier Foundation has recently launched a new campaign – rather grandly captioned Defend Innovation (as though there is any evidence it needs defending) – seeking support for a seven-point plan to scuttle software patents. Actually, two of the proposals – that unsuccessful patentees should be liable for the respondent’s legal costs, and that damages should be limited – are not only perfectly reasonable, but they are the way the system operates for all types of patents outside the US and, in our view, are a major part of the reason why the rest of us are not afflicted with patent trolls! However, most of the proposals are unworkable, not least because there is, and never will be, any agreement on what exactly constitutes a ‘software patent’ which should be subject to a unique set of rules and requirements.

The EFF campaign has been running for about two days now and, despite a flurry of initial publicity, has so far attracted only about 5200 ‘signatures’. We imagine that the EFF would consider this quite a disappointing start. However, we are not at all surprised that the actual level of interest is low, by people willing to add their real names and email addresses to their opinions.

As for objections to patents in other fields, such as genetic technologies, this is an area which would benefit from greater attention by the ‘defenders’ of the patent system.  For more on this topic see Why IP Professionals Must Take ‘Gene Patent’ Opponents Seriously.

CONCLUSION

Looking at the big picture, there is little evidence to support claims that there is anything fundamentally wrong with the patent system, that it is ‘broken’, or that it should be abolished or significantly modified in relation to any particular fields of technology.

The patentability of computer-implemented inventions, in particular, has over the years become something of a political hot-potato, largely due to efforts of a small but vocal (and largely online) minority.  Yet there is absolutely no evidence in Australia of any significant lessening of competition in software markets resulting from patents.  In the US there have been a handful of high-profile cases which appear to have raised disproportionate fears that small developers are vulnerable to patent infringement suits which will suppress innovation. 

And yet there does not appear to be any lack of software innovation occurring.  There are, for example, currently nearly 700,000 apps available for download from the US Apple App Store, created by over 160,000 active publishers.  If fear of patent infringement is slowing development, it is quite frightening to contemplate how many apps there might be without patents.  Always assuming, of course, that the iPhone and the App Store still existed and held such a dominant position in that patent-free world.

None of which is to say that the patent system cannot be improved.  Like any human endeavour it is not, and never will be, perfect.  We will pick up on that idea in the next article in this mini-series.

13 comments:

Anon said...

Great post again Mark.


I'd be interested to hear what your views are on arguments to abolish the copyright system. I ask because it seems to be the complete opposite of what happens in the patents space - ie it is rare that big corporations argue to abolish copyright or complain it should be reduced, and in fact, try to get stronger enforcement mechanisms or find other forms of liability (eg AFACT in iiNet).

arachne said...

The patent system serves two
stakeholders: patent right holders and the public.





Patent right holders are generally
supportive of the current patent system since:





If you own something, you support
the system that ensures that ownership.






Businesses desire certainty and
the status quo provides that certainty.



The public interest is less coherent
than patent right holders since:





It is in favour of hard to define
goals such as fairness, freedom and efficiency

It represents a more diverse range
of people than rights holders including: entrepreneurs businesses
without patents, consumers and academics.






The fact that the lay person is
generally uninterested in the patent system, or that there is not a
unified voice representing the public interest does not diminish the
importance of the public interest. The fact that there are 700,000
iPhone apps, or that there are only 400 appeals to patent litigation
cases in the US per year does not obviate the need for genuine
analysis about how the patent system should operate.





Although there are differences in the
interests of the two stakeholders, there is also a fundamental
commonality: a desire for an efficient system of governing invention
and technological progress.

pick a name said...

its very difficult to define what 'public' is. If the 'public' (ie, the majority) depends on a small group of people for making critical decisions on patent related issues, it would be important to ensure that the 'public' (the few) actually has sufficient knowledge and wisdom to do whats really best for the 'public'.

sometimes things aren't always what they seem. we should trust the CIA...

pick a name said...

large corporations that have failed to secure copyrights on ideas that have great economic potential would support and argue for the abolishment of the copyright system.

Patentology (Mark Summerfield) said...

Patent rights-holders are also members of the public, and not so easily separable into a distinct special interest group. It is not that there are two stakeholders. Everybody is a stakeholder, and none of the groups you have identified represent a single coherent interest group.

There are entrepreneurs and businesses without patents that are supportive of the patent system, and would apply for patents when and if this was the best way for them to protect thier innovations and business interests. There are also entrepreneurs and businesses without patents that are opposed to the patent system, and would gladly execute business models based on imitation of competitors' innovations wherever there are no legal rights preventing them from doing so.

There are academics along the full spectrum of support for/against the patent system, in discliplines ranging from economics and law through to science, engineering, and IT. This is an incredibly heterogeneous 'group'.

Consumers include everybody from Apple fanatics, to people who choose their hardware on the basis that it is supported by CyanogenMod, to people who do not care very much about tech toys at all.

There is also a distinction between the 'public interest' (i.e. what is 'best' for society as a whole) and the interests of individual members of the public. If there were any agreement on public interest we would not have any political differences. I challenge you to put a libertarian and a socialist in a room together and ask them to reach an agreement on how the sometimes competing requirements of fairness, freedom and efficiency should be propery balanced!

Objective, evidence-based, policy-making which guarantees that things are better after reform than before is indeed a noble goal. But first we need to agree on the metrics that constitute good measures of objective reality, and we also need to agree on what would constitute an improvement.

In the meantime, decision-making, administration and policy-making which are based on the opinions of a vocal minority that has absolutely no evidence or meaningful analysis of its own to back its position is a clear violation of the pronciples you are advocating. Yet this is what is happening.

The merit of certainty should not be underestimated. The mere fact that an existing system was not developed on the basis of a modern evidence-based analysis is not a reason to disrupt it in the absence of clear evidence that this will result in a net benefit.

Patentology (Mark Summerfield) said...

I agree that one cannot sensibly require perfect knowledge before moving from the status quo. But when messing with established social and economic institutions, I think it is quite important at least to be confident that changes are not going to inflict unforeseen harm.

The reforms in the America Invents Act and Australia's Raising the Bar Act are good examples. Although they both have their critics, from where I sit the probability that they will result in improvements (particularly in the Australian case) far outweighs the chances of any real harm being done. It is hard to see how making patents harder to get, and harder to abuse, can be a bad thing!

Patentology (Mark Summerfield) said...

I am a patent and trade marks attorney, and not a copyright lawyer. I do not have training or experience which would make my opinion on copyright issues any more authoritative than that of any moderately well-informed lay person.

For what it's worth, I do not see the copyright system as problematic in itself. The idea that the authors and sponsors of a range of creative works should be entitled to control the use and distribution of those works, and have opportunities for fair rewards for their efforts and investments seems wholly reasonable.

The problems that I see are not with copyright itself, but with the failure of rights-holders to develop new copyright-based business models that are consistent with technological developments. There is no question that we will only continue to get new books, films, TV seriesm video games and so forth, for as long as there is some way for producers, writers, actors, crew, editors, and whoever else is involved in quality production, to be paid. Advertising-supported free-to-air broadcasting is ultimately doomed, as is the sale or rental of physical packaged media (i.e. DVDs or Blu-ray discs). People are moving increasingly to e-books, which is good for the environment as well as being really convenient!

Research suggests that much of the priacy that goes in is not due to people being unwilling to pay for content, but rather because the prices asked exceed the perceived value, and/or desired content is not available legally in a timely fashion. And yet the rights holders persist with their old territorial business models, and seek to preserve the status quo by brute force (e.g. the Megadownloads raids and arrests). This is hugely counterproductive, particularly when it is seen to be done with the support of pliant governments and authorities.

As for software, I just don't see a problem at all. I understand that there are people who believe, on principle, that the world would be a better place if everybody just shared all their code, but frankly this is nothing but a utopian dream. In the absence of copyright, there would still be proprietary software, and technological protection measures to try to prevent copying.

Proprietary and open source models already exist side by side, and both are supported by copyright laws. The GPL could not exist without copyright: Microsoft could just take whatever they wanted from the open source community, with no obligation to contribute back any improvements or modifications they might make. Sure, everyone would be free, in theory, to reverse-engineer anything they wanted to, but in reality hardly anyone would have the skills and/or the inclination to do this. A world free of software copyrights would change little for anybody other than a hacker elite.

So, there you go, my views in a nutshell. Probably worth exactly what you paid for them!

Doug Calhoun said...

Another well thought out post.





The confusion that you mentioned in patent policy in New
Zealand extends to the whole basis for the system. In all the policy papers leading up to the
introduction of the Patents Bill in 2008 and in the departmental advice to the
select committee the policy advisors emphasised the fact that about 90% of New
Zealand patents are granted to foreigners.
Therefore, the benefits are likely to flow overseas. (The only evidence for their conclusion was
the percentage of foreign owned patents.)
The select committee agreed and the the range of subject matters that
can be patented was limited as far as was possible under New Zealand’s
international obligations. The select
committee was probably influenced by this overall bias against patents when it
introduced the ban on patents for computer programs.





At the same time another policy silo in New Zealand (with
the very public blessing of our two prime ministers) is pushing the expansion
of a Single Economic Market - the current phase in the evolution of the 1983
Closer Economic Relations Treaty. The
current reforms intend to institute a single system of regulation of patent
attorneys and a single patent examination system, but the proposals still cater
for the differences in substantive patent law, particularly the subject matter
exclusions in New Zealand.





In other words one silo of policy advisors promotes
protectionism as the basis for substantive patent law - while another promotes conflicting
trans-Tasman single market principles.
And neither seems to acknowledge this.






The Patents Bill will likely continue to languish near the
bottom of the Order Paper until the TPP negotiations are complete. At least in those negotiations the trade offs
are pretty clear – if the US wants New Zealand to enact stronger protection for
US IP, it has to give better access for New Zealand agricultural products
(particularly dairy) into the US market.






There is more to the
picture than meets the eye. ~Neil Young











The confusion that you mentioned in patent policy in New
Zealand extends to the whole basis for the system. In all the policy papers leading up to the
introduction of the Patents Bill in 2008 and in the departmental advice to the
select committee the policy advisors emphasised the fact that about 90% of New
Zealand patents are granted to foreigners.
Therefore, the benefits are likely to flow overseas. (The only evidence for their conclusion was
the percentage of foreign owned patents.)
The select committee agreed and the the range of subject matters that
can be patented was limited as far as was possible under New Zealand’s
international obligations. The select
committee was probably influenced by this overall bias against patents when it
introduced the ban on patents for computer programs.





At the same time another policy silo in New Zealand (with
the very public blessing of our two prime ministers) is pushing the expansion
of a Single Economic Market - the current phase in the evolution of the 1983
Closer Economic Relations Treaty. The
current reforms intend to institute a single system of regulation of patent
attorneys and a single patent examination system, but the proposals still cater
for the differences in substantive patent law, particularly the subject matter
exclusions in New Zealand.





In other words one silo of policy advisors promotes
protectionism as the basis for substantive patent law - while another promotes conflicting
trans-Tasman single market principles.
And neither seems to acknowledge this.






The Patents Bill will likely continue to languish near the
bottom of the Order Paper until the TPP negotiations are complete. At least in those negotiations the trade offs
are pretty clear – if the US wants New Zealand to enact stronger protection for
US IP, it has to give better access for New Zealand agricultural products
(particularly dairy) into the US market.






There is more to the
picture than meets the eye. ~Neil Young

Patentology (Mark Summerfield) said...

Thanks for your thoughts, Doug.

You are probably aware that when the Industrial Property Advisory Committee (IPAC) reported to the Australian Government in 1984 on Patents, Innovation and Competition in Australia, it raised simialr concerns about the disproportionate use of the patent system by foreign entities, so this is not a new concern.

But it was also honest enough to acknowledge that the costs of exiting the international patent system would be high, and that the patent system is, in any event, a fairly blunt instrument of industrial policy which cannot easily be fine-tuned to take account of particular cases.

Most of the Committee acknowledged this, anyway. The exception was the economist, professor D.M. Lamberton, who wrote a dissenting statement. If New Zealand remains in the thrall of economic rationalists, twoand a half decades on, you have my sympathies!

ecca said...

There's no problem with only 10% of patentees being nationals in what is an international system. When one considers the size of our population we are punching far above our weight. We must therefore do all we can to nurture, protect and promote these 10% minority inventors but instead patent "reform" always seems to be at the expense of national users.

As for silly NZ, what apart from software can they invent with the R&D capital available over the Tasman (that is even worse than AU). Export all your software inventions for free -- excellent idea Kiwis!

Meanwhile, the "raising the bar" "reforms" in AU, coupled with the alleged administrative bias in the patent office against software patents, has forgotten our hard-pressed national inventors in the flash-bang between multinationals and open-marketeers. Our national inventors have become the meat in the sandwich because the weakening of our entire patent system actually helps the big corporations. It means AU patents will be some of the most legally uncertain in the world, so the corporates won't be sued by those with limited funds, but will themselves sue small entities to "deep pocket" them. And expect the price of AU law suits, where every jot and tittle in a spec now becomes a point of law and fact, to skyrocket!

The "raising he bar" reforms fixes a system that wasn't broke by letting the trial-lawyer genie out of the bottle. In effect, the judgements of hard-pressed examiners at the patent office will be reviewed by high-powered legal teams with electron-microscopes through a sieve of patentability holes deliberately created by our beloved and wise Parliament! (Oh to be a New Zealander right now!)

I seriously doubt the patent attorney profession has any idea of the level of scrutiny their work and the patents office's work will now attract under these "reforms". Expect the costs of patent prosecution to rise when they realise how high the bar really is, for what in the end will be much weaker patent protection for our people. Multinationals can afford this of course, it's the SME national inventors who will suffer -- and badly.

For the minority 10% of AU inventors, the cure to the multinationals vs open-marketeers problem is worse than the disease. Go file in the US boys and girls - innovation patents excepting. No other conclusion is possible until the powers that be revisit this debate with the 10% national inventor minority squarely in view.

Patentology (Mark Summerfield) said...

I have no concerns about rising costs of patent prosecution, or any other impacts from the coming reforms.

The simple reality is that most of the Australian clients I work are not solely - or even primarily - interested in Australian patent rights. And as soon as you need to have patent claims which will stand up under US patent law, you should also be fine under Raising the Bar.

Requiring Australian applicants to meet the same standards in Australia as they will be required to meet if the wish to secure patent protection in more lucrative foreign markets is no bad thing. And if all you want is an Australian patent right, well there's always the innovation patent...

ecca said...

The issues of patent prosecution and revocation shouldn't be conflated. I have no issue with raising the bar for granting a patent, even if it costs more, provided also the bar is raised on revocation. But the reforms effectively do the opposite by treating revocation on an equal footing with grant. The U.S. system just doesn't do that. The USPTO is given due credit with a higher standard of proof required for revocation than infringement.

While the AU market is small, if you can't defend your home turf (without higher risks and costs) it forces you to get capital off shore in places where you can better defend your IP from competitors.

Therefore my comments should not be viewed purely through the prism of patent prosecution, which is only the start of the journey after all.

ecca said...

The U.S. presumption of validity should not be painted as a defence for bad patents but a disincentive to bad litigation. The presumption is justified because it acknowledges the examiner was a person ordinarily skilled in the art at the time of the priority date. That might not always be so (only true in the vast vast majority of cases) but for patents to be worth something then the grant must be of a limited monopoly not merely a right to sue an infringer to see if you might have a valid patent!

While it's true the U.S. patent system is more inventor-friendly and thus more prone to abuse by patent trolls, patents have played a huge part in making the U.S. economy the size it is today (despite all the waste and mismanagement of U.S. government). Countries with weaker patent systems or no patent system have been the big loosers in the IP economy. Why don't we follow the U.S. lead like the F.T.A. commits us to? No, instead we follow Europe's road to nowhere - just as well we have plenty of dirt to sell the Chinese while we get our act together.

Legal uncertainty promotes litigation not inventiveness and increasing the grounds of revocation, which is all what these "reforms" essentially do, is in effect granting licences to infringe based any defective draftsmanship, even if the claims are in reality fairly based on the spec. The new rules, being amongst the toughest in the word, are inherently anti-inventor. And I don't think this is good news for AU patent attorneys either, as the trial lawyers will make life impossible for everyone, unless the judiciary reads down the new legislation, which I have no doubt they will try but it seems pretty tightly written to me.

Meanwhile, inventors should adopt as U.S. approach and be prepared to move there where the better patent system is and therefore the start-up capital is. In the end, the powers that be in Canberra have to wake up and see we are competing with the U.S. system more than Europe. Our system has been rendered uncompetitive by these "reforms" addressing what really amount to only very minor annoyances in the great scheme of things.

I think I will go outside and dig some dirt for China now.

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