For the half-year to 30 June 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Alberto Bellan, Darren Meale and Nadia Zegze.

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Thursday, 28 November 2013

The Misplaced Patent Narrative

This Kat has been out of blogging contact for the better part of two weeks, cavorting (professionally, that is), first in Miami Beach and then in Geneva. He can confirm that Miami Beach is short of snow and mountains, while Geneva is short of palm trees and sand. Back on terra firma, this Kat has had a chance to reflect on a topic of increasing interest to him: the nature of the patent narrative. By “narrative” I mean the broadstroke themes that dominate public discourse about patents. Being part of the patent narrative does not mean that the issue is necessarily central to the patent system—maybe yes, maybe no. These issues may be interrelated, one with the other, maybe yes, maybe no.

What is common to all of them is that they enjoy the public limelight and that they are widespread in the mainline media and social media, i.e., they have acquired patent “celebrity” status. Against this backdrop, it seems to this Kat that the current patent narrative consists of four principal themes. The first is the “problem” of non-practising entities and so-called patent trolls. The second is the claimed “decline” in patent quality. The third is the aggregation and accumulation of large patent portfolios in the hands of a small number of multi-national entities. The fourth is the increasing refocusing of patents as a commercial asset rather than as an enforceable legal right.

But lurking in the shadows of these celebrity topics are substantial subjects that seldom seem to make it into the pantheon of the popular patent narrative, despite their arguable importance. One such topic was suggested in connection with a recent podcast that this Kat heard this week. In short, a serially successful entrepreneur was discussing his most recent social media venture, a platform for truly mass interactive television. He described the process of overcoming various technological challenges to develop the platform. He was then asked about the role of patents in protecting his platform. He was quick to answer—patents played no role. He acknowledged that patents might play some “defensive” role for large companies (perhaps alluding to the various mega-patent portfolios that have been acquired during the last several years). But for him, what mattered was getting the technology right. Was he worried that competitors might simply imitate his technology? Not at all, was his response, to develop it was too complex and time-consuming to pose a real threat of competition. For this entrepreneur, innovation was all about the cumulative know-how embodied in creating state-of-the-art technology; patents are perceived as having little or no relevance.

Consider the thrust of these comments. Much effort and many resources are devoted to enabling small and medium enterprises, the so-called SMEs, to take greater advantage of the patent system. What underlies these efforts is the belief that patents are a sine qua non of innovation and development, and that large companies have an unfair advantage in exploiting the patent system, whether due to costs or other “burdens” of the patent system. As a result, it is argued, there is patent divide between large companies and SMEs and the goal of enlightened patent policy is to bridge this divide and bring SMEs more into the patent fold.

But the anecdotal comments described above suggest a quite different narrative, according to which SMEs (and start-ups) may eschew patent protection for the simple reason that it provides less benefit than simply protecting one’s technology as a form of know-how. Create a better platform, get it to market and develop a powerful brand, and not accumulating a patent portfolio, is the preferred road to success. If this be true, then the efforts and resources expended to bring patents to the SMEs may simply be misplaced. The more correct narrative should focus on how to enable the development of quality technology in the form know-how/trade secrets to be leveraged by effective marketing and branding rather to seek to impose the patent system on such companies. Inasmuch as encouraging start-up activity is a major priority in most developed countries, recasting the narrative in this way may be no less important for innovation and technological development than the patent themes mentioned above. No less important, indeed, but whether it will become part of the public narrative remains an open question.

11 comments:

Suleman said...

I think whether or not patents are relevant is very dependent on the technology sector. So I think for many IT companies trade secrets and first to market advantages are much more important than patents. However for biotech patents would normally be very important, for example.

I do think something has gone wrong with the patent system when large companies need to build up portfolios for defensive purposes. That cannot have been an aim of the patent system, and someone needs to rethink what patent protection is meant to be about.

John MItchell said...

One SME's opinion in his field is of little consequence to others working in different fields where reverse engineering is sometimes very easy e.g software. Your example SME hasn't got to a position of making substantial sales and thus got the interest of large companies whose markets will be disrupted as a result. Then, and only then, will his real growth (or not once for example, he finds his supplies dry up and copies are sold ousting him from his position) be relevant to the debate you mention.

Many SMEs actually believe patents offer protection as well! Until they find out, assuming they are successful of course with some invention that proves to be valuable, about the "defence" of patent litigation and the inevitable attack on their "crap quality" patent combined with diversionary procedures that seem almost entirely designed to stop innovation and hand monies over to lawyers, judges and all the hangers-on.

Anonymous said...

Nice post. I'm interested to know the entrepreneur you are talking about with the mass interactive TV venture? Sounds exciting.

I agree with your last paragraph, but think it applies equally to multinationals as well as to SMEs. While patents might not motivate or even be warranted for SMEs, do they have a choice about it? For everyone, the reality is way you say in the third paragraph: if you do something better than anyone else and you do it with a lot of complex, time-consuming effort, the market will come. But once the market comes, others want a piece of the pie, right?

Don't SMEs need patents arguably even more than multinationals so that: (1) they get investors (your fourth factor);(2) they have an insurance mechanism against competitors and opportunists (your first and third factors); and (3) they can make big money if they choose to be bought out (your third factor, and the aim of most startups)? With the vastly unknowable meta patent litigation landscape and all the well-documented travails involved in getting any authoritative or predictable sort of decision, it seems that the second factor becomes a bit redundant... So then one final question is the old quality question. IF we accept that patents are necessary for SMEs for the reasons (1)-(3) above, and that litigation is really a mechanism for testing whether and to what scale a monopoly is desirable, and there's lots of efforts in the meantime to develop the best products for consumers, should we care about quality, in truth?

Anonymous said...

Excellent blog, the extant patent narrative should certainly be reevaluated.

However, I do take issue with the entrepreneur who says he does not need patents.

I can give at least one case where a patent infringer (literally, a thief) will get rich, and the innovator will probably lose his company after 10 years of hard work and much investment, all thanks to the fact that the patent system is not strong enough and not pro-innovator enough.

Roufousse T. Fairfly said...

[Part 1/2]

Some could consider the claimed “decline” to be dubious, as it implies that there once existed some golden age of "patent quality".

You might think that I'm being provocative (I almost added "as usual"), but you might think otherwise after reading the following excerpts drafted more than 140 years ago.

Their provenance are:

Reports by Her Majesty’s Secretaries of Embassy and Legation
respecting the law and practice in foreign countries with regard to inventions.

Presented to both houses of parliament by command of Her Majesty, 1873.


As the title states, this is an overview destined to the UK Parliament of most of the then existing foreign patent laws. Most of the country reports are succinct, but among the remarkable the exception on the US patent law.

p. 233: The present system of examination “is defective in this [:] The applicants and their attorneys have direct access to the Examiners. The Examiners determine all questions of fact and of law, and pass cases for issue, or reject them. Practically there is no review of these decisions, except as appeals are taken in rejected cases. From their decisions passing cases for issue, the proceedings being ex parte, there is no appeal. The result is, many bad and interfering patents are issued. Inventors and manufacturers too often are put to great and needless expense to determine their rights, the public confidence in the Office is diminished, and the validity of all patents issued is suspected.

p. 238: [...] Commissioner Leggett in a decision in 1871 may be quoted: “Some Examiners are very quick to detect resemblances, and reject almost everything; others are equally quick at finding differences, and will grant patents of mere shades of variation. Hence, a picket fence is rejected on reference to a comb; a urinal, on reference to a blacksmiths furnace; a surgical instrument for injecting spray into the throat or nostrils, on reference to a fireman’s hose; and an ore crusher, on reference to a nutcracker.” On the other hand, some examiners have granted patents for no invention at all. In a recent case of interference, in which such a patent was in question, Acting Commissioner Thacker stated in his decision that “the grant of such patents for what is utterly unworthy to be called an invention, is a fraud upon the public, and is to be condemned in the strongest terms,” and hoped that a recent decision in a law court “would check the issue of patents of this description, the number of which has been steadily increasing.” The critics who take a gloomy view of this misapplication of the examining faculty, assert that the American system must thus work, where “as in the (American) Patent Office, so many men of many minds, changeable with every new administration, are required to make independent decisions.”

There were already attempts of "quality control", before the management consultant mafia got in with their ISO nonsense:

The present Board of Revising Examiners has also been criticized as not amounting to much. This view of its position follows naturally from the views held as to the inefficiency of the examining system as above pointed out, inasmuch as that Board has not such a review of the acts of Examiners, and a control over all primary decisions, as are necessary to the proper working of the system.

Roufousse T. Fairfly said...

[part 2/2]
The job description for patent examiners hasn't evolved that much:

Moreover, according to the present system of uniting in the same person the duties of examining practically and scientifically into an application for a patent, with the duty of deciding nice questions of law, it becomes more and more difficult to find persons capable of performing both duties equally well. For questions as to the patentability of inventions become more difficult with the increase in the number of previous devices. An examiner must familiarize himself with all the inventions that have been made in his class not only in this country, but in Europe. Their great number and complexity have rendered the study of them a profession to be acquired by years of labour. An examiner’s decisions involve nice questions of law, of science, and of mechanics. The more recondite principles upon which depend the practical success of processes and machinery must be familiar to him. Large amounts of property often depend directly or indirectly upon his action. The ability and acquirements necessary to the proper discharge of his duties must be of a high order—scarcely less than those we expect in a judge of the higher courts of law. The increase in previous devices is very large. Every year adds some 20,000 [...] to the list for examination, with only the additional help which may be given by the record of inquiry into the patentability of the latest device of a class. The Examiners of the American Patent Office are generally men of distinguished ability and untiring industry, but their number is inadequate to properly discharge, under such an increase of work, both the sets of duties demanded of them.

Many the EPO may choke when reading this suggestion of deBESTification:

In view of these criticisms of the examining system, it has been proposed to separate the research from the judgment, to restrict the primary examiner to the practical examination of experts into the invention, and to establish officers to apply the law in its nicety to all applications for patents.

The observation on p. 240 may sound familiar to many today:

The system of re-issue was formerly abused. It was perverted into “a means for unlawfully stretching the apparent scope of patents beyond the true invention. Under careless and incompetent administration, this evil practice grew until it had assumed alarming proportions. No sooner did a patent for some really useful invention become remunerative, and so draw attention, than it became the object of the greedy and unscrupulous to find some old patent worthless in itself, and purchasable for a song, but in which might be found some rude embryonic traces of the principles involved in the valuable patent. Then a re-issue was obtained, and all the ingenuity of language was called into play to give this re-issue the apparent effect of anticipating and covering whatever was valuable in the later patent. This species of re-issue became a weapon wherewith to embarrass and levy black mail upon meritorious patentees and manufacturers, and either to cut off or compel a division of the hard-earned fruits of their ingenuity, or of their enterprize and invested capital.

“This had the effect, too, of casting a taint of suspicion upon re-issues generally, to the great injury of bona fide meritorious inventors.

“It was found necessary to cast some restraints upon the grant of re-issues, so as to put a stop to this mischievous practice.”


On p. 263 the report addresses in turn some criticism laid at the feet of the patent system:

"Frivolous patents are taken out to make claims."

Such a Frivolous complaint is impossible under a well-administered system of patents on the American plan. Applications for such patents would be weeded out.

[...]

"Better to yield to extortion than go into Court."

Complaints of this class would not be heard under a system which gave every patent an acknowledged and high legal status at its grant.


Plus ça change...

Susan said...

The system already knows that Examiners are not perfect. Two-thirds of European patents are either revoked or amended if opposition happens. I'm sure close to 50% must be revoked in litigation, at least in some sectors. From my personal experience in biotech I would say I have seen very few patents that are valid under classical criteria, but they are 'good enough' to be granted compared to everything else which is granted. Many of my small clients would not be able to use the patent system if this leeway did not exist. So 'patent quality' is complicated and not necessarily the way to best optimise the system

Joe Wyse said...

Well, Neil Wilkof's point is well taken , but I would suggest that patents have different levels of appeal to different industrial sectors: It may well be that, given the low entry level cost and short life cycle of much of social media innovation,the "laws delay" inherent in the present patent system and the time and trouble spent in obtaining patent protection may just mean that, in that particular sector, the costs may often outweigh the perceived benefits in eventually achieving a patent monopoly in areas of rapid onset obsolescence .
On the other hand, in fields with a longer life cycle such as drug development,biologicals, medical devices, crop plant innovation and applied chemical processes, huge resources are committed by SME's in R&D and regulation expenses, and the road to market (or to further rounds of funding) is long and beset with uncertainty. The prospect of achieving an eventual monopoly for a few years provides an incentive for the SME's and their potential investors to battle on. But for the patent system, it is hard to see how hard won applied scientific advances would be transferred from start ups to the real world.
One is lead to speculate as to what effect lower filing fees and swift patent examinations would have on the world of social media and allied industries.

Anonymous said...

Interesting thoughts Joe Wyse.

Contemplate further that patent law is (largely) non-sector specific.

And this is so for a very good reason: the next great wave of innovation cannot be known a priori.

You cannot legislate to 'allow' or 'not allow' that which cannot be known beforehand. Therefor, the system is purposefully st up with a wide open front gate and 'success' is actually let to be developed post grant (a patent is no guarantee of market success).

Anonymous said...

There is nothing so naive as inventors and entreprenuers who in their arrogance believe that they and they alone are the smart ones and smart enough to identify, secure and exclusively utilise know-how. It is a narrative for a nanoscopic sector of the world of IP, patents and technology. The danger is that the vast majority of ignorant users will inappropriately buy into this narrative. Lets face it the user base is massively ignorant of IP and its nuances in the commercial world. A serial entrepreneur in social media? What does he/she know about patents anyway? Its just brand, spin and hype about "technology" meaning fancy back end databse usually and mass unumpty consumer focus. Give me a break! Try that strategy in a biotech start-up.

When it comes to patents and know-how there are rare scenarios where it is either/or.....the rest are usually both.

The reason why a "know-how" strategy is appealing to many is because it is "free". They feel blessed reflief in their eyes in not having to go to the expense of patents. Hey! What a lovely day! I don't need a patent just a big wad of luck!

So the key IP narrative of our time is "IP Ignorance". Never have we lived in a time when the IP narrative has been hijacked by those who know next to nothing about IP. So "All it takes for this twaddle to become mainstream is for those who really know about IP to do nothing." Which is largely what they are doing.

Susan said...

Anonymous of Thursday, 5 December 2013 10:44:00 GMT you do make some valid points. However the patent system is there to help businesses, not the other way round, and to an extent we as patent attorneys have to share some of the blame for the IP ignorance we see around us. I think we've failed to address the needs of the smaller companies by not giving them affordable patent services and by not showing them how best to utilise IP.

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