Bad patents -- or bad journalism?

On the final lap ...

This Kat regrets his recent absence, but he is into the final lap of a book publishing project that has been more or less all-consuming during the last several weeks. Moving from one such publishing environment to another is a daunting challenge. "Enough of your excuses", says Mrs Kat. "Just get on with it." She is right.

Against that backdrop, my attention was drawn to a leader article that appeared in the 20 August issue of The Economist. Entitled "Patent Medicine" here, the piece is one of a continuing number of articles that appeared in the magazine critical of the state of the patent system. Just so readers know where I stand: while I am one of these who devour every word of every issue of the magazine, my feeling about their coverage of IP issues can only be described as one of tough love. I frequently find their treatment of IP issues unsatisfying, usually because they seek to overstretch their reach on the IP topic of interest and the discussion tends to jump around from point to point. Unfortunately, their most current attack on the patent system is another example.

The article goes like this:

1. Google has announced its bid for the Motorola Mobility mobile phone business and its 17,000 patents plus 7,500 plus pending patent applications. Google currently has round 2,000 patents. Google was clearly desperate to win Motorola's porfolio", having lost out in the recent auction for the Nortel patent portfolio.

2. Patents are good in principle, because they encourage innovation and discloure in exchange for a monopoly of limted duration. "In recent years, however, the patent system has been stifling rather than encouraging [innovation]."

3. Proof for this can be found in the fact that, according to an unnamed 2008 study, the total profits from patents of American public companies (excluding pharmaceutical companies) in 1999(!) were about $4 billion dollars, while costs associated with patent litigation were about $14 billion dollars. "Such costs are behind the Motorola bid"; it wants the patent portfolio to strengthen its legal hand in the various lawsuits in which it finds itself in connection with smart phones.

What then follows is quintessential Economist-speak; first the problems with the American patent system and then the solutions (all in three paragraphs).

The Problems

1. Prizing the number of patents rather than their quality.
2. The granting of dubious patents, especially in the areas of software and business methods.
3. The increasing menace of patent trolls.

The Solution

1. Variable periods of patent protection based on the industry involved, depending upon whether innovation is fast and relatively cheap (e.g. computing) or slower and more costly (e.g., pharmaceuticals). "[S]uch distinctions are made in other areas of intellectual property law", it is noted without further elaboration (and this Kat fails to come up with any examples except for some shortened periods of protection for certain kinds of copyright-protected works).

2. Raise the bar for registration of software and and business method patents,what the article calls "dubious patents" and make "re-evaluating bad patents ... more open and efficient."

3. Increase the requirements for disclosure of the ownership of patent porfolios and establish specialized courts to hear patent disputes (East Texas Federal District Court, are you listening?).

What do make of this? Passing on the reference to the unnamed 2008 report based on results for 1999, and without knowing what is meant by "profits from patents" or "associated litigation costs", this Kat would note the following:

1. Regarding the three cited problems, it is possible to recategorize them as the problems of: (i) the standard for registration; (ii) patentable subject-matter; and (iii) enforcement. If so, neither software and business method patents, nor patent trolls, strike me as being the central reasons why the patent system is allegedly now "stifling innovation rather than encouraging it."

2. Point no. (i) seems more relevant, although there have significant efforts over the last several years to raise the bar on patentability.

3. In summary, it does not seem that the article has made out the case for these three problems to be the key roadblocks to a patent system in support of innovation and development. Indeed, even if you are one who believes that aggregate innovation has declined over the last decade (this claim has been made by various luminaries), it may be the case that this decline is due to factors other than the patent system. If so, the patent system may be the result of this decline rather than a major driver.

4. Whatever you think about these three problems and the relevant weight each should be given in accounting for the alleged current mess in the American patent system and the decline in innovation, it seems questionable that the three solutions offered provide the necesssary fix.

5. Thus, it is not clear how setting different time periods for registation for different industries necessarily solves the problem of "low-quality patents". At most, it merely might provide that at least some of these "low quality patents" might not bet around for the current 20-year period.

6. Depending upon how one feels about software patents and business method patents, "raising the bar" might provide some improvement to the system, but only at the margin. Similarly, improving the "re-evaluation" of "bad patents" is a poor and inefficient second alternative to avoiding such "bad patents" in the first place.