I’m sure you’re all aware of Professor Mark Lemley from Stanford Law School. In a new article Lemley proposes policy changes to ameliorate current abuses of the patent system: Ten Things to do About Patent Holdup of Standards (and One Not To) (August 10, 2006). Stanford Public Law Working Paper No. 923470. These abuses arise from the complexity of modern technological innovation, coupled with the phenomenon of “patent trolls.”

Patents provide needed incentives. But in certain circumstances, they can give a patentee too much power to restrict an integrated product on the basis of a patent covering a minor component of that product. 11.

Having previously described patents as the system that has “fostered American growth and entrepreneurship,” Lemley is careful to point out that abolishing patents for the technology industries as neither a viable nor desired step. Many bad patents may exist yet “there are a number of significant inventions in the IT space that deserve patent protection.” 2. “Napsterizing” software patents as many open source supporters call for isn't Lemley's approach. Rather, Lemley takes a more considered view to: “realign incentives so that the value any given patentee can capture bears a reasonable relationship to the contribution their invention makes.” 11.

Citing the current patent practices and policies that hinder the role of the patent system, Lemley points out the “unifying” element to address as that of “irreversible investment.”

When defendants are taken by surprise, when they are unaware of the existence of a patent until after they have made these investments… (they) drive the licensing settlement value to a percentage that’s much greater than it would be in a ystem in which we calculated the value that the inventor had actually contributed to the product. 4.

Irreversible investment may have implications for open source software, as open source often rests on volunteer activities, With no investment towards technological R&D. Lemley recognizes the need to sometimes accommodate open source software in patent policy however:

...there are limited circumstances in which royalty free is appropriate, specifically where a software consortium is working in open source, because there may really be no other way to avoid patents covering open source software. 5.

Lemley does not propose that royalty free licensing within standards organizations be generalized to the rest of the software industry. To the inevitable vexation of open source supporters, citing principles of equity, promoting incentives to join standards organizations and antitrust concerns, Lemley continues: "if what you’re trying to say as a standard setting organization is, “We don’t want to pay inventors anything for their technology,” I think you’re going too far." 5.

Lemley’s specific proposals for standards setting organizations (SSO) and policy reforms include:

1. SSOs: impose RAND licensing terms.
2. SSOs: bind members to follow RAND policy.
3. SSOs: require patentees to specifiy the content of their RAND licenses ex ante.
4. SSOs: force disclosure of nonstandard terms by setting penalties for non-disclosure.
5. SSOs: impose step-down royalty (where each successive patenttee of an essential technology receives decreasing royalties).
6. Law/policy: increase the ability, under antitrust law, for SSOs to negotiate royalty rates.
7. Law/policy: raise the standard to prove willfulness in patent infringement.
8. Law/policy: change the approach to “defintions” and “proof” in royaltiy and damge calcultation, isolating royalties and penalties to the actual contribution of a patent to a product.
9. Law/policy: limit continuation abuses.
10. Law/policy: take more cautionary approaches to granting injunctive relief.