The House Judiciary Committee’s Subcommittee on the Courts, the Internet and Intellectual Property held the 110th Congress' first hearings on US patent system reform- American Innovation at Risk: The Case for Patent Reform. Testimonies were given by Professor Adam Jaffe of Brandeis Univ., Mark Myers, formerly of Xerox Corp. and current advisor at the NAS STEP Board, Suzanne Michel of the FTC and Daniel Ravicher of the Public Patent Foundation. Howard Berman (D-Calif.), chairman of the House Subcommittee, opened the hearings, stating:

Patents are one of the cornerstones of the American economy...at the foundation of life saving drugs and groundbreaking technologies. It is beyond dispute that robust patent protection promotes innovation. However, I also believe... the patent system is strongest, and that incentives for innovation are greatest, when the system only protects... patents that are truly inventive. When functioning properly, the patent system should encourage and enable inventors to push the boundaries of knowledge... If the patent system allows questionable patents to issue and... not provide adequate safeguards against patent abuses, the system will stifle innovation and interfere with competitive market forces.

Among arguments that distinguished the presentations, Jaffe had the insight that patents promote innovation above that possible in their absence, and stated patent reform should aim primarily at comprehensive, not industry/ technology specific, issues. Michel put forth critiques of how firms should leverage patents, which may reflect a narrow perception that patents promote innovation only through enforcing exclusivity. Myers, who has helped direct patent studies at the NAS, proffered that patents have spurred innovation for the past several decades and thus there is no need for fundamental changes. Ravicher raised several unanswered points with criticism of software patents, but his proposals for the general patent system are important.

Jaffe noted the importance of patent policy in furthering innovation above levels that would occur without formal regulatory means of appropriation for inventors. Patents promote the commercialization of inventions that would otherwise be too risky and costly to undertake, and in turn, stir economic growth. Jaffe pointed out that current problems with the patent system arise from two “mundane changes” to patent law and policy: the allocation of patent appeals to the CAFC, which has apparently take an overly "pro-patent" stance, and changes in the structure of USPTO fees/ financing, which provided incentive for patent examiners to approve patent applications. These changes made patents potent legal weapons while rendering them easier to obtain.

On software patents, Jaffe argued that some of the worst abuses of the patent system have occurred in relatively new areas covered by patents. Jaffe did not contend that new patentable subject matters nor technology specific issues are of priority in patent reform, but that a broader approach to fixing the patent system is needed: “the system must be changed so that its incentives discourage frivolous applications, encourage rigorous patent examination, and discourage patent litigation where there is not a true invention to protect.” Jaffe’s recommendations entailed making the USPTO more effective in issuing quality patents, such as by a patent opposition process. Jaffe also found judicial changes necessary for making the threat of patent litigation less harmful, especially when they concern bad patents.

Michel testified that while patents play an important role in innovation, patent policy must be balanced with competition policy. Specifically, Michel argued that bad patents can distort competition, innovation and markets; especially in cumulative industries, by discouraging R&D because of ill-defined scope in protected technologies. They can also raise the cost of litigation and induce unnecessary licensing costs. Firms may pursue patenting to build up defensive patent stockpiles not to, in Michel’s words, “protect their own innovation from use by others, but to have bargaining chips to obtain access to others’ patents through a cross-license, or to counter allegations of infringement.”

Michel’s argument on how firms use the patent system needs clarification. First, firms often selectively waive their option to enforce patents or never enforce them at all, thus there is nothing inherently wrong in obtaining patents without the intention to fully enforce them. Second, patenting to gain access to others’ patents through cross-licensing may actually benefit the industry, as that signals a diffusion of technology in the innovation community. Finally, filing patents simply for defensive purposes is wrong, but as far as I’m aware, only Red Hat does that.

Myers, former corporate R&D chief at Xerox PARC, offered compelling testimony, highlighting findings from years of research by the NAS STEP Board: "High rates of technological innovation, especially in the 1990s but continuing to this day, suggest that the patent system is not broken and does not require fundamental changes."

Myers agreed with Jaffe that the drawbacks of patents may be simply pronounced within new fields in the patent system. Among his recommendations, Myers proposed improving patent quality in new technologies and raising the standard for non-obviousness. What Myers did not propose is also important.

Eliminating specific patentable subject matters may be too costly, Myers suggested: "uncertainty about what is patentable in an emerging technology may discourage investment in innovation and product development until the courts clarify the law… greater certainty about patent validity would benefit innovators, technological followers, and consumers alike.” Later, Myers clarified his view on patent reform proposals that center on specific technologies, suggesting that they have limited value: "although the patent law is designed to be uniform across all applications, its practical effects vary greatly across technologies, industries... There is a tendency in discourse on the patent system to identify problems and solutions...from the perspective of one field, sector, or class."

Ravicher gave an interesting presentation. All previous testimonies considered only economic effects of patents on innovation, but Ravicher additionally noted that patents can affect civil liberties and individual freedoms. These issues can be important in shaping patent policy; yet Ravicher did not clarify exactly how patents unfairly deprive society of liberties and freedoms in “speech, privacy, religious expression, assembly, and voting.” Ravicher's next "shot" at patents appeared in the statement: "since patents are nothing short of government sanctioned restraints on freedom and competition, the public can also be severely harmed by errors within the patent system.” Ravicher did not explain nor show the relevance to his testimony of framing patents as “government sanctioned restraints.”

Other questionable points came when Ravicher argued the CAFC effectively put “virtually anything within patentable subject matter.” This statement is a stretch if left unqualified, however Ravicher seemed content with simply introducing a discussion of software patents: “Software, for example, which is nothing more than a set of instructions – an algorithm – to be performed by a computer in order to solve some mathematical problem, is subject matter that should not be patentable.” Noteworthy, but Ravicher should have addressed more clearly the functional aspects of algorithms and how they may or may not deem software patentable subject matter.

Ravicher gave two sets of policy proposals. One addressed patentable subject matter, where he argued for the elimination of software patents. The other recommendations aimed at improving patents generally. Ravicher did not explain the basis for his dual recommendations, nor why his proposals for the entire patent system are not sufficient to alleviate problems associated with software patents (other than that they exist).

Taken together, the testimonies provided a good starting-point for this year's patent reform discourse.

posted by Noel Le @ 8:05 AM | Academia, Legislation and Legislators, Markets: Business, Investment & Innovation, Patents

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