Patent Reform is Here! O Joy!

by Stephan Kinsella on March 23, 2011

Of course, the best patent reform would be abolition. But incremental reform would be welcome too–as long as it’s significant, and unambiguously positive. I’ve outlined some ways there could be significant improvement in How to Improve Patent, Copyright, and Trademark Law. These include reducing the scope of patents, reducing the term of patent and copyright, providing for active (instead of automatic) registration of copyright, clarifying and beefing up the fair use defense for copyright, getting rid of injunctions in patent law, and so on. These would be real changes. Of course, that’s why they would be opposed, and why all the changes that are proposed are so trivial.

Legislation is modified regularly, so it’s not surprise when patent law is adjusted. Or when IP advocates of various stripes pretend like a given reform is “revolutionary” or “substantial.” It never is. As I noted in “Radical Patent Reform Is Not on the Way,” in response to a recent legislative proposal to “reform” patent law, one patent attorney hyperbolically claims:

The U.S. has the best patent system in the world. What I’m afraid of is that they are about to throw the baby out with the bathwater.… The new rules are radical. The new legislation is radical. They will cause fewer patents to be issued.

But this is ridiculous. As I noted in that article,

[T]he truth is that none of the developments [proposed] are really that dramatic. Patent law is always evolving due to court decisions, new rules issued by the PTO, and new legislation from Congress.

… [S]ince the inception of modern US patent law in 1790, the field has been continually in flux. … Indeed, frequent and arbitrary change in the law, and the uncertainty that this breeds, is common in state-run, legislation-dominated legal systems.[19] The fact that state law changes is not new.

But though various details of the patent system continue to morph pursuant to political pressures and legal trends, the essential aspects of the patent system have not changed at all: The scope of what is patentable has not shrunk appreciably. The term is still about seventeen years. Patents are still enforceable by injunction. The groundless presumption of validity is alive and well.

Patent defendants who win usually pay their own legal fees, as before. Defending patent lawsuits continues to be incredibly expensive. Lobbying goes on as before. Companies continue to need to obtain patents if only for defensive purposes.

Obviousness and novelty remain the standards for patentability — and these standards are still vague, nonobjective, and subject to unpredictable interpretation by an inept and bureaucratic government agency, by state courts, and by technically inept juries. …

And so, for the foreseeable future, companies will continue to spend lots of money obtaining patents. And small businesses will still face the threat of patent-infringement lawsuits and court-ordered injunctions that could put them out of business.[20] And these suits will continue to cost literally millions of dollars to defend. “Bad” patents will keep being granted, and various patentability standards will always be murky, arbitrary, and uncertain.

… [O]ther than more money being spent on patent attorneys and a relatively small, probably temporary, shift in the balance of power between patentees and alleged infringers, the patent system has not radically changed. All of the problems noted above stem from the basic nature of the patent system. They will not recede by merely tinkering with details and leaving the essential features of the system intact.[22]

Finally a patent “reform” bill–the “America Invents Act”–has been passed by the Senate (S.23), co-sponsored by Orrin Hatch, on a 95-5 vote.

Do not trust anything pushed by any Congresscritter, especially the loathsome Orrin Hatch (R–IP).1 If anyone wants to improve patent law, just reduce the term and the scope and the penalties for infringement.2

The changes to be made to the US patent law by the America Invents Act are summarized in an AIPLA Report (more details on the changes can also be found in this Akin Gump news alert)–I reprint some of these bullet points below with my comments in parenthesis and italics:

  • Adoption of a first-inventor-to-file patent system (everyone says this is a huge change but for most cases and most inventors, this is irrelevant; it mainly affects squabbles between competing patentees–who cares which one of them wins the patent, the first to file or the first to conceive of the idea? Victims of the winning patentee don’t care which one sues them.);
  • Funding for the U.S. Patent and Trademark Office that will bring budget predictability to this critical agency (meh);
  • The creation of an ever more effective post-grant review procedure (I’m skeptical, but a possible minor improvement);
  • Third party submissions of prior art for pending applications (minor possible improvement);
  • USPTO fee setting authority (meh);
  • Supplemental examination authority (meh);
  • Repeal of the residency requirement for Federal Circuit judges (meh);
  • Micro entity status for reduced fees (bad; makes it cheaper for independent inventors to obtain patents);
  • Unpatentability of tax strategies as within the prior art (arbitrary, but possibly a slight improvement);
  • Elimination of the best mode defense (bad–removes one possible defense that can be used against patentees who game the system or flout the best-mode disclosure requirements);
  • Creation of a special post-grant review for business method patents (mehjust business method patents?);
  • USPTO authority to establish satellite offices (meh);
  • Creation of a USPTO ombudsman (meh); and
  • USPTO authority to prioritize examination of inventions of national importance (bad; will result in some patents issuing faster).

Those interested in this and related topics might find my current Mises Academy Course Rethinking Intellectual Property, a six-week course, of interest. The first lecture was this week, Tuesday, March 22–it’s not too late to sign up–even if you miss the first class, you can watch the recording before lecture 2 next week. For more information, see my article Rethinking IP, and Kinsella Can Be Your Professor.

[Mises cross post]

  1. Identifying Hatch as (R–IP) calls to mine one of my favorite Rockwellianisms–in one of Lew Rockwell’s columns many years ago, probably in the venerable Rothbard-Rockwell Report or The Free Market, he offhandedly mentioning some Congressman, and glibly listed his affiliation thusly: “Rep. Smith (R–Lockheed)”. Anyway, for examples of Hatch’s IP-abominations, see Hatch’s “International IP Piracy Priority Watch List”; Hollywood Backs State Thuggery Over Free Speech; The Road To (Intellectual) Serfdom; and COICA: More Copyright-Backed Censorship on the Way?. []
  2. This is analogous to the tax reform issue. As I noted in Say No To Tax Reform,

    Calls for tax reform of a distraction (no offense, my naive, youthful advocacy of a national sales tax). For good material on this see: Rockwell, The Tax Reform Racket; Rockwell, Diversions; Rothbard, The Consumption Tax: A Critique; and The Fair Tax Fraud and Flat Tax Folly by Laurence Vance. In Power and Market, Rothbard lays out a taxonomy of the methods utilized by the state to confiscate private property and how each tax uniquely distorts the free market.

    As Rockwell writes in The Tax Reform Racket:

    Is there a need to reform taxes? Most certainly. Always and everywhere. You can always make a strong case against all forms of taxation and all tax codes and all mechanisms by which a privileged elite attempts to extract wealth from the population. And this is always the first step in any tax reform: get the public seething about the tax code, and do it by way of preparation for step two, which is the proposed replacement system.

    Of course, this is the stage at which you need to hold onto your wallet. []

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