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Source link: http://archive.mises.org/16177/patent-reform-is-here-o-joy/

Patent Reform Is Here! O Joy!

March 23, 2011 by

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). ((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?.)) If anyone wants to improve patent law, just reduce the term and the scope and the penalties for infringement. ((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.))

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.

Update: See this disgusting, dishonest defense of the patent system by the loathesome faux-libertarian Dana Rohrabacher. Ugh.

{ 34 comments }

Nuke Gray March 23, 2011 at 9:00 pm

As an inventor, I’ll just ask one question- what have you invented that you then gave away for free? That is what you are asking us to do.

BioTube March 23, 2011 at 9:46 pm

Ever heard of an NDA?

Tex2002ans March 23, 2011 at 11:45 pm

I’ll just ask one question- what have you invented that you then gave away for free? That is what you are asking us to do.

You do not have to give away your invention for free, no one is stopping you from being able to produce and sell whatever you have invented.

Nuke Gray March 24, 2011 at 12:06 am

Your name is not Kinsella, and you haven’t listed your own inventions here, I note. Who here is an inventor, or ‘product developer’ (as Harvey Reese wants us to call ourselves)?

charonme March 24, 2011 at 2:29 am

Nuke, your question is completely irrelevant to this topic, so you probably won’t mind a similar question: do you use any technology or idea not developed in the last ~400 years? Is it all with the consent and compensation of their authors or their heirs?

Sione March 24, 2011 at 2:55 pm

I’m an inventor.

Sione

Nuke Gray March 24, 2011 at 9:08 pm

And what do you think of Kinsella’s arguments? Do you agree or disagree with him?

Oklahoma Libertarian March 24, 2011 at 2:19 am

Ummm, how about every single book/article/blog post he’s ever written?

Peter Surda March 24, 2011 at 6:02 am

Nuke, have you stopped beating your wife yet?

Nuke Gray March 24, 2011 at 6:21 pm

Of course not! She likes it, honest!

coturnix19 March 24, 2011 at 7:39 am

you should probably stop being an inventor then…

Braden Talbot March 24, 2011 at 11:10 am

When did anyone ever say you had to give anything away for free?

Abhilash Nambiar March 24, 2011 at 11:59 am

Benjamin Franklin refused to patent any of his inventions. His most useful inventions include the lightning rod and the bifocal lens. Here is his reasoning:

As we enjoy great advantages from the inventions of others, we should be glad of an opportunity to serve others by any invention of ours; and this we should do freely and generously.

Stephan Kinsella March 24, 2011 at 12:08 pm

Damn, you actually said somthing useful!

Abhilash Nambiar March 24, 2011 at 2:23 pm

To be fair, I was not trying to impress you or otherwise.

xcopfly March 23, 2011 at 9:54 pm

Does this mean a major software company can pay the required thousands of dollars and shut down every small, independent, and/or open-source competitor there is? Can some random person now file a patent for “Use of office collaboration software to form a knowledge base relevant to one or more subjects” and rip through the Internet, stealing money and shutting down Wikis he/she politically/religiously disagrees with? Worse yet, could he become the new unchallengable supervisor of all Wiki articles?

Gerard den Braber March 24, 2011 at 4:32 am

The main problem with US patents is not directly related to the patent system itself, but the too costly litigation, the extravagant damages awarded, and the (in)competence of the fist-instance courts. This gives a patent owner (a patent troll) the incentive and opportunity to conduct a legal form of extortion. The alleged infringer, which may even be a Big Company, is likely to give in, even if he is convinced that there is no infringement and/or that the patent is totally invalid. Why? The cost of litigation is higher than the license fee asked for, so he settles (with a bad taste in the mouth). This is particularly a US problem.
I’m sorry, but US citizens tend to be too US centric. The world is more than the US only. Please look around and see what others in the world are doing, how their patent systems work, some quite well, serving the legitimate interests of small, young, innovative businesses. Look around and learn.

Sione March 24, 2011 at 3:09 pm

Gerard

I’m sorry but you Euro white fellas tend to be far to Euro white fella centric. The world is more than the Euro white fella zone only. Please look around and see what others in the world are suffering, how they must employ risky work-arounds to avoid patent monopolies, how markets are prevented from working freely by patent monopolies, how property rights are eroded and wealth expropriated, how the whole mess is imposed by govt cronies, monopolists and statists, how the monopolistic patent systems copied from or imposed by Euro white fellas damage the legitimate interests of vulnerable people (including the innovative, the old, the young, the ill, the helpless, the weak, the clever, the inventive, the powerless, the investor, the start-up, etc. etc. etc.). Look around and learn.

Sione

J Cortez March 24, 2011 at 8:50 am

I read this quote, “What I’m afraid of is that they are about to throw the baby out with the bathwater,” and immediately thought of something Tom Woods said in regards to people defending the Fed with that same line.

To quote Tom Woods: “You should definitely throw the baby out with the bathwater—if it’s a demon baby.”

Nielsio March 24, 2011 at 9:57 am

:)

Wildberry March 24, 2011 at 2:34 pm

And I thought Kinsella’s “Rosemary’s baby” quip was original, but now I learn he stole it from Woods. What a disappointment!

I guess this demonstrates that the highest for of complimnet is emulation.

Stephan Kinsella March 24, 2011 at 2:47 pm

Wildberry, just to clarify, you remind me more of of the foetus in Eraserhead.

Wildberry March 24, 2011 at 4:36 pm

OK, you got me on that one, I had to look it up.

That is the way you imagine me? I’m much more hideous in person!

Inquisitor March 24, 2011 at 1:48 pm

Funnily enough, when watching Dragon’s Den (UK show where budding entrepreneurs are put up against 5 potential business magnates, and a show where it is a frequent question “But is your idea patented?”), one of the ideas was a device to reduce standby electricity consumption by electronic devices. The inventors said they were in it for the money (duh) and the potential green savings (usual crap.) So, unexpectedly, Duncan Bannatyne retorts: (loosely paraphrasing) “You do realise you don’t really care all about the environment, do you? By patenting this you’ve denied other manufacturers the possibility of producing this and reduced its scale.”

I think in a free market without IP the question won’t be “What IP do you have protecting this?” but “how easy is it to reverse-engineer?” or “Is it protected by an NDA?” etc.

Inquisitor March 24, 2011 at 2:33 pm

-potential*

nate-m March 24, 2011 at 3:12 pm

The reality for vast majority patents are only used for purposes of convincing lenders to give loans. Something like well over 90%.

Almost nobody actually does anything with the patent. They don’t sell the rights to the patent, they don’t try to sue other people with similar ideas, and quite often the patents never actually end up covering any portion of any product.

It’s quite pathetic, really.

Wildberry March 24, 2011 at 6:29 pm

Stephan,

Your list of revisions has some merit. I would especially be supportive of reduced terms for copyrights.

On your patent article, I have some questions:

1) Isn’t the presumption of validity based on the fact that a patent is assumed to be properly issued, and the burden should therefore be on the party asserting invalidity? I realize that this puts the issue on whether the patent was issued properly by the patent office, but that is a technical issue concerning the competence of the issuers. Why shift the burden to the patent holder?

2) Wouldn’t elimination of the best mode defense just make it easier to game the patent process, as was apparently the case in Ajinomoto Co., Inc. v. International Trade Commission, in which the patent was invalidated because they purposefully filed based on a strain of bacteria that was not their favored strain for the patented process? How would this be an improvement if a patent can be awarded without requiring a best mode disclosure?

We should talk about your list sometime. First time I’ve encountered the less-than-absolutely-radical-and-extreme Kinsella.

Sione March 25, 2011 at 12:56 pm

Nuke Gray

Yes, I think he is likely correct.

When I read his first draft paper years ago I was surprised. His view was counter-intuitive. Up to that point, I hadn’t thought all that much about the nature and attributes of IP even though I was involved with it in a related field. I figured I was in the position of needing to find out much more. After reading Dr Kinsella’s draft paper I went and read all the citations he supplied. Then I asked around some (sought information and opinion from people I respected for their knowledge and experience, as well as from people I knew to be scoundrels and rortists- albeit successful ones). More reading resulted. Then I spent a lot of time considering the situation from first principles. In the end it came down to two main issues and a set of subsidiary ones, any of which was fatal to conventional notions supporting the institution of IP. They two main ones were:

1/. Can it be proved that IP is property? If so, then what is the proof?

2/. As the practical is the moral, is it practical to treat IP as property?

It appears the answers are in the negative. In conclusion then, Dr Kinsella’s position is formidable- solid. He’s on safe ground. Now that was an unexpected surprise. It meant that such luminaries as Ayn Rand were not correct in their formulations regarding IP. Also that Rothbard had likely erred to some extent. It also suggested that by neglecting to properly examine the matter of IP many of the libertarian movement had erred by omission. Various anarchists, on the other hand, appeared to understand the situation clearly. This turned out to be a demonstration of the old lesson of not taking anything for granted without being prepared to check it from first principles.

Sione

Wildberry March 25, 2011 at 2:00 pm

Sione,

I am just curious to know if in all of this research, you ever encountred the statutes themselves, or every read any cases where a particular issue was decided and examamined the reasoning there? Did you ever read any treatises supporting the concept of IP other than those who were responding to the sources (or similar) above?

In other words, if you only evaluated Kinsella, Rothbard and Rand for consistency of thought, how do you know that you have only validated the system of logic that you share with these three sources? What was it that you contrasted this view with?

Sione March 25, 2011 at 8:59 pm

Wildberry

I qualified in law (MLLP) a long while back so I’ve certainly encountered the statutes, read precedent cases, examined the reasoning, had direct experience with IP litigation and so on. Mostly this turns out to be irrelevant to the issues that require solution.

Firstly, Law, as practiced in the British Commonwealth of Nations, does not embody the consistent application of principle. It suffers from many internal contradictions and often lacks sound logic. IP law is not an exception to this. My experience with the US suggests matters are even worse in that legal jurisdiction. Anyway, the conclusion is that the law is not a reliable source from which to erect or confirm a derivation of rights, principle etc. For example, in the case of property, Mises confirmed that the correct derivation of and defintion for property is not legalistic. He points out that the right to property is not derived from law or a legal system. Interestingly enough, Ayn Rand points out that individual rights (including the right to acquire, own and dispose of property) are not based or validated upon a legal system or the law. So she was identifying that a just and moral legal system presupposes individual rights, not the other way around.

What this meant for my enquiry was that it was not possible, or justifyable, to employ the law or legal precedent (as interesting as some of that can be) to defend argument for the validity of IP, let alone property rights themselves. Bugger!

In the end the deal was that I had to return right down to the bottom of the intellectual hierarchy of thought underlying IP. Then it was necessary to go further and take a good long look at the derivation of individual rights, including the property right. This occurred after lots of fascinating discussion with lots of other people (including colleagues and associates and even with people whose opinions I’d normally treat with doubt and caution). Now the interesting thing about all this was that the fellows I’d assumed would have the answers at their intellectual fingertips (so to speak) were helpless when it came to the two main issues (disclosed in my previous post). Answers were not forthcoming. Same deal goes for most of the treatise I’ve located (regarding IP). Yet those two issues are the key to the entire business. If they can’t be properly and successfully resolved, then the idea of IP as property is a dead loss.

Secondly, in regards to defense of IP, you have to realise that at the time I first read Dr Kinsella’s draft there was little else of high academic standard available with the anti position- nothing I’d come across at that point anyway (turned out there was quite a bit, but not as specific or as fresh). Hence his material was a surprise and he certainly got my attention. It should have been an easy business to resolve in conventional manner I surmised. Turned out not to be so at all. Anyway, early on, nothing of the pro position I read was in response to his work. That material started to arrive later on. Still, it was handy that it did or else I’d still be waiting to see if anyone had a strong defense all sewn up. They didn’t and don’t and it is unlikely that anyone can achieve that. Again, it isn’t a case of observing the debate (like a tennis game where the ball goes back and forth) but rather a case of deriving the principle of property and of rights to property and then proving that all of this can be properly applied to IP.

Thirdly, my approach wasn’t a solely a matter of evaluation of pro or anti arguments for internal consistency. I concluded that the way to a resolution was to see whether it was possible to demonstrate solution to certain specific issues or particular questions (call them proofs or challenges if you like). Two in particular appear to be key.

Finally, the great majority of my colleagues are quick to promote and defend the pro-IP position. As may be imagined, it is simplicity itself to seek contradiction and critique of the anti position whenever I want it. Then that material can be tested out. The good news is I don’t have to pay for any delivered opinions! Practitioners and academics are passionate about this subject. How good is that!

Sione

Wildberry March 25, 2011 at 10:45 pm

Sione,

That was a great response, thank you.

OK, you’ve got me. What are your two key issues?

Sione March 26, 2011 at 2:51 am

Wildberry

Actually there are several issues although the two I am most concerned with are whether IP is property (and can be proven to be so from first principles) and whether it can be practical to treat IP consistently as property.

Sione

Andras March 26, 2011 at 1:04 am

Thank you Sione, you have so much to say when you loose your cynicism.

NotSwedish March 25, 2011 at 10:39 pm

@Sione
Thank you for your profound and interesting story.

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