It’s widely recognized that the American patent system is “broken” and needs to be “fixed.” ((See Chorus Of Mainstream Press Saying The Patent System Is Broken Gets Louder; Bill Gates’ 1991 Comments on Patents ; Even The OECD Is Noting How Dreadful Patent Quality Is Negatively Impacting Innovation.)) And so various alleged “patent reform” measures have been bandied about for years now.
And so, after about six years of gestation and special-interest wrangling, the America Invents Act was signed into law on Sept. 16 by President Obama. Below I summarize my take on this law. (For elaboration, see the slides and audio I presented in Mises Academy Webinar a week after its signing, appended below; see also my Mises Daily article, Obama’s Patent Reform: Improvement or Continuing Calamity?)
1. Patent Law versus Private Property and the Free Market
Despite the received wisdom that patent rights are a type of property right, they are in fact simply state-granted monopoly privileges that allow patentees to use state force to squelch competition. See, e.g.:
Patent law should be repealed completely and immediately. That is the optimal, pro-property, pro-capitalist, libertarian solution.
2. What Real Patent Reform would Look Like
Real patent reform is repeal of the US patent law. Short of that, any legislative, executive, or judicial reform that significantly reduces the scope and impact–and thus cost–of patent law, is to be welcome. As I laid out in Radical Patent Reform Is Not on the Way and How to Improve Patent, Copyright, and Trademark Law, significant reform would include things like:
The reasons for these reforms, and others, are explained in the preceding linked articles.
So the question before us is: Does the AIA achieve any such significant reform?
3. The AIA: Good, Meh, and Ugly
In what was a surprise to me, one of the improvements I have advocated has been adopted: a version of the prior-user defense (discussed below). Other than this, the AIA does not significantly reduce the overall cost of the patent system. Almost all of the changes are minor, and some make a horrible system even worse. Let’s review them.
Prior Commercial User Defense. Under previous US patent law, if someone is using a device or process in secret, and someone else independently discovers or invents it later and then patents it, the second inventor can stop the earlier user from using their time-tested machines or processes. For example if a chemical company uses a given innovative nozzle or mixing technique to make a product more efficiently, and keeps this as a trade secret, then if a second company independently re-invents and patents this technique, they could stop the first user from using their own machine or process. In 1998 a narrow exception was added to give “prior users” of business methods a defense against those who later patent the same method. Subsequent caselaw weakened business method patents so that this defense was even more rarely needed (see the Bilski case in 2008). The AIA’s one significant improvement–probably the first real improvement to US patent law since 1790–was to adopt a fairly broad prior user right, one not restricted to business methods.
So now, for example, a patentee seeking to sue a competitor for patent infringement may fail if that competitor was already practicing the patented idea. This can weaken the ability to use patents for legal extortion, at least in some circumstances. This is good. A thin reed–but good. There are special-interest exceptions to this defense, and there is still no general independent inventor defense, but the expansion of this defense is nontrivial and good.
Other positive, albeit minor, changes to US patent law in the AIA, include:
First-to-File Priority System. The big hub-bub about the AIA is that it changed the US patent system from a first-to-invent priority system to a first-to-file priority system (more like other countries’ patent systems). ((See Ayn Rand Finally Right about the First-to-File US Patent System.)) Patent lawyers and others complain about this, but in reality it makes little difference (and why they whine about patent reform in either direction is a mystery; any change only generates work for them–see Mike Masnick, New Patent Reform Law Already A Good Thing… For Patent Attorneys). First, of hundreds of thousands of patents filed annually, less than a hundred are contested in so-called “interference proceedings,” the previous method of settling who gets the patent between two independent inventors who both file similar patent applications. I.e., this problem is rare, and fairly irrelevant. Second, and most importantly, the victim of patent aggression does not care whether he are being sued or extorted or put out of business by a patentee who is the first inventor or the first filer. What difference does this make to him?
And a third point about the debate over what is better, a first to file, or first to invent, patent priority system. But note that in cases where this question even arises there is nearly simultaneous, independent invention of the same thing by different people. As I and others have suggested, not only should there be a broad independent inventor defense (that is, even when the accused infringer is not a “prior user,” but a later, but independent, inventor), ((Prior User Rights and Patent Reform.)) but the fact of independent invention should mean the invention is obvious and thus unpatentable. ((See Mike Masnick, The Economist Notices That The Patent System Is Hindering Innovation And Needs To Be Fixed.))
Boring Miscellany. Other changes that I rate as “meh” include repeal of the residency requirement for Federal Circuit judges, giving the USPTO authority to establish satellite offices, and the creation of a USPTO ombudsman. Who cares? There is also complaining about PTO “fee diversion,” but this is completely confused complaints, as I noted in Patent Fee Diversion and Patent Reform Whining.
The AIA makes only minor changes, and does little to diminish the escalating cost of patents. The only significant improvement is prior commercial user defense, and it makes some things worse. The AIA does nothing to stop:
Under the post-AIA system, stupid patents will continue to be granted (Obama Signs Patent ‘Reform’ Bill — ‘Crustless Sandwich’ Still Patented, David Kravets, Wired).
The complaints that the AIA helps big corporations at the expense of the small guy are misguided. Neither large corporations nor independent inventors should be able to obtain state-granted anti-competitive patent monopoly privileges.
The audio of the webinar is available at: Kinsella Webinar: Obama’s Patent Reform (mp3), and the slides used are provided below as well.