Friday, November 18, 2005

Patent Power and Innovation

There are growing degrees skepticism among academics and others about whether such state-imposed monopolies as patent protection help a rapidly evolving market such as the Internet.

What is "novel," "nonobvious" or "useful" is hard enough to know in a relatively stable field. In a transforming market that changes weekly (just look at Google stock price today at $400), it's nearly impossible for anyone - let alone an underpaid worker in the U.S. Department of Commerce who spends on average of eight hours evaluating the prior art in a patent and gets paid based on how many he processes - to identify what's "novel." Costly mistakes get made. On average it takes $1.2 million to challenge the validity of a patent, which means it is often cheaper simply to pay the royalties than to establish that the patent isn't deserved.

"Bad patents" are the debris of cyberspace. Nowhere is this clearer than in the context of business-method patents. There are an increasing number of business-method patents that now haunt Internet space. Patent No. 5,715,314, for example, gives the holder a monopoly over "network-based sales systems" - we call that e-commerce. Patent No. 5,797,127 forms the basis for and effectively blocks any competitor. Patent No. 4,949,257 covers the purchase of software over a network.

To those of us connected to e-commerce development, it seems bizarre that the US Patent Office consider these ideas to be novel and nonobvious. But the real problem is the incentives such a system creates. Awarding patents of that type siphons off resources from technologists to lawyers - from people making real products to people applying for regulatory privilege and protection. An increasingly significant cost of Net startups involves both defensive and offensive lawyering - making sure you don't "steal" someone else's "idea" and quickly claiming as yours every "idea" you can describe in a patent application. It is getting silly (unless you happen to be a lawyer or someone producing lawyers).

When the world was given TCP/IP and the collection of protocols it induced, a billion ideas became obvious to anyone who took the time to think. These were not ideas that were "discovered" because some lone inventor spent years toiling away in his basement, but because TCP/IP was a language with which practically anything could be done. And with very little promise of protection by government, lots was done. The Internet revolution was born long before lawyers arrived on the scene. Now they look like they may kill it.

The question economists are now asking is whether expanded patent protection will do any good. Certainly it will make some people very rich, but that's different from improving a market or stimulating innovation. The questions are many, while good answers are few. Does it make any sense in the context of computer code to protect an idea for 20 years, let alone the 95 years that copyright law gives code? Berkeley economist Joseph Farrell has floated the idea, although he has not endorsed it, of a moratorium. Berkeley lawyer Robert Merges has proposed badly needed changes to the patent system, to force better disclosure to competitors so that the government can determine which ideas really merit protection.

These ideas are good, but they underline a more fundamental problem. Washington is obsessed with intellectual-property rights. It lives under the mistaken idea that stronger IP always means a stronger economy. No doubt it means larger campaign contributions, but whether it means a better market is a tougher question.

Rather than unbounded protection, our tradition teaches balance and the dangers inherent in overly strong intellectual- property regimes. But balance in IP seems over for now. A feeding frenzy has taken its place - not just in the field of patents, but in IP generally, as copyright protections are increased.

We should also be concerned that the U.S. Congress is toying with a dangerous database-protection bill.

Its no surprise, then, that we see the growth of open source science - for example, biology (see ). As some scientists challenge the idea of commercialize or perish, they model their thinking on what has happened with Linnux. Maybe there is a new model for the academy after all.

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