By Jeff John Roberts
August 10, 2015

Patents mean more innovation, right? Sadly, that’s not the case as The Economist makes clear. In a terrific piece of writing in the August 8th issue, the UK magazine explains in clear language what has gone so wrong:

Patents are supposed to spread knowledge, by obliging holders to lay out their innovation for all to see; they often fail, because patent-lawyers are masters of obfuscation. Instead, the system has created a parasitic ecology of trolls and defensive patent-holders, who aim to block innovation, or at least to stand in its way unless they can grab a share of the spoils […]

Innovation fuels the abundance of modern life. From Google’s algorithms to a new treatment for cystic fibrosis, it underpins the knowledge in the “knowledge economy”. The cost of the innovation that never takes place because of the flawed patent system is incalculable.

The Economist editorial comes at a time when patent reform is getting bogged down yet again in the U.S. Congress. If you’re keeping score, this is the third time in five years that lawmakers have tried to fix the system but, as before, the patent lobby is swooping down with money and dire slogans to grind the process to a halt.

Meanwhile, patent trolls keep laughing all the way to the bank: just look at this $40 million verdict a troll raked in last week. Ironically, the troll’s patents relate to “cyber-security” and “hostile downloadables” – meaning the troll didn’t just tax productive companies; it also created another obstacle for firms looking to secure their systems against hackers.

 

Why can’t we fix the system? As The Economist points out, a big part of the problem is that lawmakers have come to see patents and innovation as the same thing. They’re not. Patents too often gum up access to research and impose needless transaction taxes on productive companies. Unfortunately, legions of patent lawyers, trolls and IP research firms have a vested interest in preserving the status quo; for the groups, patents have become an economy unto themselves, even as they produce harmful externalities on the rest of society.

Fortunately, The Economist does offer some commonsense solutions to fixing this mess, including shorter patent terms and a focus on rewarding major breakthrough technologies, rather than trivial product tweaks:

One aim should be to rout the trolls and the blockers. Studies have found that 40%-90% of patents are never exploited or licensed out by their owners. Patents should come with a blunt “use it or lose it” rule, so that they expire if the invention is not brought to market. Patents should also be easier to challenge without the expense of a full-blown court case. The burden of proof for overturning a patent in court should be lowered.

Patents should reward those who work hard on big, fresh ideas, rather than those who file the paperwork on a tiddler. The requirement for ideas to be “non-obvious” must be strengthened. Apple should not be granted patents on rectangular tablets with rounded corners; Twitter does not deserve a patent on its pull-to-refresh feed.

Most fundamentally, it’s time to start to founding patent policy on evidence, not empty rhetoric about innovation. It’s time for patent reform opponents to show how a surfeit of 20-year monopolies benefit the economy, rather than simply telling lawmakers to maintain the status quo with slogans like this one from the Innovation Alliance: “A strong U.S. patent system is the driver of American job creation, economic growth and innovation.”

 

Right now, patent reform is stalling despite bipartisan support in the Senate from liberals like Chuck Schumer (D-NY) and conservatives like John Cornyn (R-Tx), and from the White House. Meanwhile, the strategy of opponents, as it was in 2011 when Congress passed the piffling American Invents Act, turns on pledging support for “reform” in the form of cosmetic legal changes – a tactic that will stave off any meaningful shake-up of the status quo. It will be a shame if this slight-of-hand works again. As The Economist notes:

“Today’s patent regime operates in the name of progress. Instead, it sets innovation back. Time to fix it.”

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