Patented Nonsense

National Post Dec. 6:

CAMBRIDGE – Research in Motion is simply the latest “victim” of America’s patent chaos, said expert Josh Lerner of the Harvard Business School.

“It is a victim of a patent system gone awry,” he said. “I’m not a lawyer but it seems pretty clear that NTP [the company that sued RIM for patent infringement] got an extremely narrow patent but during the litigation process, it got a judge that broadened out the claim.”

The problem in the U.S. is that while a company may wait appeal, there is the threat of injunctive relief. “This forces settlements,” he said.

It also makes it easy to shake down unwitting companies with frivolous actions.
One such specialist is a businessman called Ron Katz whose company has raked in an estimated US$1 billion in royalties because it has a batch of patents for call centers, or the combination of phones and computers.

“The injunction threat is a problem for call centers so Citigroup and others selling financial services cannot afford to have their call centers shut down for a minute. So they have paid him lots of money,” said Professor Lerner.

There are some bizarre examples of other types of patent problems. For instance, a large food manufacturer patented the peanut-butter-and-jelly sandwich a few years ago and began suing caterers for royalties before a judge called a halt to it. Another individual got a patent for swinging on swings sideways and attempted to sue playground manufacturers for royalties.

“Smuckers [the food manufacturer] had its patent for sandwiches narrowed by a judge who realized the patent was too broad,” said Professor Lerner. “The guy who got the patent for swinging on a swing was discredited by all the publicity and fired.”

These and other examples of dysfunction flow throughout his book “Innovation and Its Discontents”.
These practices of patenting inventions that already exist are known as “patent trolling”. One famous case involved Henry Ford’s battle with a man called Selden, who had a very broad patent on the internal combustion engine for the automobile. Ford won his battle.

Similarly, the world’s greatest inventor, Thomas Edison, had to fend off many litigants to protect his patents, the most any individual has ever held.

Another more recent example involved a Harvard Nobel Prize winner, and colleague of Lerner’s, who won his prize in the 1970s for option pricing. Patents were rare for financial products in those days but times have changed.

An MBA student came across the option pricing, filed a patent, got one and then licensed it for use to the Philadelphia Stock Exchange. The professor threatened to sue but didn’t.

The problem lies in the nature of the patent process, he said.
There are currently 5,000 people in the U.S. Patent Office and examiners spend 12 to 16 hours on each application, which isn’t enough time for some and too much time for others, he said.

“The best example of the difficulty of the patent awarding process is that Albert Einstein worked in the Swiss patent office, while he worked on his theory of relativity. And he was always accused of awarding patents that were too broad or of awarding patents that were too narrow. If Einstein couldn’t get it right then how can the typical patent examiner?”

Lerner believes that multiple examiners in an open public process is a better method of awarding patents and that, once granted, they should be tested rigorously and adversarially.

Patents are a critical cornerstone to wealth creation and currently last 20 years, unlike copyright protection which has been extended through lobbying by the music and software industries to death plus 70 more years.

“Patents are a trade off: You grant a monopoly to provide an incentive to invent,” he said.
That’s why the continuous extension of copyright protection, retroactively, is totally unjust. The “invention” has already been invented and capitalized on through monopoly protection and yet companies like Disney continue to agitate for extensions.

In future, the biggest challenge involves bio-tech patents.
“After the genome was defined, people were filing gene patents by the truckloads, literally. Hundreds of thousands of pages of raw sequences of genes were being brought in for patenting,” he said.

Both the United States and Britain passed laws that genes could not be patented because they were essential to the public good.

“The publicity brought that policy about so there are no patents on gene sequences, but people have gotten around this. There are patents on proteins which coat genes,” he said. “These and other issues should be addressed because the system is really in a mess.”