New Patent Reform Bill Defines Software Patents; Targets Trolls

from the well-that's-interesting... dept

We've discussed the "America Invents Act," a patent reform bill that passed last year after years of Congressional fighting. As we (and plenty of others) noted at the time, for all the hyperbole around the bill, it completely ignored nearly every problem with the patent system today, and seemed almost entirely useless. Our worry, then, was that this would kill off any appetite for Congress to take on the real problems of patents today. So it's good to see that a new patent bill has been introduced -- by Reps. Peter DeFazio and Jason Chaffetz, with a very, very minor change to patent law: it would allow those sued for hardware or software patents the ability to recover litigation costs if it's determined that the suing patent holder "did not have a reasonable likelihood of succeeding."

In other words, this is a bill targeted very directly at the pure trolls: the patent holders who sue companies with no real intention of taking a case to court, but rather just to get them to pay a settlement fee to avoid the (expensive) court costs in defending a patent infringement claim (which is quite frequently much more expensive than the settlement options):

Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney's fees, other than the United States.

But what's much more interesting about this is that it seeks to carve out a specific definition for software patents. I know that in software circles there's been plenty of talk over the years about the problems of software patents, and many don't believe that software should be patentable at all. However, as defenders of the patent system like to point out, there's no such "thing" as a "software patent" defined in the law, so it would be difficult to say software isn't subject to patents. Well... this bill defines software patents:

SOFTWARE PATENT.--The term 'software patent' means a patent that covers--

"(A) any process that could be implemented in a computer regardless of whether a computer is specifically mentioned in the patent; or
"(B) any computer system that is programmed to perform a process described in subparagraph (A).".

Given the massive fight in previous years over patent reform, I fully expect to see patent system supporters throw a massive hissy fit over this very, very minor change to patent law, but it's so minor that I'm at a loss as to how they'll have any compelling argument. The only reason I can think to be against the changes here is if you're in the business of abusing the patent system to shake down innovators. I actually think that supporters of the patent system, such as pharma companies, should support this kind of change too. If the patent system can successfully slice off the problems associated with software patents, it means that there will be less pressure for massive patent system changes.

Of course, if you want real patent reform that takes on the larger issues that impact all sorts of areas (beyond just software), we've made clear our suggestions -- though there doesn't seem to be any appetite in Congress to make such major changes in the near future.

Filed Under: attorneys' fees, costs, litigation, patent reform, patent trolls, patents, software, software patents

Want More Jobs? Get Rid Of The Patent Trolls

from the let-innovation-run-free dept

Last fall, after years and years of bickering and fighting, Congress and the President finally got together to pass what they called a "patent reform" bill. While the bill made a few changes to how the patent system works, it almost completely ignored the issue of patent trolling or just how destructive patents are to innovation. Even more ridiculous is that the President insisted that the new bill would create jobs. Perhaps for patent lawyers, but not for many others. Vivek Wadhwa has written up a great piece in the Washington Post noting that if we want job growth, we need to deal with the patent trolls, and most specifically the software patent trolls:

The President is mistaken—at least when it comes to the patent system as it relates to software patents. These patents—and the patent system—aren’t creating innovation, they are inhibiting it and, by extension, job creation. Why? Because the breakthroughs aren’t in the patents, they are in the way ideas are commercialized and marketed. Because of flaws in the patent system and government leaders’ misunderstandings, there is an arms race of sorts happening in the tech industry that is sapping billions out of the economy and crushing technology startups. This system is enriching patent trolls—companies that buy patents in order to extort money from innovators. These trolls are like a modern day mafia. Given this, I argue software patents need to be eliminated or curtailed.

Indeed. But we'll never fix the patent system if the government continues to think that patents themselves are the key to innovation, despite the evidence showing that patents simply don't correlate to actual innovation.

Filed Under: congress, jobs, patent reform, vivek wadhwa

New Patent Reform Law Already A Good Thing... For Patent Attorneys

from the but-of-course dept

While it seems pretty clear that the patent reform bill that became law a few weeks ago won't actually do much to improve our broken patent system, one area of business it's helping tremendously is in increasing demand for patent lawyers. Due to the new law, suddenly law firms are scrambling for more and more patent lawyers:

Patent lawyers are in such demand that their specialty may account for more than 15 percent of law firm job openings while representing just 3 percent of lawyers in the United States.

Such lawyers typically have degrees in fields like engineering as well as law. Some law firms are now almost doubling recruitment fees to meet the growing demand for specialists in intellectual property, or I.P., particularly in technology, said T. J. Duane, a principal at a legal recruitment firm, Lateral Link.

The NY Times article above goes on to point out that the new law has especially made things much more complicated, thereby increasing demand for patent lawyers. It also mentions how law firms are really seeking people who could have been contributing to actual innovation, but have left engineering for the law instead:

The ideal candidate would hold a doctoral degree in electrical engineering, have graduated from a top 10 law school and have worked for four years at a strong law firm, Mr. Duane said.

This is not a good thing. A functioning patent system is one where the rules are clear and fewer lawyers are needed. The fact that the clearest immediate impact of the change in the law is the opposite should give the politicians who supported this law a pretty big reason to rethink it.

Filed Under: lawyers, patent lawyers, patent reform, patents

Day Before Patent Reform Was Signed, Mad Dash By Trolls To Sue: 51 Cases Against 680 Defendants

from the in-under-the-wire dept

While we still think that the new patent law that was signed by the President last week won't do much to make a difference, it does appear that a bunch of trolls who were at least a little concerned about the "joinder reform" part decide to sneak in as many cases against as many defendants as possible before the law went into effect. As you may recall, one of the few useful parts of the law was that it made it harder for patent holders to lump together totally unrelated companies into a single lawsuit. Doing so was popular for a variety of reasons: it's cheaper, obviously, but also because it made it easier to justify an East Texas (or other preferred) jurisdiction.

Groklaw noted a bunch of last minute patent troll lawsuits being filed right before the bill was signed into law, naming three such trolls that brought 12 cases against 222 companies, but also noting that this didn't represent all such cases. In fact, the folks at RPX contacted us with more data on this, noting that 85 cases against over 800 defendants were filed in the two week period before the bill was signed into law... and that includes 51 cases against 680 defendants the day before the bill was signed into law. This is in comparison to an average of about 160 companies sued in a "normal" week for infringement.

Filed Under: lawsuits, patent reform, patent trolls, patents

Patent Reform Official, Along With More Bad Ideas

from the make-it-stop dept

Well, the nearly useless patent reform bill has now been signed into law. As we've discussed at length, this is a pretty empty bill. Nearly all of the good ideas were excised in the process, and you can tell that's true by the fact that no actual tech company appeared with the President at the signing. Instead, it was chemical and pharma companies -- old school legacy industries that are trying to "protect" old businesses, not innovate with the new. That link above notes one point that I hadn't realized made it into the final bill: the end of anyone being able to file "false marking" lawsuits over patents. As you may recall, a big industry had sprung up following some court rulings, in which anyone who found a product falsely marked with a patent claim (such as if a product still noted patents after they'd expired), could sue the company and get money (to be split with the government). I had mixed feelings on those lawsuits, because it clearly looked like "trolling," but I'm troubled by people claiming patents on inventions that are public domain.

Now, there is one thing that also made it into the final package that I hadn't realized earlier either: joinder reform. We had noted that patent trolls in particular had started suing more companies in each lawsuit after judges had started transferring some cases out of East Texas (patent holders' favorite venue for patent cases). The reason to sue more companies, from around the country, is so you can argue that no other location is "any better" than Texas. On top of that, the trolls would often throw in a random tiny East Texas company or two along with all the big companies, just to try to establish East Texas as a proper venue. As the link above notes, those tiny companies were later dropped from the case, but only after venue was established (and those companies had to pile up legal fees).

The new law actually makes that much harder, and may limit trolls to suing one company at a time. If so, that would definitely be a step up -- though I imagine it will also mean that we'll have a few more empty offices in empty buildings in downtown Marshall, Texas, as more and more trolls "open up offices" in East Texas...

Along with the new patent reform bill, the Obama administration appears to be rolling out lots of other bad ideas around patents, doubling down on the dreadful idea of using patents to encourage "commercialization" of university research. We have 25 years of data showing just how damaging the Bayh-Dole Act (which pushed universities to patent their research) has been towards university research, so why are we making it even worse?

In coordination with the Administration, the Association of American Universities, and the Association of Public and Land-grant Universities, 135 university leaders committed to working more closely with industry, investors, and agencies to bolster entrepreneurship, encourage university-industry collaboration, and enhance economic development. Today, over 40 universities are answering the President�s call to expand their commercialization programs and goals. These institutions include The Georgia Institute of Technology, which has outlined its expanded initiatives, as well as universities like the University of Virginia and Carnegie Mellon University, which are announcing plans today.

These programs have been a complete failure -- and it's even worse once you exclude the fact that Intellectual Ventures swooped in and effectively "saved" some universities by buying all their patents for pennies so those universities could show some return for the money they'd wasted setting up tech transfer offices. The problem is that universities aren't good at commercializing, and they don't understand how it works. So they think that the way to commercialize is to patent and then sell off the patents. But that's usually not the best way. So this plan is only going to drive greater patenting of (usually government-funded) research, rather than more such research actually making its way to the commercial market.

Filed Under: patent reform, patents

Congress Moves Forward With Useless Patent Reform That Won't Fix Any Real Problems

from the too-bad,-so-sad dept

With Congress and the President pretending that a bad patent reform bill is all about "creating jobs" even as there's little evidence that the reforms will actually do anything, Congress appears to be poised to approve the bill. Of course, the bill does almost nothing to address the real problems of the patent system, but that won't stop the grandstanding. More important, it won't stop the political back-scratching. While Congress won't debate the bigger issues, they will be considering amendments that benefit a particular constituency rather than looking at anything that will actually benefit innovation or the economy.

Filed Under: patent reform, patents

WSJ Latest To Note Ridiculous State Of The Patent System

from the anyone-not-noticing? dept

The avalanche of mainstream press stories condemning the state of the patent system (especially when it comes to software) continues. The latest is a column in the Wall Street Journal by former WSJ publisher L. Gordon Crovitz that also condemns the state of the patent system. I don't always agree with Crovitz (in fact, I was just strongly disagreeing with him over his First Amendment views), but it's nice to see another well known commentator point out the problem and pure economic waste created by the patent system:

The costs of our broken patent system are often abstract, but this month Google put a price tag on the problem: $12.5 billion. That's what Google paid for Motorola's U.S. smartphone business and its 17,000 patents. This is $12.5 billion that one of America's most creative companies will not use to innovate, fund research or hire anyone beside patent lawyers.

[....]

The value of patents in software and hardware such as smartphones has everything to do with litigation risk. It has almost nothing to do with technology.

So now we've got This American Life, the NY Times, the Washington Post, the Economist and the Wall Street Journal -- all coming out with articles about how the patent system is massively hindering innovation in the tech industry, and is generally driving money to unproductive and non-innovative parties. So, again, we have to ask, why is Congress still pretending that it's tackling this problem with its current useless patent reform bill that doesn't address the problems raised by all of these articles? Where's the real patent reform, Congress?

Filed Under: l. gordon crovitz, patent reform, patents, software patents

So How Do We Fix The Patent System?

from the stop-with-the-bad-suggestions dept

There's been a lot of attention lately to the massive problems with the patent system. Finally the problem has gone mainstream, in part thanks to the excellent This American Life episode on problems with the patent system. That seems to have emboldened other mainstream publications to finally run articles pointing out problems with the patent system, including the NY Times, the Huffington Post and PC World.

Then there's the Economist, who actually was one of the first mainstream publications to highlight problems with the patent system, only to change its mind and argue for more bad patents. However, it's flipped again, and is arguing (once more) that the patent system is broken and needs fixing.

And this time, unlike many of the articles lately, The Economist actually puts forth some suggestions on how to fix the patent system:

First, patents in fields where innovation moves fast and is relatively cheap—like computing—should have shorter terms than those in areas where it is slower and more expensive—like pharmaceuticals. The divergent interests of patent-holders in different industries have held up reform, but there is no reason why they should not be treated differently: such distinctions are made in other areas of intellectual-property law. Second, the bar for obtaining a patent, particularly for software or business methods, should be much higher (as it is in other countries), and the process of re-evaluating bad patents should be more open and efficient. Finally, there should be greater disclosure requirements of the ownership of patent portfolios, and patent cases should be heard by specialised courts (as happens in other areas of law), rather than non-expert juries in advantageous jurisdictions in Texas. That would make life harder for trolls. These fixes would help America's patent system encourage innovation rather than litigation.

These are all pretty common suggestions that we've heard before. Unfortunately, while I think the overall article does a great job laying out the problem, these suggestions are the kinds of suggestions made by people who haven't spent that much time with the patent system (or who are somewhat unfamiliar with its history), and won't do much good.

Tim Lee beat me to the punch in debunking the whole "specialized court" notion, since that's actually a big part of the problem today. First, he notes that for all the talk of "bad" Texas courts and juries, the Texas jurisdictions have, unfortunately, become de facto "specialized" patent courts. And, on top of that, for the past 30 years or so, patent cases at the appeals level all go to a single appeals court, the Court of Appeals for the Federal Circuit (CAFC). This breaks one of the key parts of our court system, which has all those different circuits so that they can develop their own takes on laws, and the Supreme Court can help settle any disputes and circuit splits. With CAFC there are no more circuit splits, and in creating a specialized court, it made it easier for patent attorneys to influence the case law:

This had the unintended consequence of dramatically increasing the influence of the patent bar over patent law. Not only do Federal Circuit judges spend all their time hearing arguments from patent attorneys, but some of them are former patent attorneys themselves. In its first two decades, the Federal Circuit gradually shifted patent law in the pro-patent direction favored by most patent attorneys. Patents became easier to get and harder to invalidate. The courts allowed tougher punishments against infringers. And the Federal Circuit unilaterally eliminated traditional limits on patenting software and “business methods.”

Separately, he notes that the lack of circuit splits meant that CAFC totally rewrote patent law without the Supreme Court taking much notice, in the 90s. It only caught on in the last decade, and that's created quite a mess, since (as patent system supporters always argue) any changes the Supreme Court makes to roll back CAFC excesses "upset the apple cart" of "established" patent law.

But when the Federal Circuit became the only court ruling on patent cases, there were no more circuit splits and no more competing legal precedents. That might be why the Supreme Court seems to have barely noticed that the Federal Circuit was dramatically reshaping patent law in the 1990s. The high court reviewed only about a dozen Federal Circuit decisions between 1982 and 2004, and the ones it did review tended to be on narrow, technical issues. The Supreme Court finally began to give the Federal Circuit’s handiwork some serious scrutiny when Chief Justice John Roberts took the bench. And the justices did not like what they saw. In the Chief Justice’s first three terms, the high court heard five different patent cases, and all of them resulted in unanimous or near-unanimous reversals of pro-patent decisions by the Federal Circuit.

But a lot of the damage had already been done. Hundreds of thousands of low-quality patents had been approved under the permissive rules the Federal Circuit had developed during the 1990s. Those patents may be technically invalid under recent Supreme Court decisions, but that’s of little help to a small company that can’t afford to litigate the question.

Separately, I'd argue that the Economist's desire to set up different rules for different "types" of patents opens up another massive can of worms. First it opens up all sorts of definitional questions. What is a "software patent"? There's no such thing in the law, and setting up specific definitions would just drive patent attorneys to seek ways to fit any particular patent under the types of patents that have the most enforcement strength and length. Defining patents into different buckets just opens up more opportunities for lobbyists to seek to define patents in ways that benefit patent holders, rather than fixing the real problems of the patent system.

So if we want to offer solutions instead of just "complaining," here's how we would fix the patent system (short of just scrapping the damn thing).

First, we have to define the real problem. And it's actually not that hard to figure it out: bad or unnecessary patents that are used to stop others from innovating. Defenders of the patent system often talk up how it "protects" innovators. That's almost entirely false. The vast majority of the patent system hinders innovators by making it more difficult for them to innovate. So a few key ways to stop the worst of the patent system:

• Create an independent invention defense: We've been arguing this for years. If the patent system is supposed to protect innovators, the fact that it blocks even those who invented something entirely independently goes entirely against the principles of the patent system. Even in copyright law (generally seen as more strict than patent law) there's a defense based on independent creation. If you haven't copied someone's patents or were completely unaware of someone's patent, it's ridiculous to claim you were infringing on that patent.
  
  If you understood how infrequently patent disputes involve anyone actually copying a patent (or a patented invention), you'd realize how much of the problems of our patent system this would solve. Unfortunately, patent holders and the press (especially) frequently mislead on this point, claiming that patent infringement suits are about companies "copying" or "stealing" from the patent holder. That's almost never the case. Studies have shown over and over again, that even though you can get treble damages for showing someone willfully copied a patented invention, it's almost never asserted.
  
  
• Recognize that independent invention is a sign of lack of patentability: This one is a bit more controversial, but the point of the patent system is supposedly only to reward patents on inventions that are non-obvious to those skilled in the art. If multiple people, skilled in the art, are coming up with the same thing independently at the same time, it seems like pretty strong evidence that, in fact, the ideas were obvious to those skilled in the art. There has been a lot of work done lately showing that nearly all major inventions are independently invented at around the same time by multiple people. And there's a view that's gaining support that basically what fuels such innovation is not patents at all, but just that all the factors necessary for the "next step" are in place, and those skilled in the art can just take that last step.
  
  Thus, in such cases where there is independent invention, it shouldn't just be a defense against infringement, but it should be evidence that any such patent is invalid, as it doesn't qualify as non-obvious to those skilled in the art.
  
  
• Patent examiners should seek out input from those actually skilled in the art: Since the very standard for patentability is those skilled in the art, they should at least be able to weigh in on the patentability and obviousness of the solution in question. As it stands, patent examiners may be smart in a particular field, but since they don't actually work in that field, their knowledge is not always really up to date. I'm sure they try their best, but there's a difference between those who actually build stuff and those who don't.
  
  Patent system supporters hate this suggestion, and they often claim that "jealousy" will lead others to claim that an invention is obvious. There are easy ways to control for this however. We're not saying that if anyone says, "this is obvious," the patent is automatically rejected. Rather, we're saying that it's another source of data and input for the examiner to make a determination of obviousness. That is the person actually skilled in the art could present an explanation for why something is obvious, and the examiner can then take it into account, and use that as another bit of information.
  
  
• Drop the assumption of validity and allow for greater post grant review: This is the one that really upsets patent system supporters, as they would like to go in the other direction. But, really, the arguments for assuming patent validity are really, really weak. As we've discussed before, the patent system gives one entity a full government-granted monopoly based on one person spending an average of about 16 to 17 hours on a single patent, and only hearing from the side who wants the patent. They almost never hear an adversarial position during the review.
  
  That's kind of insane when you think about it. If we're going to approve patents on such a flimsy system, the least we can do is admit that they can be opened up for review much more easily. Hell, why not use the system described in the point above (creating a panel of actual people skilled in the art) to evaluate patent appeals on any patent in dispute. It doesn't even have to be done during the initial examination if we get rid of the assumption of validity and the difficult current process to get post-grant review.

Do all of that and you'll have a much more functional patent system that gets rid of a significant portion of the bad patents and will encourage much more innovation. You don't even have to separate out different kinds of patents. This setup would fix many of the problems across the board, while still allowing patents on truly important "breakthroughs" that wouldn't have happened without the patent system. The only reason I can think of to go against these ideas is if you want to profit from bad patents yourself.

Filed Under: independent invention, patent reform, patents