Volume 3, Number 22 -- June 13, 2006

Mad Dog 21/21: Patent Depending

Published: June 13, 2006

by Hesh Wiener

When you think of rights granted by law, such as the right to express your opinion, you usually think in positive terms. Positive rights guarantee freedom of action. If you're willing to obey some rules and follow some procedures, you can own some property, you can drive a car, you can publish an article about patents that includes controversial opinions. Patent rights are different. They are negative rights. They allow you to restrict the activity of others. There are other negative rights in the law, of course, such as the right to exclude others from your home. But few negative rights have the big financial impact of patent rights, as the recent Blackberry affair demonstrated.

Patent rights are generally exercised within a framework of civil law, and parties whose patent rights are proven to be infringed generally seek compensation in the form of money damages and court orders prohibiting further infringement. But this is not always the case. There are cases in which parties who violate patents are sent to prison. So, while individuals or legal persons (like corporations) are the usual holders of patent rights, violations can be punished by both persons and by the state.

The involvement of the state in patent rights, to the extent that governments the world over criminalize infringement, isn't surprising. Going back to the English, whose sovereigns granted monopoly rights for a variety of reasons, including invention, the financial benefits of monopoly were immediately apparent not only to inventors and to persons who took to heart the interests of the state, but also to greedy and corrupt rulers. England didn't transform the right to grant patents from an arbitrary royal prerogative into a matter of law until 1623, during the reign of James I, when Parliament enacted the Statute of Monopolies, which among other things provided a 14-year term of protected monopoly for inventions even as it curtailed the opportunities for monarchs to profitably make patent deals in cahoots with monopolists. By that time, England had gone so far as to issue a patent creating a monopoly on salt.

English patent law was further amended over the years. One notable change took place during the reign of Queen Anne in the early years of the eighteenth century, an amendment that substantially increased the requirements for a written description of a patented invention. But, with changes, seventeenth century law served the English until 1977, when it was replaced with a modern statute that harmonizes English patent law with that of other European countries. There's no radical difference between Continental European patent systems than the English or American systems, but some distinctions do exist.

Europeans have resisted the idea of issuing patents for software on the basis that it's more like a mathematical formula than a machine or process. In addition, despite their economic cooperation via the European Union, European countries still exhibit nationalism in some instances. Every European country takes pride in its scientists, engineers, and other inventors and wants to reinforce aspects of its economy that generate wealth, attract new business, and add to national pride. So while every member of the EU sees some advantage in treaties that make it easier for inventors to get multinational patent protection, they also each seem to believe they can offer some localized advantage to inventors.

Patent Office Circa 1870: Patents are so important to governments that even the Confederacy set one up during its failed revolution

Patent laws are only part of various national efforts to encourage excellence in the sciences, and may in fact be secondary to tax laws, educational policies, and other practices. But every country recognizes that patent laws can play a role in encouraging (or, at times discouraging) progress.

American patent law has its roots in the English law. During the colonial period, monopolies were protected by grants similar to those of the British crown, but provided by legislatures of the various colonies. After the American Revolution, Congress got down to business, and passed the first U.S. patent law in 1790. In addition to written documentation, this law required an inventor to provide a scale model of the invention. In about three years the government decided it was too much work to examine patent applications and a new law pretty much handed patents to anyone who applied. It took the U.S. until 1836 to resume the process of patent examination, by which time industrialization was a major factor in the American economy. And the requirement for working models remained in force until late in the nineteenth century. In fact, the U.S. Patent and Trademark Office can still ask for a model, if it wants to.

The biggest new issue in patent law around the world is software. There are debates everywhere about whether patents should protect any rights in software and, if so, under what conditions. These debates are not just arguments among legal scholars. Patent laws and related policies affect the pace of innovation, and every country wants to give its inventors, including software developers, the best possible climate for work.

As it turns out, the question of whether patents in general stimulate or stifle invention has never been completely settled.

Any argument in favor of patents is an argument in favor of monopoly. Monopoly might be good for the monopolist, but it might not be very good for those forced to deal with a monopoly, both in a narrow view of the monopolist's business segment and the broader view of a society's whole economy. Because patents are of limited duration, 20 years everywhere I checked, they don't look like a permanent monopoly. But in some technologies, including notably pharmaceuticals and software, 20 years, less than a human generation, can be several technological generations.

Additionally, patents can for some purposes be extended. If, before patent rights lapse, the inventor develops a improvement or variation nobody else could successfully develop because at its inception it depends on the underlying patent, that second patent might well extend the first for all practical purposes. If that second invention is developed, say, 10 years into the life of the first patent, and if the patent holder does not wish to license the first patent to others who might improve on it, the pair of patents could well create a 30-year monopoly. It is even possible for the inventor to come up with another kicker and further extend the practical reach of the first two patents.

Swiss Patent Clerk in 1904: You don't have to be Einstein to understand patents, but it helps

Often, the only way an inventor can work out a deal with another on patents is to come up with a related invention, one that threatens or substantially enhances the other party's patent, and swap or cross-license rights. This cross-licensing game is standard practice in many industries, and very widely used in computing, where pacts among patent holders have become part and parcel of the trade. Such pacts are used in at every stage in the building of computers, from semiconductor manufacturing to the fabrication of racks that house server farms. It's hard for a new player to get into the game without inventing and patenting something the established companies want so much that they will swap their own patent rights for it.

The large sums that are at stake can make for big battles over patent rights. These battles take place in the courts, and the body of case law that has evolved surrounding patents makes for complicated and uncertain litigation. That situation by itself affects the role of patents in economic society. It makes invention a high stakes game. It can force the little guy, the next Philo T. Farnsworth, to hook up with partners whose wealth may provide protection but at a substantial cost in the spiritual independence from which invention springs. Laying the golden egg may make the goose barren.

The result is a world in which various parties not only argue about whether patents as a concept are good or bad for a business, a nation, or the world economy, but also disagree about what should or should not be subject to patent protection, how long the protection should last, and how patent disputes should be settled.

If you're an inventor with a really good idea, you can't be sure that you'll be rewarded, but it's a safe bet that if you are, you'll also be punished.


Mad Dog 21/21: Patent Lather

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Editor: Timothy Prickett Morgan
Contributing Editors: Dan Burger, Joe Hertvik, Kevin Vandever,
Shannon O'Donnell, Victor Rozek, Hesh Wiener, Alex Woodie
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