No Obvious Solutions for IT Patent Reform

BERKELEY, CALIF. — Executives of a group of top-tier technology companies plan to roll up their sleeves to help solve problems at the U.S. Patent Office.

FTC Commissioner Mozelle Thompson closed a high-level conference on reforming the patent process Friday with the announcement of a new technology industry working group that will cooperate on making the patent system more responsive to technical innovation. Cisco, Intel, eBay, Symantec, Chiron, Microsoft, and Genentech said they will work with regulators and legislators on patent reform.

Mozelle gave the news to attendees at Ideas Into Action, a conference on patent reform sponsored by the University of California’s Berkeley Center for Law and Technology. Mozelle brokered the formation of the still-unnamed group during the course of the conference, Chiron vice president and chief patent counsel Robert Blackburn told internetnews.com.

The conference, co-sponsored by the Federal Trade Commission and the National Academy of Science (NAS), let academics, attorneys and business leaders comment on two reports on how to reform the system, one by the FTC released in 2003 and the NAS’, to be released Monday.

The U.S. patent process is deeply broken, according to the IT companies. As the number of patent applications has exploded, the quality has gone down. The result is boom times for lawyers and a lifetime of litigation for corporate counsel.

Jay Monahan, associate general counsel for eBay, said patent problems for his company began about three-and-a-half years ago, when it began getting mostly frivolous letters asserting claims.

“It’s driven eBay’s costs up. I spend more of my time on patent issues than any other single issue,” he said.

Companies that use complex technology — semiconductors, Internet software, biotechnology and nanotechnology among them — have a strong focus on patents.

“Our industry is characterized by a rapid product development lifecycle and incremental innovation,” said Michael Schallop, Symantec senior corporate counsel. “Competitors develop similar features or even improve on them, so you have an incentive to patent as many of your key product features as you can.”

The lack of time examiners spend on individual patents seems shocking. The 3,000 examiners handle 350,000 applications a year. They only spend an average of 17 hours on any particular application — spread out over as much as three years. Many panelists agreed that the quality of U.S. patents issued has gone down.

Continue to page 2: Is Congressional Action Needed?

Is Congressional Action Needed?

There are other factors besides lack of time that contribute to the growing pile of bad patents.

“The mission statement of the Patent Office is, ‘to help our customers get patents,'” said Boalt Hall School of Law professor Mark Lemley. “The applicant has no burden to prove anything.” Moreover, patent examiners are rewarded for opening and closing claims, he said. “You don’t get rewarded more for long complex patents, so they’re likely to get less scrutiny. The examiner’s incentive is to get as many applications out the door as possible.” Applicants can continue to re-apply when they’re refused, “until they wear down the examiner.” According to Lemley, if you include such continuations, 85 percent of all applications eventually result in a patent.

Stephen Kunin, USPTO deputy commissioner for patent examination policy, said that applicants have more of an incentive not to offer “prior art” — examples of tech that the invention is related to — or reviews of technical literature. “One of the most frequent allegations raised by accused infringers is that the patent owner committed inequitable conduct,” he told internetnews.com. The charge usually refers to hiding important information from the examiner.

“Anything that you say to characterize a piece of prior art can and will be used against you,” Kunin said.

For example, if an applicant attaches a document and highlights the relevant portion, in litigation the opposing party will argue that another part of the document is more relevant, and the applicant tried to misdirect the examiner’s attention.

It would take Congressional action to give patentees protection from such claims, Kunin said, and when the rules were made, holders of intellectual property fought such protection. In its report, NAS recommended raising the standards under which rivals can claim inequitable conduct.

Most of the decision the USPTO makes don’t matter, said Rochelle Dreyfus, a professor at New York University. But there’s no way to identify those that will be critical to an entire industry. She said peer review panels similar to those for grants or academic journals could help.

John Barton, a Stanford University professor, pointed out the tension between patents as incentives for research and as barriers for business. “The patent system is serving its role as incentive to carry out research,” he said. But those same patents can make it prohibitively expensive for other companies that need licenses in order to make their own innovations — and that ultimately costs consumers more, as well. “Do we want a system that rewards and encourages routine research?” Barton asked. “Or do you want to preserve the monopoly of the patent system for a level of research that’s a level above the normal level of innovation?”

Barton proposed including with patent applications an indication of the level of routine innovation in that industry, and only rewarding with patents innovations that rise above that baseline.

Another inherent problem in the system is a reliance on the courts as the ultimate arbiter of whether a patent should have been issued. In effect, the system lets the market decide which patents are important when companies choose the infringement claims they’re willing to fight.

It’s common for patent suits to include instances of prior art — examples of someone else using the same technique or process — that were never considered by the examiner. “When patents are litigated, enormous resources are brought to bear,” said Q. Todd Dickson, former director of the USPTO. “When you start to apply $10, $15 or $20 million dollars to try to turn up prior art, that’s a little different than the 18 hours you put into examining the application.” Unfortunately he added, in addition to the immense cost to both parties, the judicial process can take as much as ten years, enough time for an entire new industry to spring up.

Creating an administrative review process, in which competitors could dispute and refute a patent soon after it’s granted, was a key proposal in each organization’s report. Post-grant reviews would be cheaper than going to court, and, if they had a set time for completion, they would help businesses better plan their product strategies.

Both the NAS and the FTC recommended procedures to test patents with public argument and review — after they’re granted. The NAS also called for allowing researchers and industry to alert the PTO about emerging technologies so they can start gathering literature and staffing the office correctly.

Douglas Norman, general patent counsel for Eli Lilly, presented his company’s ideal post-grant review process: A three-judge panel trained in both patent issues and Federal rules of evidence; a deadline of perhaps one year for opponents to request a review; a time limit to complete the process; and some limits on the discovery process to eliminate cases such as the one in which his company was required to produce 1.9 million documents.

Despite the wealth of solid ideas for improving the system, patent reform is not imminent. The U.S. patent system itself is ancient by Internet standards, and its pace is glacial. The FTC’s report was published in October 2003; six months later, NAS has published its own call for reform. FTC Commissioner Thompson, said the next step is a political process to implement the recommendations, and that members of Congress are interested in hearing from some of the people who gave the FTC input for its report.

“There is a degree of momentum that’s building,” he said.

News Around the Web