In Defense of a Strong U.S. Patent System
What is the first word that comes to your mind when you hear the word patent?
At a recent conference held by the Center for the Protection of Intellectual Property (CPIP), titled, "Intellectual Property and Global Prosperity," keynote speaker Dean Kamen noted a chilling trend: Common responses from a decade ago, like entrepreneur, excitement, invention, innovation, or eureka have been replaced by pejoratives like troll. This cultural shift has unsurprisingly coincided with calls for patent "reform" legislation. Since new laws are already making it difficult for inventors like Kamen to obtain and enforce their patents, it is time to reconsider the rationales behind these "reforms."
A major justification, asserted by the FTC, for patent reform is that bad patents stifle innovation. Ron Katznelson, the founder and president of Bi-Level Technologies, studied an early automobile patent, owned by George Selden. Selden used the threat of infringement suits against his weak, overly broad patent to extort licensing fees and deter customers from car manufacturers, including Henry Ford. However, the automobile industry grew during the term of Selden's patent and its royalties funded research and development among its license-holders. As for Ford, his analysis of the patent made him so confident he would win an infringement suit that he bought full-page ads indemnifying buyers, and he did win the eventual court battle. Selden's Association of Licensed Automobile Manufacturers, once called "the father of all trolls," fell apart shortly afterwards, utterly failing to kill the new industry.
Speaking of trolls, while the name Dean Kamen might make you think of Segway, or insulin pump, or DEKA Corporation, our lawmakers beg to differ. Kamen once testified before Congress, "I only recently found out after reading the definition of a troll that I am one." Kamen admits a superficial resemblance: "There is not a product in the world that says DEKA on it." But laws that are supposed to prevent patent abuse are harming real inventors like him. Armed with a patent to protect his ideas, Kamen can offer licenses to corporations with the supply, manufacturing, and distribution chains he doesn't have. This saves the licensee the costs and risks of research, and permits Kamen to concentrate on invention and development. "If I show them what I have got, the only thing that I have on my side of the table is that patent..." Patent reform seems to have tossed out the division of labor baby with the bathwater of a few highly publicized bad actors.
Another red herring in the patent reform debate is the so-called recent "explosion" of patent litigation, such as that seen for smart phones. Law professor and CPIP co-founder Adam Mossoff comprehensively demolished this notion, noting that the phrase, "patent litigation explosion" is over a decade old. Indeed, the term "patent wars" is 150 years old, and our current smart phone wars are hardly unusual, historically. Smart phone wars involved 125 cases at their peak; paltry compared to the 800 involving the light bulb. End users have always been in the infringement cross-hairs: Mossoff cited over 900 suits filed in Long Island, many against farmers, over well-drilling technology in a single courthouse back in the 1880's. According to Mossoff, this type of litigation is inherent to our common-law system any time a dispute arises over any kind of new property rights. (For example, Oklahoma's land rush spawned hundreds of lawsuits over land ownership.) Mossoff's presentation ended with a flat-line graph of the annual patent litigation rate over the past twenty-five years, all at or below two percent. Ironically, the small uptick that occurred in 2011 was a consequence of Obama's America Invents Act.
If, as Lincoln said, "The U.S. patent system adds the fuel of interest to the fire of genius in the discovery and production of new and useful things," we should, at a minimum, have a sound basis for any reforms. Otherwise, confabulations about bad patents, trolls, and runaway litigation will drain the creativity of our inventors. Anyone who wonders how we can all carry around cheap supercomputers in our pockets despite a patent system that supposedly stifles innovation would do well to visit the CPIP conference web site. In Dean Kamen's words, we have already, "greatly devalued patents in this country."
I for one am glad, for the sake of our future prosperity, that an able and dedicated group such as the CPIP is setting the record straight about our patent system, and fighting to keep it strong.
