Wednesday, July 20, 2011

Patent Part 1: The Basics

To wrap up this tutorial series on intellectual property, I will need to spend a few installments talking about patents. In short, patents are to inventions what copyright is to creative media. Nevertheless, patent has its own hornet's nest of issues, and ethical concerns, to discuss. This installment will cover the basics, providing a general look at patent law. The following installments will detail some of the thornier problems with biological patents, pharmaceutical patents, software patents, design patents, and business method patents.

Like copyright, a patent is a limited monopoly granted to an inventor for the purposes of controlling and securing a living from her intellectual labor. The invention must be something new, non-obvious, and useful, and the monopoly lasts twenty years. The holder of the patent can control the duplication, distribution, or implementation of the invention, so she can sell licenses to firms, granting access to the invention in exchange for some monetary compensation. US patent law originates in the same clause of the Constitution as copyright, and it set out to serve the same purpose: “to promote the Progress of Society and useful Arts.” As such, patents are supposed to serve as an incentive; in exchange for releasing an invention to the public, the inventor is granted a limited monopoly on the invention. The similarity to copyright, stops about there.

While copyright does not require any review, patents are granted on the basis of a lengthy application disclosing the details of the invention or innovation, and any “prior art” that may affect the judgment of originality. Once granted, these applications are public record, fulfilling the disclose requirement. As such, while a patent is technically protected against reverse-engineering, reverse-engineering is not really an issue since the details of the invention are public record. Of course, should an unlicensed firm use those details to put the invention into production, the patent-holder can sue them for patent infringement. Nevertheless, a patent infringement suit can be won by showing that the patent is invalid for some reason. For instance, the defendant might show that the patented invention is not substantially different from some older invention, now in the public domain, or he might argue that the patented article is obvious for some reason, and therefore not truly innovative.

There is no fair use for patent. Any use of the invention, including cases of independent discovery, constitute infringement of the patent. Remember that discussion of transformative use as part of a fair use defense? Such a defense in unavailable for patents. If a second inventor improves a patented invention, even to the degree that the improvement could be patented in its own right, the second inventor must still license the original invention. Combine the possibility of accidental infringement and the necessity of licenses for new inventions that might build on old ones, and you have the jungle of cross-license agreements in which many firms find themselves today. In the corporate world, and the American judicial system, it pays to be cautious. If a firm can avoid future litigation by entering into cross-license agreements with firms in the same industry, then it makes sense to enter into such deals. Even if one suspects that the other firm could not win a patent infringement suit, the cost of such suits is better avoided.

Some patent law includes “working provisions” that require the patent be put to use within the patent-granting jurisdiction. For those jurisdictions, the US not among them, there are penalties, including loss of the patent in some cases, for failing to put the invention to sufficient use, according to some criteria defined by law. Without such requirements, a patent can be held by a firm until it finds another firm releasing some product that may infringe the held-patent. At that time, the holding firm can sue for patent infringement. On the Internet, such holding firms are known as “patent trolls.” Despite not making use of their monopoly to benefit the public in any way, such firms seek to profit from other firms' success. Clearly this is region where patent law fails to maximize the public good. Supporters of patent troll practices (I really do not know a non-prejudicial term; that should tell you something, right?) argue that holding patents makes them liquid, they become valuable commodities that can be traded. I still do not see how holding back an innovation so that you can suppress the next firm that wants to release the innovation is good for the market.

Certainly, patent troll practices seem to undermine the stated purpose of patent law, to promote technological progress. Instead, such practices threaten progress by discouraging the release of new technologies without elaborate cross-license protection or costly (and sometimes futile) research into prior innovations and patents granted. Patent trolls are a sort of intellectual property landlord, seeking rents on technology that they did not develop and do not currently use. As such, they do form a potential obstacle to innovations coming to market.

To discuss any more substantial issues, I think I would have to get into specifics. Return to this site next time for an in-depth discussion of biological and pharmaceutical patents.