Patently Unfair

Congress has spent the last six years cobbling together a bill to overhaul the way the strapped and struggling U.S. patent system works. This week, lawmakers are on the cusp of passing the America Invents Act, which has been championed in the Senate by Judiciary Committee Chair Patrick Leahy, a Democrat from Vermont, and in the House by his counterpart Lamar Smith, a Republican from Texas. But like many inventors during their process of creation, Congress seems to have lost a clear vision of the problem it was trying to solve.

For some time, patent-reform advocates have pushed for a variety of remedies, like establishing specialized patent courts, developing more precise patent applications, and making the patent process more transparent. The bill, though, doesn't address much of what ails the system. Instead, Congress went for one Big Idea and one Very Small Idea, both tailored to big business.

First, the Big Idea, which is switching the United States from a "first to invent" to the "first to file" approach that the rest of the world uses when it comes to patents. Modern innovation studies suggest that invention is far less about Eureka! moments than eked-out results. Rarely do great, original ideas simply drop from the sky. More often, they are the product of long study and ripe environments. Advances in broadband and Web video standards, for example, had to happen before Chad Hurley, Steven Chen, and Jawad Kerim could invent YouTube. And the "independent" discoveries of oxygen by one Brit and one Swede within a year of each other owes much to the state of 18th-century physics. Unique among other developed nations, the U.S. setup allows inventors to acquire a patent at some point along the creative process as long as they can prove that they were the first to think up and pursue an idea. In Congress, we're hearing the surprising cry that the United States really should "harmonize" itself the way that other countries do things.

There's dissent. California Republican Representative Dana Rohrabacher argues that if it's so very important for the U.S. to live in harmony with Japan's and Europe's patent ways, let them change. But first-to-file, which grants patents to whoever can prove invention first, has fans at the Obama White House and the U.S. Patent and Trademark Office. Starting the clock at the moment that the paperwork comes in makes the patent-approval process easier and more certain, the thinking goes, while setting up U.S. inventors to compete around the globe.

Critics, however, hold that first-to-file favors deep-pocketed companies that have the resources to treat the commodification of patents as a core part of the invention process. IBM, Apple, Cisco, Dell, HP, and others, reported The Washington Post, have lobbied aggressively for the change, alongside the U.S. Chamber of Commerce and scores of biotech firms. As an upending of the structure of industry at the behest of big business, it's the Glass-Steagall repeal redux, argues Representative Marcy Kaptur. "We are living in their successes today," the northern Ohio Democrat has said dryly in her criticism of first-to-file. If speed is what counts most, little-guy and little-gal inventors simply don't, opponents say, have the wherewithal to compete -- even if they can come up with the same great ideas as the giants.

The Canadian experience bears this out. Two University of Pennsylvania professors, David Abrams and R. Polk Wagner, published a working paper last week on what happened when Canada switched to first-to-file back in 1989. Looking at the five-year periods before and after the change, Abrams and Wagner found that the segment of patents granted to independent inventors dropped from 10.7 percent to 7.8 percent. (The pair's findings did, however, challenge an oft-heard criticism of first-to-file: that a rush to the patent office will lead to poorer quality patents across the board.)

Opponents of first-to-file also find refuge in the U.S. Constitution, Article 1 Section 8. "To promote the Science and useful arts," the founders provided for "securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Authors and Inventors. Not the guy who can hustle his bustle to the FedEx store or has an intellectual-property lawyer on speed dial. First-to-invent is also more likely to discern the true first inventor. A group of law professors has argued that Samuel Johnson's 1785 law dictionary, the reference book of the founders, defined "inventor" as "one who produces something new; a devisor of something not known before." Congress can't just go redefining the term, he says. Sure they can, supporters of first-to-file counter; Congress is in the business of defining things.

You can make the case that divorcing inventors from inventions, and inventions from patents will only stoke the patent wars. We see Google attempting to buy up Motorola for $12.3 billion in a bid to get so-called defensive patents in the hopes of staving off enemies in the mobile market, and Microsoft and Intel scrambling to pick up some 6,000 patents from the defunct Ontario equipment firm Nortel, to the tune of $4.5 billion. When patents are divorced from the discovery process, they stop being the proxies for beneficial, practical inventions that advance the sciences and useful arts. They become mere ammunition in the patent wars. Forget competing in fair markets. Smaller inventors are being asked to compete on battlegrounds where the other combatants are enormous and well armed.

The patent wars brings us to the bill's Very Small Idea. One particularly bloody battle has been codified in the Leahy-Smith bill. For years, big banks and Wall Street have tried to swat away patent-infringement claims made by DataTreasury, a Plano, Texas, firm that holds patents on check-imaging technologies and whose CEO brags about extracting some $400 million from the likes of JPMorgan Chase and Merrill Lynch. New York Democratic Senator Chuck Schumer slipped into the reform bill a laser-focused provision that gives firms targeted for violating financial-service data-processing patents the right to ask a presumably sympathetic patent office to review their validity of those patents. Critics say Schumer's Section 18 creates an end-run around the courts. Leahy's Judiciary Committee argues back that it's within Congress's discretion. "From our founding," reads a committee fact sheet, "patents have never been regarded as a fully and irrevocably vested right."

So as to leave no doubt that this is about DataTreasury's battle with Schumer's Wall Street constituents, the legislative language exempts "patents for technological inventions." That has left tech-industry representatives screaming that if anyone needs protection, it's them. Hey, it's good to have a friend in Chuck Schumer.

Now, for critics of the patenting of software and other "business methods, " like Amazon's One-Click program, which allows users to -- and they are legion -- Section 18 sets up a conundrum. A widely heard recent episode of This American Life profiled Intellectual Ventures, a patent factory derided by Silicon Valley figure Chris Sacca as guilty of practicing "Mafia-style shakedown[s]." The company called the criticism "absurd." If business-method patents are bad, then maybe Schumer's do-over at the United States Patent and Trademark Office is a sensible way of providing limited relief and balance in a broken system.

The patent office is, by general admission, resource strapped and overwhelmed. Oklahoma Republican Senator Tom Coburn has been fiercely fighting to end the practice of fee diversion -- that is, Congress's skimming off of the fees inventors pay to the patent office for its own purposes. Writing in National Review, Coburn blasted Congress for filching nearly a billion dollars from the patent office over the last 20 years. Fee retention has its own problems. The Patent Office is a government agency central to the U.S. economy -- not a 7-Eleven that's trying to make big money on small change. It shouldn't be Congress's piggy bank. "If leaders in both parties continue to be afraid of rolling the appropriators and ending this indefensible practice," wrote Coburn, "sooner or later they will find themselves rolled by voters." That seems like a bout of wishful thinking. Congressional filching is gripping, perhaps, but this is still the humdrum world of patents we're talking about.

At the least, the bill's fans see in it bipartisan gain. President Barack Obama has said he'll gladly sign America Invents. At his late June press conference on jobs, Obama called for Congress to pass legislation to make it "easier for entrepreneurs to patent a new product or idea." An official White House position paper declares that first-to-file "provides greater certainty for innovators, reduces legal costs that often burden small businesses and independent inventors, and makes it easier for innovators to market their inventions in the global marketplace." Should the Senate finish with the bill before tonight, look for Obama to hold up the legislation in his joint-session jobs address as an example of Republicans and Democrats coming together to repair the American economy.

There's a good argument to be made that this patent-reform measure is another case of Obama and congressional Democrats coming out with a less progressive win. But, Coburn's prediction about voter outrage notwithstanding, they're not likely to get rolled for half-baked patent reform by voters come November.

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