Analyzing Congress's Multiple Approaches To Patent Reform

ectoman writes "Patent reform is becoming an unavoidable issue — and the United States Congress is taking note. But the scope and scale of the problem have prompted multiple legislative solutions, and keeping track of them all can be rather difficult. Mark Bohannon, Vice President of Corporate Affairs and Global Public Policy at Red Hat, provides an overview of four important legislative actions currently under consideration, offering clear and concise analysis of their goals and provisions. He also assesses their potential impacts. 'Given the widening attacks by PAEs [Patent Assertion Entities],' Bohannon concludes, 'it is essential that Congress work to produce meaningful legislation on at least the issues identified above in order to begin to stem the tide.'"

Comments

Be careful what you wish for.

[VortexCortex]

I say the idea of granting monopolies over work which has already been performed is counter to the nature of the Universe, and that we have Zero evidence that Patents and Copyrights are actually beneficial for society. Laborers have unlimited monopolies over their works prior to the work being done, and can leverage this monopoly in the same way that home builders and car mechanics do: Payment Agreement Up Front. Copyright and Patent laws ignore the economic fact that ideas and procedures and information are in infinite supply in the Information Age. Economics 101 states that which is in infinite supply has zero price regardless of cost to create or demand. What's scarce is not the solutions and information; What's scarce is the ability to create new solutions and new works. Market the labor, not the infinitely reproducible output, otherwise you're trying to sell ice to Eskimos; You're letting mechanics charge you for each time you start the car.

Humans and all life are information duplication and refining machines. Laws against human nature should be abolished, especially if they have ZERO evidence to support the assumption that they're beneficial for society -- Especially when the fashion and automotive industries are successful and sell primarily on design, even though these markets are not allowed design patents or copyrights; This is evidence these archaic restrictive systems are unnecessary. No scientist would agree to run the world on unproven hypotheses. What if patents and copyright are harmful? We MUST test the hypothesis and abolish them.

The important thing to be careful about here is that the patent and copyright regimes do greatly benefit the large rich corporations the most. In fact they do give an advantage to the immortal corporations which can simply wait out a patent before using it, or leverage a copyright for three generations of humans. I hypothesize that in a climate where corporations rule via lobbyists that any change to the patent system that is not abolition will be in the best interest of corporations primarily, and secondarily will be detrimental to society as a whole if possible.

Here we have a situation where through a loophole a small entity can leverage patents against small business and big corporations alike without retaliation if they merely do nothing but hold one or more patents and sue over them. If my hypothesis is correct, the patent reform will not address the issue of anti-competitive practices against small companies with small patent portfolios who actually create things, but will merely remove the teeth of patents held by smaller companies in general.

Be Careful. The medicine they're developing is not a cure for the artificial scarcity insanity; It could be much worse than the disease.

Re:Be careful what you wish for.

[icebike]

Mostly well reasoned, especially as it pertains to the type of patents being issued today, which amount to nothing more than protection for a mash-up of previously used ideas and objects.

Where your analysis falls down is most easily seen in the world of drug development. Unless a company can make a profit sufficient at least to cover its research costs many simply refuse to do the research at all. Its not petulant behavior of picking up their marbles and going home, its a simple fact of "They can't afford it".

Unless or until you transfer ALL research into the hands of tax payer funded entities (universities) there appears no other common mechanism to induce people to pay for billions in research with no sure way to pay for it in the end.

Its not just drugs, but it is easiest to see the direct linkage in that field. In Electronics and computers you have the same situation. Why would anyone develop some totally new technology at the expense of years in the lab and millions of dollars of salary and equipment with no way to assure a payment?

Comparison to a laborer is just tot simplistic to work, and i suspect you knew that when you wrote it.

You need to restructure virtually the entire methods of funding research before you can totally remove any protection for inventors. (And there is nothing so dangerous as a man with a plan to restructure society).

I just can't see any situation where you watch your family starve because you want to spend the next few years trying to invent a new widget or a new drug instead of planting a garden or getting a brick laying job. Sooner or later, you plant the garden, swing the hammer, and forget about new drugs.

Until you solve that patents aren't going away.

Re:Be careful what you wish for.

[dgatwood]

In Electronics and computers you have the same situation. Why would anyone develop some totally new technology at the expense of years in the lab and millions of dollars of salary and equipment with no way to assure a payment?

They do now. Have you seen how blatantly China and other developing nations ignore patents and produce blatant knock-offs of American goods? And before that, it was Korea, then before that, Japan, and I'd imagine somebody else before that, and at some point, if you look back far enough, it was America making knock-offs of patented continental goods.

So throughout pretty much the entire history of the industrial world, you had some developing nation ignoring patents and making the products anyway, and before very long, those nations were the ones doing much of the innovation, because they weren't content to just make exact copies for long, unlike the lumbering companies with patents, who basically sat on their butts and tried to milk their inventions for every penny they could while doing as little as they could to improve things. All of modern technology, ultimately, exists in large part because patents were ignored.

Re:Be careful what you wish for.

[nbauman]

Where your analysis falls down is most easily seen in the world of drug development. Unless a company can make a profit sufficient at least to cover its research costs many simply refuse to do the research at all. Its not petulant behavior of picking up their marbles and going home, its a simple fact of "They can't afford it".

Unless or until you transfer ALL research into the hands of tax payer funded entities (universities) there appears no other common mechanism to induce people to pay for billions in research with no sure way to pay for it in the end.

The best argument against that is that some of the most important drugs weren't patented.

Alexander Flemming didn't patent penicillin. He generously shared it during the war with the Americans, who took process patents on their contributions so they could charge the original inventors royalties.

Milstein and Kohler invented monoclonal antibodies. Can't get much more innovative and significant than that. They didn't bother to patent them either. In the spirit of scientific collaboration, they generously shared their work with Hilary Koprowski, who -- fool me twice -- took out his own patent. http://www.whatisbiotechnology.org/exhibitions/milstein/patents Those Americans!

Most of the original, creative drug research in the US is done first in academic laboratories, funded by the National Institutes of Health. Thanks to the Bayh–Dole Act, these patents are now owned by the inventor, who usually sells his rights to a private company.

One contribution of the private pharmaceutical companies, scaling up a drug from the research bench to pilot plant and industrial production, is not trivial, and it's often creative, but it's mostly textbook chemical engineering that the Indian pharmaceutical companies have proven themselves to be capable of doing. The New York City health department developed its own vaccines.

Another contribution of the private pharmaceutical companies is the job of bringing drugs through phase I, II and III clinical trials, which establishes their dose, efficacy and safety. However, there are several government agencies, notably the Veterans Affairs agency, which has run some of the best-designed and most important clinical trials of all. In the UK, the government medical research agencies also ran important trials.

The pharmaceutical companies, and particularly their lobby PhRMA, claim that it costs $300 million to bring a drug to market. This is not based on actual company data, since the drug companies never gave researchers access to their internal data, but on inferences by clever economists. If you trace that number to its source, it turns out to be what is known in the industry as a scientific wild-ass guess. Marcia Angell, the former editor of the New England Journal of Medicine, has written several articles and books, which you can find with a Google search, arguing for much lower figures.

I've been to medical conferences. Yes, if you're going to spend $10 million on a product launch party at ASCO, and if you're going to invite doctors to football games and marketing dinners at the Waldorf Astoria, and if you're going to pay your high-prescribing "thought leaders" millions in consulting fees, and run multi-million dollar direct-to-consumer TV and print campaigns to "ask your doctor" about prescription drugs, those marketing costs can add up. But outside the US they don't have marketing costs like that.

The private pharmaceutical companies do turn out some important drugs, and I don't want to kill a goose that lays even an occasional, high-priced golden egg. I don't think it would be a good idea to nationalize Merck and send its executives to the rice paddies for re-education. (It might be a good idea for URL Pharma.) But if these companies keep selling their new drugs, based on university research, for $20,000 or $100,000 a year, and it starts bankrupting individuals a

Cost shifting the deck chairs on the Titanic

[icebike]

Most of the proposals in TFA deal with cost shifting as a way to reign in the Patent Trolls.
These proposals tend to make it easier to extract money from the trolls that lose their case, but that seems hardly enough.

If there were no patent trolls, we would STILL have a problem with pointless and obvious things being patented and
these patents bought and sold with the sole intent to prevent others from using the "invention" and import bans etc.

If Patents are to benefit society as a whole, perhaps we should be investigating MANDATORY Licensing of patents.

Then develop a framework of deciding what that should cost. Maybe it would take the form of a Court of Cost Recovery, or a methodology of evaluating the value that each patent contributed to the wholesale price of the item. But such an evaluation would have to start from the position that the invention
MUST be licensed, for the good of all human kind. And the remuneration must be in line with some realistic value.

Inventions couldn't be used solely to prevent another party from producing something.

Bounce-Back patents (reaching the end of a scrolling action), if forcibly licensed would not prevent the inventor from making
phones, or add a great deal of value to other manufacturer's phones. The harm is very little for one side, the gain is vary little
for the other side if such a patent is abused.

So why should import bans be on the table at all?

If you start from the basis that all inventions MUST be licensed, all that drama goes away, and it becomes
a simple matter of price determination.

If you want to deny some item to society, you should find another way to use your invention, because you
gain your patent protection only if you license it.

Patent "Reform" Kills Patent Value

[Anonymous Coward]

Speaking as an inventor of more than 50 patents - the current system _is_ broken, but not in the way that these reforms are trying to fix. The real problem is that companies do not and will not negotiate with patent holders until they are taken to court. Before filing a lawsuit, companies won't take any discussion seriously. Licensee's don't negotiate outside of litigation because (1) the record of such negotiation might be used against them in litigation and (2) there is no penalty for refusing to negotiate. The "stick" of treble damages for wilful infringement is never awarded in court, and licensees know that.

The direct consequence of licensees refusal to negotiate outside of a lawsuit is that patent holders MUST file a lawsuit to have any hope of negotiating a license. Patent holders must pay enormous costs to lawyers and expert to file such a lawsuit, and these costs are never recovered in settlements - the pro forma settlement has each side paying their own costs. Potential licensees will pay millions in litigation costs before they are are wiling to negotiate a license - to them, anything that costs less than a license is just "good business" - even when any reasonable person could see that extending litigation would be fruitless. It is only when they've exhausted all the time leading up to trial that it becomes time for licensees to come to the table - since there is no penalty for delaying negotiations by extending litigation - in fact, since it delays payment, it can be seen as reducing expenses.

REAL reform would be to have a "safe harbor" where patent holders and patent infringers can realistically negotiate licenses. In order to do so, infringers have to provide truthful information about production volume and projected volume, and patent holders would have to provide truthful information about previous license arrangements. Upon entering a good-faith negotiation, both sides need to have the facts at hand to make a fair settlement. If one side or the other fails to negotiate in good faith, such a fact should be material to a resulting lawsuit. Having a penalty at trial for forcing the patent holder to file suit in order to negotiate a license instead of engaging in good-faith negotiations is the way to avoid lawsuits in the first place. Likewise, forcing patent holders to negotiate first instead of filing suit first also avoids expensive lawsuits.

If we are to value intellectual property fairly, reducing the "friction" in negotiating intellectual property licenses is key. At the moment, even for patents which have been examined by the patent office, "examined" by bringing those patents to court in prior cases, and re-examined by the patent office with senior patent examiners, and ruled on by patent appeal boards with several senior patent officials, the cost of litigation to negotiate a license can be tens of millions of dollars. What this means is that if you have a patent worth less than tens of millions of dollars, you can't get _anything_ of value for your patent. If your patent is more valuable than than, it's still a tremendous drag on patent value.

The current system is rewarding lawyers, not inventors, and the AIA and these further "reforms" are making the problem worse.

Re:Patent "Reform" Kills Patent Value

[icebike]

Speaking as an inventor of more than 50 patents - the current system _is_ broken, but not in the way that these reforms are trying to fix

You say this, but then you document the practices that might indeed be fixed by some of the proposed legislation. Specifically I suggest you reread some of the proposals in the Cornyn bill. These are aimed precisely at adjusting tie imbalance.