04 December 2005

Patent Law Blues.

The L.A. Times, in an editorial, nicely sums up the problems of patent law these days. In a nutshell:

[O]n many levels, the U.S. patent system is profoundly flawed. Too many patents are issued for "innovations" that are obvious, vague or already in wide use. Too many patent holders try to extend their claims to devices and services that weren't even contemplated when the patents were granted. And it's a difficult, costly exercise to overturn a questionable patent after it has been awarded.

Compounding the problem, federal courts have been quick to hand patent holders a sledgehammer when their patents have been infringed. The appeals court in Washington takes the position that, except in exceptional circumstances, courts must issue permanent injunctions to stop infringers from using the inventions in dispute.

As a consequence, someone who holds a patent over even a small piece of a product, service or business model could shut an entire operation down — a nice bit of leverage when it comes to negotiating a licensing fee. As the Federal Trade Commission noted in a 2003 report, firms in some high-tech fields must obtain licenses to "dozens, hundreds or even thousands of patents" to produce just one product. . . . judges need flexibility to provide different remedies in different situations. Patents must be enforced, but that doesn't necessarily require courts to award crippling injunctions — particularly when the patent in dispute is just one of many involved in the product, service or business that would be shut down by an injunction. Nor is it good policy to encourage the creation of companies whose purpose is not to develop new products and services but to shake down businesses that do.

Besides, the near-automatic granting of injunctions can lead to the absurd result of a company being forced to pay royalties to license patents later found to be invalid. That's the potential result in the battle between Research in Motion, the company behind the popular BlackBerry wireless e-mail devices, and patent holder NTP Inc. A federal judge may reinstate the injunction he granted against RIM for violating NTP's patents even though the Patent Office, which is reexamining the patents, has issued preliminary findings that all five are invalid.

It is nice not to be the only voice in the wilderness.

In my opinion, the problem with intellectual property law, in general, is that property is the wrong metaphor to produce reasonable results. A property metaphor leads naturally to the all or nothing kinds of disputes we are seeing now in the EBay and Blackberry cases. But, the reality is, that the companies seeking to shut down both services with their patents, in fact, don't want to such down either service at all. What they really want to do, is to keep the very profitable operations going and receive a piece of the profits.

"Intellectual property" should really be about unjust enrichment rather the property rights. When someone makes a profit from a pure copy of someone else's creative work or invention, without permission, the remedy is easy. All profits should be forfeited to the author of the works. But, the important and hard cases aren't so simple. Most of the cases where free speech is an important consideration, involve cases where the person using the copyrighted work is making little or no profit which would otherwise have been available to the author. And, many of the important cases involve either derivative works, where the original merely inspires or flavors important new contributions to the whole, and complex inventions, where the patented idea is only one piece of hundreds or thousands in the whole.

Legitimate patent holders and copyright right holders could have a piece of those pies too, but the proper remedy is a piece of the profit which is proportional to the author's contribution to the total work. In the case of a movie or multi-media work, or alblum full of samples, that piece is likely to be small. In a translation, or a cover recording of a song, it might be larger. Indeed, covers of songs, which is one of the few areas of the intellectual property law where anyone can use someone else's work and pay a government established royalty in exchange, is a model for how much of the rest of the intellectual property law could work.

If our law were based on unjust enrichment, rather than property laws, the patent holders in the EBay case and Blackberry case, far from trying to shut those valuable enterprises down, would be doing everything they could to make them more profitable, since that would increase their own stake when a court finally determined an appropriate royalty, if any, for their contribution to the whole.

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