Wall Street Journal: Current Patent System Suppresses Innovation

    By Donald Zuhn --

In an op-ed piece in today's Wall Street Journal, L. Gordon Crovitz opines that Congress' failure to enact patent reform this year has undermined the Constitutional mandate to encourage innovation (see "Patent Gridlock Suppresses Innovation").  The fault for our flawed system, according to Mr. Crovitz, rests with Congress, which he believes "[f]or the third year in a row . . . has just given up on passing a law reforming how patents are awarded and litigated."

Mr. Crovitz (at left) leaves little doubt as to which team he backs when he discusses the efforts of the Allied Security Trust, an industry consortium that has begun to buy up patents in order to keep them out of the hands of dreaded "patent trolls" (when Mr. Crovitz notes that the Allied Security Trust includes "[c]ompanies as diverse as Verizon, Google, Cisco and Hewlett-Packard," one wonders what definition of "diverse" he is using).  While Mr. Crovitz asserts that our current patent system has become "patently absurd" for most innovations, it is clear that he speaks for the "software and other technology companies" -- which he expects "to be the growth engine of the economy" -- and not for the biotechnology and pharmaceutical industry.  For example, when Mr. Crovitz contrasts the pharmaceutical industry's self-centered reasons for lobbying against patent reform legislation with pro-reform lobbying conducted by technology companies, he argues that the latter were "worried more about uncertainty in the law than about the value of their patents."

According to Mr. Crovitz, "growing" evidence indicates that "for most industries, today's patent system causes more harm than good."  However, the only evidence Mr. Crovitz cites in his article is James Bessen's and Michael Meurer's book "Patent Failure," which Mr. Crovitz contends establishes that the costs of U.S. patent litigation to alleged infringers ($12 billion in 1999) outweighed the profits companies earned from patents ($4 billion in 1999).

Mr. Crovitz enumerates the problems he believes plague our current patent system.  In his view, these include an "uncertainty about who owns what rights," "poorly defined property rights for inventions," the issuance of "increasingly broad and vague patents," the inability of companies to know whether or not they are complying with patent law, the perpetuation of a first-to-invent standard over a first-inventor-to-file system, "a still-primitive system for notifying others of the existence of patents," and a squeezing out of small inventors by companies that "only pay for rights they think the system will protect."

A cynic might suggest, after reading this latest attack on the U.S. patent system, that if Mr. Crovitz were forced to choose, he might pick unfettered access to his Blackberry device over access to new pharmaceuticals.  And while that might be fine for him, it's not a choice the rest of us may be willing to make.

Mr. Crovitz served as executive vice-president of Dow Jones, where he launched the company's Consumer Media Group, integrating the print, online, television, and digital editions of The Wall Street Journal, MarketWatch.com, and Barron's.  He left Dow Jones in December 2007, when Dow Jones was acquired by News Corp.

For additional information regarding this or other related topics, please see:

• "The Wall Street Journal's Problem with the U.S. Constitution," November 14, 2007
• "The Wall Street Journal Gets It Half Right," November 5, 2007

Comments

[K.R.]

Just another guy opining on something he knows nothing about. Guys like this are the reason the economy is so screwed up.

[BT]

From the article: "These are shocking findings, but they point to the solution. New drugs require great specificity to earn a patent, whereas patents are often granted to broad, thus vague, innovations in software, communications and other technologies."
So whats the solution pal? Greater specificity? How again does apportioning damages get you there?

[Pat]

His comments about the total profits from patents in the last eight years is $4 B is laughable. Where is this statistic from? Some big pharma companies are earning close to (more than?) that for a single product per year.

[Donald Zuhn]

BT:

Thanks for pointing out the "[n]ew drugs require great specificity to earn a patent" comment. I wanted to work that into the post, but like a number of other statements in the article, I was not sure what the author meant.

Thanks for your comment.

Don

[angry dude]

"Small inventors feel the brunt of the uncertainty costs, since bigger companies only pay for rights they think the system will protect"

In other words, even with the current system WITHOUT damage apportionement big companies step on small guys all the time...
I imagine how wonderful things will be after damages are apportioned

Let's see: the apportioned damages calculated by the court for e.g. some infringing functionality in MShit Windoze OS is 1 mil but the cost of multi-year litigation against MShit is at least 4-5 mil
Who will take this case to litigate on a contingency basis ? Any takers ?
If they want to lower damages paid out to patent holders they have to criminalize at least willful patent infringement
If patent litigation stays a civil matter damages have to be high enough to discourage big capitalized entities from stepping on smaller competitors. Period.