The Patent Cold War

Quentin Stafford-Fraser

The current patent system is something of a farce. Almost everybody involved in it knows this, but it's a game we all have to keep playing because nobody can afford to be the first one to stop.

The patent system has been with us for nearly half a millennium, and it has always, I think, been rather a good idea. Anybody who came up with an invention and needed time to develop it into a business was granted a monopoly on the idea for a limited period, in exchange for writing it up and making it public. So there was an incentive to be inventive, less need for secrecy for fear of competition, and a constant flow of published new ideas to form the basis of technological and industrial progress.

But for most of the last year I've been involved in reading and writing patents, and if you have been lucky enough to have been spared this particular pastime, let me tell you that those noble aims have now descended into a pretty soul-destroying business. I'm certainly not an expert in this field. In fact, I feel more like a war correspondent who has been caught up in the periphery of a battle, hasn't seen too much of the fighting, but has enough experience that he might hope to convey some useful information to his readers. I'm about to move on to other things, so I wanted to file my final report on location before going home.

a problem of motivation

This military metaphor is somewhat appropriate, because the patent system now reminds me of nothing more than the arms race of the Cold War years. All parties have to amass huge stockpiles of weapons, and it's not because they need them to defend their territory. The twenty-years-or-so lifetime of a patent seems an eternity now when compared to the rate of technological development. Patents can easily take three years even to be examined, so a modern start-up company can be created, funded, and then sold for millions of dollars before it even knows whether its first patent will be granted. But it must have some patent applications to gain the valuation it needs with any investors.

So the arms race flourishes, partly because those involved want to be taken seriously - their country must be coloured pink on the map if they are to make an impression on those who care about these things - but chiefly because they're terrified of anyone who may have a bigger stockpile than themselves.

And so we have the first major problem. The acquisition of patents, instead of being a means to an end, has become an end in itself.

accessible giants

In our world of global high-speed travel and communication, it is natural that many people will come up with the same or similar ideas at roughly the same time. Yes, there are some genuine major leaps of invention and discovery by individuals, but most progress has always come from 'standing on the shoulders of giants'. The difference now is that we all have access to the giants. We can jump on a plane to go to their keynote speeches, or we can listen to their podcasts on the way to work. So when X develops a gadget which receives worldwide publicity, and Y launches a new web service which everybody starts using, about 1,000 people around the world immediately notice that it would be really cool to connect X and Y together. There are probably several million people who could conceivably have reached that conclusion and only 1,000 did, so it can still be deemed to be non-obvious. And nobody thought of it before X & Y came along, so it's novel. It's therefore patentable.

But who will actually get the patent? The person who thought of it first? The person who would make the most successful business out of it? The person who explains it most clearly for the benefit of others? The person who would come up with a really neat implementation in a beautiful piece of industrial design?

No, in general it will be the person who has the time to write it down and the resources to file it, maintain it, translate it and pay all the other associated costs, or who can afford to get somebody else to do it for them. Big businesses, of course, can do this, and for them the cost is relatively low, so they patent the hell out of everything. I've worked in the research labs of big companies and, yes, we invented lots of cool things and patented quite a few of them. But almost none of them ever became part of the business of the company and so deserved the protection for which the patent system was designed. Yet the patents will live on for another decade and a half. IBM now has around 30,000 patents and they are currently filing an amazing 3,000 per year. From one company. They can't possibly exploit all of those; most of them will just end up packing the filing cabinets of the corporate attorneys. In fact, if recent history is anything to go by, it is small, agile companies who are the ones most likely and able to turn inventions into real value.

And so this is problem number two: Lots of people have the ideas, but the wrong people are getting most of the patents.

money talks

When somebody in a big company files a patent, what happens to the other 999 people who thought of the same idea at about the same time? Well, they won't know anything about it. They may think the idea was rather a good one. A couple of them will start a business based around it, and pour their life's savings into it. And this is a real worry because, when patents are being filed at such a rate - the US Patent Office received over 400,000 applications this year - it's almost impossible in some spheres to do anything without infringing somebody's intellectual property, even if you don't have the slightest intention of doing so. The question is simply whether you'll ever be found out by the guy who owns the filing cabinet. Not really what the system was intended to achieve.

"But surely", you say, "sometimes the little guy wins? Sometimes he gets the patent?" Yes, and there are many stories of people making their fortunes through the judicious capture of a single idea. But there are probably just as many of small companies who have been driven into bankruptcy by the cost of defending their patents, even if they eventually won the case. The American Intellectual Property Law Association has estimated the price tag to defend a typical software-patent lawsuit at $3 million.

And so we come to a very clichéd but nonetheless important problem number three: In the end, whether a patent is worth anything depends chiefly on how much you can afford to spend on lawyers. Even if you rightfully have the patent, you may not win.

forgotten (prior) arts

And how are the patent offices holding up against such a flood of applications? Well, roughly half of US patent applications are granted at present. It has fluctuated over the last forty years, rising as high as 75% or so in the late sixties and early seventies and falling slowly since then to today's level. So, on the percentages, you might assume that it was harder to get a patent now than then. But that would assume that the quality of the applications were the same now as then. And the numbers are on a very different scale. There were more than three times as many patents granted in 2004 as in 1964, and it's not clear to me that people have become three times as clever or inventive. And because, as a result of this load, patents can take several years to be examined, even the applications which are not granted are still dangerous. They are unexploded land-mines, which may or may not be lethal but because nobody has managed to defuse them yet, but they will stop you from enjoying a walk on the beach.

I'm amazed, actually, that the patent offices achieve as much as they do with nearly 2000 new applications landing on their desks each working day in the US alone. But, of necessity, their examination of the prior art to check for the novelty of an idea must be very cursory . And in my experience, the only prior art that is ever cited in response to an application is that which has also been filed as an application in the past. If old Professor Snodgrass who used to teach you physics has been lecturing about his great ideas for 15 years but never got around to employing a patent attorney, then the patent office is unlikely to complain if you file a patent on them today. Of course, somebody with a recording of the good professor might be able to come along and invalidate your patent in the future, but that would cost them a lot of money and, anyway, you'll have the VCs to defend you by then.

And so we come to my last major concern, that a lot of the ideas for which patents are granted probably aren't very novel. So the system isn't really stimulating technological development by granting people 20-year monopolies on them.

a suggestion or two

So why, in the face of all these problems, do we still keep playing this ridiculous and expensive game? Because, as with the arms race, nobody wants to be the first to quit. The problem is that the system, for all its failings, does still have the power of law behind it. The missiles are real, there are huge stockpiles of them, and, unlike in the Cold War, they are used rather regularly, so nobody can afford to ignore them. Unilateral disarmament is a dangerous option.

So, for what it's worth, here's an amateur observer's suggestion on how we might improve the system before it all blows up in a very messy way.

The fundamental problem, as I see it, is that patents are obtained fairly casually and then held on to for litigation or exchange purposes only, and that makes a mockery of the system. Many countries have 'maintenance fees' for a patent which make it rather pricey for the individual entrepreneur, but they're too low to be of concern to a big business. So the engineers are bullied, bribed or otherwise motivated into condensing their lucid ideas into a form which is not really suitable for reading by humans, but is remarkably good at filling up filing cabinets.

In an ideal world, I think, you would forfeit your patent after a short period if you were not making active commercial use of it. This pure concept is probably a bit too difficult to police, though some countries have a variation on it called a 'working requirement', where you can be required to license your patent at reasonable rates if you are not making use of it to others who have a need for it, though I imagine the process may not be trivial and it doesn't necessarily stop the huge numbers of applications.

So my alternative suggestion is as follows: Make it cheap enough to obtain a patent that the individual entrepreneur can reasonably expect to do it. Keep the costs of maintaining it low for the first year or two. But after that, the maintenance charge should double every year. When you stop paying, you forfeit the patent. So there is a great incentive to make full use of your patent as soon as you can. If you're selling it to anybody they'll want to do the deal very quickly, too. But simply keeping large stocks of patents in your filing cabinet becomes a prohibitively expensive business very quickly, and a lot of useful ideas will be deposited in the public domain much sooner, encouraging innovation all round. Essentially, only the most valuable patents are kept current, and then only for a lifetime dependent on their value.

In the meantime, if you're starting a company, my advice is to avoid patents if you possibly can. If you can come up with a business model which depends on a strong brand, speedy execution, quality products and customer satisfaction, then go for it, and there is a magic force field you can set up which will stop others from patenting your ideas and won't cost you a penny:

Tell everybody about what you're doing. Publish as much as possible about your idea as widely as possible. You still, in the US at least, have a year to patent it if you decide you want to, but widespread publication of your core ideas will make sure that nobody else can patent them. It can be hard to make this fit with many business models, and there's always the danger that people will start patenting stuff close to your field. But if you can make it work, it is, perhaps, the only way now to deal with the madness and remain sane.