If even the tech and pharma companies are calling for patent reform perhaps we'll actually get it?

By Tim Worstall , written on April 4, 2014

From The News Desk

One and a half cheers perhaps for a new industry lobbying group. Not that I'm in favour of lobbying groups but these guys do seem to have at least one and a half good ideas. And given that this is the major tech and pharma companies trying to reform patent law possibly there's a chance that we might get a decent reform of it?

The announcement is here and of course there's all the usual press releases flying around about what they're up to.

The Partnership for American Innovation is a diverse group of industry-leading companies comprised of Apple, DuPont, Ford, GE, IBM, Microsoft and Pfizer which have staked their businesses on innovation. PAI members represent a diverse cross section of the economy – they have different business models, use their patent portfolios in very different manners, and are frequently competitors.
Super, yes, lovely and so on. However, they do support the most obvious method of getting rid of patent trolls, which is moving the patent legal system to one where the loser pays all the legal fees of everyone in the case. This is one wholly good idea.

As background there's nothing wrong at all with a patent assertion entity (PAE). This is a company that doesn't do anything but own intellectual property and try to collect on it. It's open to abuse of course, but imagine, say, Harvard. One of their professors invents something and Harvard then (depends upon the contract of course) owns that. It would be a very harsh legal system indeed that demanded that Harvard then go off and manufacture that new sexual lubricant in order to be able to profit from the IP. We'd all, I think, agree that they should be able to just licence it. Being a PAE isn't a problem.

Being a patent troll is indeed a problem and almost all patent trolls are also PAEs. But the signature of the troll is suing everyone and anyone on a flimsy patent and making the settlement agreement less than the cost of hiring the lawyers to fight it. Given that it can cost $500 to file suit and $2 million to defend one this can be a lucrative model. However, this model does depend upon a peculiarity of the American civil legal code. In which all parties to a law suit pay their own legal fees. In my native UK we have the system whereby the loser (whether that be the person who sues or the person who is sued) pays everyone's fees. This makes settlement when someone is caught bang to rights more likely: and it also prevents people from launching frivolous suits in the hope of a settlement. The risks of filing $500 near nuisance suits over a dodgy patent are rather different from those where someone might fight back and land you with their $2 million defence bill.

And the thing is, in the UK we have PAEs that operate entirely effectively (ARM Holdings, the designer of near every chip in near every mobile is at heart a PAE, they make absolutely nothing except designs that they licence) and we have no patent trolls. It's just not an effective business strategy that second. Further, in the construction of the new European Union patent system (a patent challenge in the EU will now be heard once and once only, in any court across the bloc) they have adopted this entirely sensible part of English law.

So, our new lobbying group on patents at least appears to have one good thing going for it. Microsoft also tells me, as background, that they're building a database of all of the patents they do have so that it's actually possible to go find out whether what you're trying to do merits trying to get a licence or not. This is certainly at least half a good idea, bringing some clarity to what needs a patent licence and what doesn't. Although one would hope that they're not using Bing to search it.

But I'm afraid that it is only one and a half cheers: for they're still in favour of software patents. And I'm firmly of the view that these should be abolished (rather than as is likely to happen with the Supremes in the Alice v. CLS Bank case, their scope limited) and software return to where it was, copyright law. I'm just absolutely fine with the actual code to do something being protected: just as I am with the order of words in a book being so (as you might imagine as a writer). But that software can be written to perform a task seems to me to go too far. It's like me being able to patent snark mixing economic and tech coverage. I should indeed be able to protect an instance of it but not the more general idea itself.

So that's one of the traditional three as a boo not a cheer for this initiative. And the final half is, as I explained about the theft of IP in India, that they're very keen on extending the very strict (and righteously so) US and rich world controls on IP to poor countries. This is usually called "TRIPS" and is written into most modern trade compacts and treaties. Given that poor people don't actually have any money there's no great loss to anyone if poor people rip off intellectual property. And by the time they do have some money which IP owners would like to appropriate, they'll be producing IP of their own that they would like to protect. This is pretty much the definition of getting richer, beginning to produce things of value. So my attitude is to wait and sting them when they've got some cash worth fighting over. Our new organisation doesn't agree with me on this of course.

But overall that first recommended change, one that's already before Congress in fact (Goodlatte introduced it I believe?) is such a good one that I would support this group. Until they succeed on that one and then I can return to shouting at them about the other bits and pieces.

[illustration by Brad Jonas for Pando]