Wednesday, April 2, 2014

Three (3) Ways the patent system promotes progress. Not 1. Not 2.

The patent system promotes progress in three ways.  At least three.  But certainly not one. And not two. They are: the carrot, the stick, and the "it's not all about you" factor: enriching the public domain.

Let me count the ways.

The first way patents promote progress is the one that comes to mind from the phrase "incentivizing the innovators" (see [n1] below).  The carrot of possible patent protection motivates people to come up with ideas, sometimes all on their own, sometimes because their knowledge and training convinces people with money to hire them to come up with ideas.  Then people (the same or different) spend some money on developing, commercializing, and marketing those ideas.  Obtaining a patent lets the people who own the patent exclude competition, albeit for a relatively short time (see [n2] below).  Those people may make more money and then they may decide to spend it on additional research and development.  Innovation happens.  Society benefits.

But that is not the end of the story about how the patent system promotes progress. We have to count past one to two and three.

Numbers two and three on the list of benefits are less obvious.  They also tend to be ignored by journalists, academics, judges, justices, and others who do not know all that much about the patent system.  In fact, this post was prompted by a talk I heard last May about patents as incentives to innovation. The talk was half over before the speaker mentioned the third benefit and ne never mentioned the second at all.

The second way patents promote progress is with a stick.  Other people's patents can stop you from doing what you want because of the threat of suit, or the owner's refusal to license you at a rate you can afford, or your refusal to deal with the owner because it is a fierce competitor or, what gets too much attention these days, a troll. But the stick of patent protection is more in the nature of a prod. You are always at liberty to come up with a better idea: in patent lingo, to "design around" the patent.  Patents, during their limited life, don't bar everything in the field, they only bar what is claimed. Alas, in at least the years since the 1982 creation of the Federal Circuit (the appeals court for patent cases), the Supreme Court has never used the phrase design around to describe one of the ways that patents "promote Progress in Useful Arts," the justification for patents given in the Constitution (Art. I, sec. 8, cl. 8). Why not? Everyone says "saying it does not make it so" (attribution unknown) but this is a case where
NOT saying it does not make it NOT so.
"Designing around" may lead to another patent because of that carrot, and then there will be another stick (prod) as well as benefit number three.

The third way patents promote progress is that they enrich the public domain, the public store of knowledge about how to do things.  In order to obtain a patent, the inventor must describe the invention so that other people can (in patent lingo:  are enabled to) make and use it.  "Enablement" has long been referred to as the quid pro quo for the patent "monopoly."  Anyone can read a patent and learn from it. That was true even before the internet. That rich store of free, accessible and relatively easy-to-search information is a huge benefit that we, the people, receive because we have a patent system. Yet the term public domain has been used only rarely by the Supreme Court in the last forty years in decisions about patent law, and then only to focus is on how a wrongly issued (invalid, overly broad, etc.) patent steals from the public domain. The only exception to that anti-patent bias is found in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 US 141, 151 (1989). Bonito Boats addressed a challenge not to a patent but to a state statute against copying boat hulls, and the opinion contains several references to the theft view of patents before acknowledging that:
"[T]he ultimate goal of the patent system is to bring new designs and technologies into the public domain through disclosure."

I think the patent system -- and the statutes, the case law, the proposals for reform -- would be improved if people understood that it has more progress-promoting capability than just offering the promise of a time-limited monopoly.

(n1)  Jim Alexander, a student in my IP Survey course in 2007, was the first person I heard use this phrase.  I believe it originated with Prof. Katherine E. White. See her 2006 law review article: Preserving the Patent Process to Incentivize Innovation in Global Economy, 2006 Syracuse Sci. & Tech. L. Rep. (2006).

(n2) It is true that patents give patent owners' some rights but there are limits.
           A.    A patent gives the owner the right to exclude but only for a limited time.  Patents have expiration dates.  Before the expiration date, the owner must pay maintenance fees.  Once the patent expires, or once the fee hasn't been paid, the patent owner has no right to exclude. The patent has risen into (see [n3] below) the public domain.
           B.  A patent is a right to exclude not a right to do. That's because there may exist a patent #1, which gives owner #1 a right to exclude what patent owner #2 does, even though owner #2 has a patent. During the time that patent #1 is in effect, owner #2 has no absolute right to practice nis own patent but ne can: (1) wait until patent #1 rises into the public domain; (2) design around patent #1 (and maybe obtain patent #3), or (3) hope that owner #1 won't do anything. If that hope is dashed, owner #2 can choose to (a) change its business; (b) fight; or (c) take a license. Depending on how much #1 and #2 hate each other (and how good patent #3, if there is one, is as an alternative), owner #1 and owner #2 may decide to cross-license or merge. More innovation may emerge from that transaction and often does.

(n3)  At a conference on digitization at the University of Michigan in 2006, President Mary Sue Coleman gave excellent opening remarks about copyright and education and libraries.  I felt obliged to comment, however, when she said something about works "falling into" the public domain.  I pointed out that we ought to say that they RISE into the public domain.  When a piece of intellectual property passes from private hands to the public domain, the change should be likened to going to Heaven, not the other place, or to standing up and being counted, not to collapsing and being buried.  (I was unable to attend the afternoon session at that conference, but I was told that some speakers had changed their slides where they mentioned the public domain, crossing out the word "falling" and putting in the word "rising.")  Yes.

Drafted, but not posted, in May of 2013.
Minor revisions and posting: April 2, 2014; rev 20140523