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Finding The Best Cure

Intellectual Property Magazine

Let us go back to basics. The US Constitution authorises Congress to promote scientific research by granting limited exclusionary rights to inventors. Congress, in turn, has established a patent system to grant a limited monopoly right in exchange for public disclosure of an invention. Underlying that system is an effort to balance the need to encourage innovation with the avoidance of monopolies that stifle competition. While the economic incentives make practical sense, the reality is different. Recent research into the "R&D 100 Awards" over the period 1977-2004, suggests that slightly less than 10% of the award-winning innovations were patented. These results line up with prior, similar research. One could argue that this suggests that the patent system does not sufficiently incentivise inventors. But such an argument would ignore the existence of the data set itself, which includes awards granted to thousands of inventions over almost 30 years. What the data really suggests is that the patent system is a weak driver of innovation.

Given the weak correlation between patent rights and innovation, perhaps we are granting too much in the way of limited exclusionary rights. Perhaps the balance is tipping in favour of monopolies that stifle competition (or at least make competition more expensive). As evidenced by the recent proposals from the White House and Congress, the patent system risks being hijacked by attempts to over-extend patent rights. Regardless of what term one uses to describe the instigators-‘non-practising entity', ‘patent assertion entity', or simply ‘patent troll'-they represent a current plague on the system.

The problem is, it that it is not entirely fair to blame the ‘trolls'. Try as we might to identify a boogeyman for the pandemic of low-merit patent lawsuits, these companies are rational economic actors. Indeed, economists would say that ‘trolls' are doing exactly what they should be doing: taking advantage of systemic faults in patent law. And while at first the effort may have been spearheaded by forward-thinking plaintiff attorneys, many ‘trolls' today are well-funded operations with sophisticated backers, including large corporations and financial institutions.

Before addressing where those systemic faults exist and what might be done about them, it is worth spending a moment distinguishing among the so-called ‘trolls'. While hesitant to embark on yet another effort to re-define this group, there appear to be two types of trolls (though they certainly fall on a continuum). First, there is the group that asserts one or more patents, often against a large number of defendants, in the hopes of extracting cost-of-litigation settlements. This group does not so much prey on systemic problems in the patent system but rather systemic problems in US litigation generally. Because litigation is expensive, inconvenient, and relatively slow, targets of lawsuits may settle them for a nuisance value. This, too, is an economically rational business decision, even if a lawsuit is meritless.

But there is also a group that tries to extend its limited monopoly rights to cover innovations altogether different from the one disclosed in the patent, more typically suing one or a small number of large-revenue companies. For example, asserting a patent on a very particular functionality (eg, how to manage a folder on a network drive) against a much more general area of technology (eg, operating a cloud-based data storage system).

The White House executive actions and proposals to Congress are largely efforts to address the first group. They are also efforts to treat the symptoms of a broken system rather than cure it. The various measures - disclosing the real party in interest; permitting more discretion in awarding fees; and protecting downstream consumers - do not fix the more critical issue posed by the second group: patent claims that are too broad. The only effort aimed squarely at that issue is the executive action to improve the examination of functional claiming language, particularly in the context of software. While commendable, any such effort will take many years to bear fruit; it will only impact patent applications filed in the future, from which patents will not issue for years.

In the interim, it is time for courts (or Congress) to re-evaluate claim construction issues. Under current law, the standard rubric is to start with the language of the claims and interpret them broadly absent some explicit, narrowing limitation in either the specification or prosecution history. This gives too much primacy to the claim language. It allows for mischief as patent owners seek to have their patents cover altogether un-envisioned technologies that, through clever argument, may somehow fall within the claim language.

In the context of granting limited monopolies, this legal framework is simply backwards. As a default matter, claim scope should be interpreted narrowly (in keeping with the actual invention disclosed in the specification). Then, only if the disclosure in the patent specification warrants should the claims be broadened-and then only so far as they deserve based on the patent disclosure. Notably, courts could do this even applying current case law. They simply need to keep in mind the mission of avoiding undeserved monopolies that stifle competition, and that granting too much in the way of monopoly turns out to be a weak motivator for encouraging innovation.

About Matthias Kamber
With a background in mechanical engineering and a practice focused on patent and other intellectual property matters, Matthias Kamber protects his clients' technology from aggressive competitors and trolls. Regardless of the type of case or technology, he quickly determines the most effective legal strategy while balancing each client's corporate objectives. His approach has resulted in favorable early-stage dispositions, successful negotiated resolutions, and victories at trial. He has handled cases involving smartphone software and hardware, internet telephony, wireless networking, microprocessor design, and medical devices throughout the country and before the US International Trade Commission.