Book Review: Patent Failure - How Judges, Bureaucrats, and Lawyers Put Innovators at Risk
Arguments about intellectual property rights (IPR) never go away, particularly now that technological and market changes drive the legal agendas along very fast. Nowhere faster probably than in software and business-methods patents, one of the more colourful aspects of a highly litigious field today. Much of the debate centres on the USA where R&D spending is highest (particularly by big players, who incidentally have the most lucrative and best-defended patents). Indeed a recent decision by the Senate (May 2008, the time of writing) to remove the Patent Reform Act from its calendar (among other things it would have changed the first-to-invent rule to a first-to-file rule) has been seen by commentators as further evidence of patent and policy failure.
It is not by accident, then, that Bessen (software developer and now at Boston University School of Law) and Meurer (professor of law at Boston University) call their book Patent Failure. Predictably enough, though timely in itself, their argument is that there is plenty of evidence, historical and current, to debunk some key assumptions about IPR and patents and innovation – such as the strong protections over a robust period that patents provide, such as the incentives to innovation and creativity that patent protection offers, and such as reliance on an effective (they contend the reverse) bureaucracy made up of bodies like USPTO, the United States Patent and Trademark Office.
Their approach is interesting and eclectic. The over-arching case is that current patent arrangements are ineffective for many reasons: claims are vague and are processed slowly, the courts interpret the law in ambiguous ways, the technological complexity of many patents leads to inevitable confusion (for example about who got there first, and whether infringement really took place), and patent trolls (predatory opportunists) lurk to launch appeals. The authors build their case upon historical as well as contemporary economic data. They suggest that, for all the perceived innovation to arise from technological change that was at the same time protected by IPR, there is a great deal more confusion and abuse. In other words, the costs (of establishing and maintaining the claim, of issuing effective notices, of contests at law, of bottom-line returns on investment, particularly for the small inventor) exceed the benefits. Too much attention has been paid to the benefits and too little to the costs: the evidence, they claim, speaks for itself.
They rightly pinpoint software and business methods as especially problematic. They could and should have ventured far more into pharmaceuticals but they decided that enough can be made of the case based on what they do include. Patents suits are more probable in the software and business methods field than in any other in the USA (the setting for this book throughout). They cite three examples from the present (information, videotape, and broadcasting) and several from the past (telegraphy).
Their analysis hinges, they say, on such patents, and the phenomena on which they are based, being 'abstract' (a term that varies here between lacking transparency to being intellectually complex and therefore legally demanding). They are right in suggesting that such patents often trip up on the extent to which the intellectual material (e.g. the algorithms and source code) translates into the functional material. This really is the key here – as recent cases show – that exclusive rights to transactions that, say, extrapolate hedge fund trends might be sustainable but not if such transactions can be executed on any computer: understandably Microsoft and IBM, who have both the software and the hardware, insist that patents should be restricted or else there is a free-for-all. Others argue the opposite, that the intangible rights should be enough, or else all business methods applications (like online booking systems) would be infringers. Some characterise this as a pure and applied patent debate.
Beyond all this, of course, lie the numerous arguments for non-proprietary and collaborative systems, typified by the open source movement, and examined as being a major new source of wealth for networks by writers like Benkler. I would have liked this book to have travelled further in that direction. Its arguments could have been better, and less parochial, if it had absorbed more about the Internet and about cross-border patents (where a lot of corporate IPR activity lies at present, albeit some ending up in US courts, federal and state).
That said, Bessen and Meurer have recommendations on how to manage the future: as well as querying the link between innovation and patent protection, as well as admitting that the bureaucracy is over-worked and some patents are vague and notices get neglected and ignored, they are right to advocate more legal expertise in specialised patent courts. Equally they correctly call for: more effort to sort out fuzzy boundaries (say for prior-user defences) in software and business methods patents; more exemptions for good-faith infringers; and subtler distinctions between different sectors of the marketplace (some seem worse, i.e. more litigious and more risky, than others – software, say, more than chemicals, small inventor territory more than large corporates). The text is supported by extensive notes, a large and helpful bibliography, and an index. Even so, its arguments are journalistic and the central points raised by and in the book could have formed an article rather than a book. Yet at the price who is complaining?