April 6, 2007

"Big Dig #3" - Patent Law

The following was an assignment, "Big Dig #3," for a business journalism class. I researched the patent process and interviewed a patent attorney from Houston, Texas, Stephan Kinsella (his personal website is available here).

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On November 28, 2006, the Supreme Court heard oral arguments in the KSR v. Teleflex patent case, a trial which could produce the most important ruling for patent law in forty years.

The case involves a dispute between KSR, a company which manufactures gas pedals that use an electronic signal rather than a mechanical cable to signal the engine, and Teleflex, a company which claims KSR has infringed a patent it was issued in 2001 for a similar technology. The dispute revolves around whether or not KSR’s system was an “obvious” integration of known technologies or not.

"The implications of this case to the patent system are huge. It could impact millions of U.S. patents currently in force and over 700,000 patent applications currently being examined by the PTO,” according to an interview conducted by PRNewswire.com of Robert Greene Sterne, a member of the counsel for KSR.

Patents, like trade secrets, trademarks and copyright, seek to protect “intellectual property,” or “IP.” Of the general IP category, only patents and trade secrets protect inventions.

According to Stephan Kinsella, a patent attorney from Houston, Texas, there are four criteria the United States Patent and Trademark Office (or PTO), use when judging whether or not an invention is patentable—statutory subject matter, utility, novelty and non-obviousness.

“Basically you can patent machines and processes that produce a useful result, so that’s the first one, and utility means it just has to do something useful,” says Kinsella.

So, based on the first two criteria, drugs are in (potentially make you healthier), while nuclear bombs and perpetual motion machines are out (nukes can only do harm or disutility, while perpetual motion machines are impossible according to the laws of thermodynamics).

“Novelty means it has to be new, and that’s usually pretty easy to overcome,” Kinsella continues. “But then you have to ask yourself if it’s an obvious difference or a non-obvious difference, and in most other parts of the world this is called the ‘inventive step.’”

So, by way of example, Kinsella says patenting the use of an LCD panel with a computer would not be a possibility because it is already obvious that you would use a display device with a computer, even though and LCD is new in comparison to a standard CRT monitor.

As the Supreme Court case shows, and as Mr. Kinsella emphasizes, obviousness – or lack thereof – is the central issue of patent law being debated these days. And the spread of the Internet and electronic goods will serve only to further complicate the patent system in that regard.

“About five years ago, Amazon got an injunction against Barnes and Noble to stop their one-click—they had a patent on clicking once on the basket to buy something as opposed to clicking twice,” says Kinsella, recounting a key moment in the growth of e-commerce. “It’s ridiculous, utterly ridiculous… Barnes and Noble is lagging behind now and I don’t know if that’s why, but it’s possible.”

According to Kinsella, there may even be a kind of populist revolt against the concept of IP by consumers who are increasingly frustrated by restrictions on the way they use their electronic media and information technologies.

“I believe there is a growing hostility towards IP in general, at least among Gen-X and the tech people,” Kinsella says, citing the examples of the RIAA, Disney and the recent Blackberry patent suit in which the company was forced to pay hundreds of millions of dollars to another company which claimed Blackberry had violated one of its patents. “There is an increasing fear a lot of small companies are in of patent infringement when they’re just trying to do business.”

That’s a concern worth taking seriously—after all, the patent system is predicated on the belief that the limited-monopolies granted by it incentivize creativity and create a net benefit for the economy. But if the arbitrariness of the patent system leads to exponentially-increasing costs, the economic usefulness of the system might need to be reexamined.

“If you really take seriously the idea that anyone who comes up with an idea has some property right in it, it either has to be definite or infinite. If it’s infinite, the human race probably would’ve died out a long time ago, because no one would be able to use the wheel, or fire or build a house without getting permission,” says Kinsella. “Therefore, the only way to make them work is to define their duration, but then you run into the problem of arbitrariness—twenty years for a patent, seventy-five years for a copyright, ten year renewable terms for trademarks.”

Until the time comes for Mr. Kinsella’s ideal system which only respects trade secrets and trademarks, he and others concerned with the patent system will just have to cheer on the right outcome in court cases such as KBR v. Teleflex. Depending on the way the ruling goes, that case could result in a striking down of current notions regarding “secondary conditions of non-obviousness,” which Kinsella views as currently helping to promote the arbitrariness of the patent system which is responsible for situations like the Amazon one-click patent.

According to the industry blog PatentlyO.com, Justice Scalia has already hinted that a conclusion in the case has been reached, saying, “I know how that one comes out, but I'm not going to tell you.”

Stephan Kinsella has his fingers crossed.

1 comments:

cowbot said...

Well written. Thanks.

I've written a refutation of 'intellectual property' based on austrian praxeological method here:

http://phreadom.blogspot.com/2008/05/intellectual-property-is-fiction.html

The very nature of reality indicates that the idea opens a path towards harm.