Mr. Reuven Brenner, a lecturer at McGill University's Desautels Faculty of Management, wrote an opinion piece in the Wall Street Journal advocating that patent protection be shortened or vary depending on the industry. Mr. Brenner an economist who knows a great deal about business, speculation and intellectual property opined,
The 20-year patent life does benefit consultants and lawyers. It also brings about an increase in government administration and expansion of the courts. This results in a misallocation of talents and capital that could be mitigated or even avoided either if the life of patents weren't so long, or if patent protection varied depending on industry.
The article was widely circulated around the patentsphere by the broken patent system camp, progressive intellectual property lawyers opposed to maximalist patent enforcement regimes, civil society voices arguing that patent adversely impact innovative firms and those whose goal is to eliminate patent protection completely for certain inventions like software and business methods. The article posits that the effect of shortened patent terms is fewer enforceable patents with shorter shelf lives. When patents expire faster it creates added incentives for a truce in the patent war and more rational licensing approaches. Money being spent on patent administration, defensive patent practices and building portfolios of patents of questionable value would be redirected toward innovation. And we would add that it would make patent trolling more difficult as patent assertion entities would operate at increased risk because they would have to gamble more on which patents would cover market moving innovations earlier in their life cycle. Lawyers, accountants, and consultants would need to explore other career opportunities.
What would happen if the life of patents in some industries…, such as software, were shortened… Companies and governments would be far more likely to cooperate than fight. There would be less piracy around the world. With regulatory and legal reform, there would be less litigation. Money spent on lawyers and lengthy trials today would instead be spent on innovations.
Shortening patent terms across the board has little chance of getting past the Congress and the cadre of industry lobbyists. Regulated industries like pharma where the time to market is impacted not only by the time it takes to get a patent but by the time it takes to work through the regulatory requirements for new products being available for sale would revolt. The competitiveness meme about new market sectors, compelling arguments based on the need for economic growth and the potential for foreign entities to gain substantial market advantage if patent protection length is shortened would make for a tough fight for an across the board reduction of paten term.
And varying the term by industry?
The Congress and USPTO would first need to define "industry" and then figure out (and explain) the rules for each industry and its patent term.
The possibilities for crafting industry definitions and their permutations are limitless — by NAICS code; by type of business — for profit, not for profit, non-profit; by size — small, large, micro. What about considerations aimed at where an invention sits on the innovation curve and how long certain technologies take to get to market? Would there be different terms for inventions covering basic research, applied research and the incremental innovations under the broad heading of development?
Then there is the challenge of defining the "industry" in light of the accelerating scientific and technological convergence and the evolution of new business models that go along with it. What happens when technology and industry converge? Camera companies replaced by firms making personal mobile devices with miniaturized digital cameras. Techniques used to cool things in the semiconductor industry used to improve heat dispersion and reduce energy use in commercial cookware. And if there is any doubt about industry definitions and business models evolving, when you travel you now check in to a Real Estate Investment Trust (REIT) that happens to have rooms you can stay over in, known as a hotel. And this REIT-based hospitality business is supported by patented business methods used to do everything from manage your reservation, suggest what sporting events you might enjoy based on your previous travel history, award loyalty points, track water and energy usage, and handle payments via mobile no touch payment systems. The boundaries on what constitutes an industry are very fuzzy.
As for shortened or varied patent terms reducing government administration or the load patents place on the courts, there would inevitably be a need for adjudication process to challenge the industry patents placed in or the classification it receives. Procedures for granting exceptions for universities, independent inventors, nascent industries, and more would not doubt make it into the mix. The art of patent term extension would become a specialized field in patent law not unlike firms specializing in Substantial New Questions of patentability. Could Congress resist the urge to tinker for the benefit of emerging industries back home?
As for the lawyers, accountants, and consultants? Guaranteed full employment. Right now where there is a only one patent term for utility patents — 20 years from the filing date. It is impossible for the average inventor, investor, or entrepreneur to figure out which patents are valid and enforceable without the aid of a talented patent attorney and a deep dive image file wrapper researcher. Just look at the complexity of the USPTO's Patent Term Calculator tools if there is any doubt. The legal gymnastics of mergers and acquisitions when companies in disparate industries with significant IP assets form new entities would be a potential lawyer and consultant bonanza.
What Patents Are Enforceable
There is a way to achieve some of what Mr. Brenner is proposing without Congress or lobbyists or prolonged legislative and regulatory naval contemplation on the definition of "industry". For many patents, the term already expires well in advance of their legal 20 year term as a result of abandonment. For others they are invalidated by USPTO through reexamination or by the courts as a result of patent litigations. A portion of the patents that remain are overtaken by scientific and technological events, market movements, or have characteristics that make them un-licensable — poor claim construction, too little prior art, too much prior art, incremental inventions easy to design around.
According to an article on by Andrew Pham on strategic portfolio-based patent investment and management, the maintenance rate for patents declines at each of the renewal period. The renewal rate is 87% at 1st renewal interval (3.5 years); 70% at the second renewal (7.5 years); and down 47% at the final renewal (at 11.5 years). This means that within 3.5 years after patents are issued 13% are abandoned; by the 7.5 years 30% are abandoned; and by 11.5 years over 53% are no longer enforceable, more than half. Using the number of US utility patents granted in 2012 (253,155) that means by 2016 over 32,900 of the 2012 vintage patents will be abandoned, by 2020, the 7.5 year mark, 75,000 would be gone, and by 2023 over 124,500 of 2012 vintage patents would no longer be enforceable and available for innovators for the taking.
The problem is that no one can tell which patents are valid and enforceable and which they are not.
USPTO needs to update its systems to reflect the current status of every patent. Every single patent in every single patent family should have an easily accessible up to date status and expiration date. Enter a patent number at USPTO and the system returns a status, and an expiration date.
Status information should be simple — enforceable, abandoned, expired.
Only a valid patent is enforceable. Abandoned discriminates those that expired before their 20 year term from those that expired according to normal term expiration. (There is lots of legal minutiae about claims that are invalid but USPTO already marks up the invalid claims that it changes. The problem is that the data isn't presented in a usable way. We will leave that discussion about why the Office of the Chief Information Officer needs more money for another day.)
The extended period for paying maintenance fees and for being able to petition for reinstatement of abandoned patents needs to be shortened. This means streamlining the procedures for paying maintenance fees. A good start would be to look at how many patents that are abandoned are reinstated and why. It would be nice to know if there is any real benefit in this protracted reinstatement process that results in any market moving use of these patents. Instincts say that it probably doesn't and that all that is happening is more uncertainty about which patents are enforceable and which are not while allowing patent owners to continue to have the illusion of bigger more scary patent portfolios.
The information presented in the Official Gazette on which patents are due to pay maintenance fees, which are delinquent, and which are abandoned should be easily assessible and integrated into the USPTO publicly facing systems. And it should be easy to tell which patents are no longer in the reinstatement grey area.
Address the problems small inventors have with the costs associated with patent maintenance through other creative means — financing options, installment payments, small business patent pooling.
You can be sure that patent monetization organizations can certainly tell which patents are still valid and which are not. Rumor has it that Intellectual Ventures routinely looks at the validity, enforceablity, and status of terminal disclaimer information on patents is part of its due diligence process. We would expect nothing less. It would be nice if USPTO supported that process for the rest of us. Imagine how the dynamics would change if the guys on the other side of the table had information as good as theirs.