[Commons-Law] The Patent Epidemic - It's wasting companies' money and slowing the development of new products

[Hasit seth]

======================================
Dear All,

    This is a nicely written piece about problems in the obviousness
zoo of US patent law. Good material for those opposing patents!

    But do note an important point, that patenting shows a jump when a
new kind of energy source, material or something fundamentally novel
is created. This is not a fault of a patent system but rather the fact
that patent system deals with a field that has sporadic, irregular and
uneven jumps in progress. Anti-software patent activists should make a
note of this fact.

"One reason for this explosion is the natural tendency of patents to
track broad economic and technological trends. Just as the early 20th
century saw the advent of large-scale patenting of chemicals, the past
two decades have witnessed the spread of patents on computer software,
business methods, and genes. Controversy often accompanies the
expansion. For example, critics say many business method patents, for
processes that perform operations, are often nothing more than
combinations of age-old practices with a computer or the Internet.
"

Regards,
- Hasit
======================================
JANUARY 9, 2006, BUSINESSWEEK.COM

LEGAL AFFAIRS

The Patent Epidemic
It's wasting companies' money and slowing the development of new products


A man "has a right to use his knife to cut his meat, a fork to hold
it; may a patentee take from him the right to combine their use on the
same subject?" -- Thomas Jefferson

The order was potentially a big one for KSR International Co. General
Motors Corp. () wanted the Canadian auto parts maker to supply gas
pedals for its 2003 Chevrolet and GMC light trucks and sport-utility
vehicles. But not just any pedals. GM wanted adjustable ones that
could move back and forth to accommodate drivers of different heights.
And it wanted the pedals to send an electronic signal, rather than
using a mechanical cable, to change the engine speed when a driver
stepped on or off the accelerator.

Both features had been around the automobile industry for a number of
years, so KSR set about designing a combination. Not so fast, warned a
March, 2001, letter from Teleflex Inc. (), a Limerick (Pa.) competitor
that had gotten wind of KSR's discussions with GM. Teleflex claimed
its patents covered all combinations of an adjustable pedal with an
electronic sensor and that anyone else making them would be
infringing. If KSR wanted to proceed, the letter said, it needed to
pay Teleflex a royalty. Rejecting the demand, KSR sealed the deal with
GM, which it still supplies.

Teleflex sued KSR, and the companies are now locked in litigation.
KSR's defense is simple: U.S. law does not allow patents for
inventions that are "obvious." Nothing could be more obvious, KSR says
in court filings, than a combination of "preexisting, off-the-shelf
components" that each perform "exactly the same function" for which
they were originally designed. In essence, KSR's argument is that
Teleflex may as well have patented the combination of the refrigerator
and the light bulb. Rodger D. Young, Teleflex's attorney, counters:
"The fact that Device A and Device B exist does not make it...obvious
that they should be put together."

HIGH COURT INTEREST
KSR has asked the U.S. Supreme Court to weigh in. If it does, the gas
pedal dispute will join a high court docket unusually rich in patent
cases this term, with the collective potential for broadly reshaping
current law. The justices have not taken such an interest in the area
since 1965.

How to determine when an invention is "obvious" is one of the most
critical and contentious issues in patent circles. Over the past two
decades, critics say, the hurdle for passing the obviousness test has
been steadily lowered, and the U.S. is now awash in a sea of junk
patents. Some are just plain silly, such as a patent for "a method
[of] exercising and entertaining cats" (basically teasing them with a
laser pointer), or another for "an animal toy that a dog may carry in
its mouth" (which not only sounds suspiciously like a stick but also
looks like one in the patent drawings).

But many perceive a serious threat. A coalition of businesses,
including Microsoft (), Cisco Systems (), VF, Hallmark Cards, and
Fortune Brands () has jointly filed its own brief in the KSR case
asking the Supreme Court to take corrective action. Two dozen
intellectual-property law professors have made a similar filing.
Massive overpatenting, the professors say, "creates an unnecessary
drag on innovation," forcing companies to redesign their products,
pony up license fees for technology that should be free, and even
deter some research altogether.

The tide shows no sign of turning. In 2004, the U.S. Patent &
Trademark Office issued 181,000 patents, up from 99,000 in 1990. New
applications, meanwhile, are being filed at a rate of about 400,000
per year. If the Patent Office closed its doors today it would need
two years just to clear the backlog.

One reason for this explosion is the natural tendency of patents to
track broad economic and technological trends. Just as the early 20th
century saw the advent of large-scale patenting of chemicals, the past
two decades have witnessed the spread of patents on computer software,
business methods, and genes. Controversy often accompanies the
expansion. For example, critics say many business method patents, for
processes that perform operations, are often nothing more than
combinations of age-old practices with a computer or the Internet.

In an article in The National Law Journal last month, New York
attorney Barry Schindler expressed the current
patent-everything-in-sight mentality. Seizing on a recent ruling by a
Patent Office administrative board that said method patents don't even
need to make use of technology, he advised companies to "now seek U.S.
patent rights for any unique business method covering every
conceivable business operation, such as methods of billing clients,
hiring employees, marketing products or service...or simply obtaining
funding."

All this complicates day-to-day life for a range of businesses.
Companies operating in patent-choked environments are at continual
risk of tripping over someone else's intellectual property. Microsoft
Corp. is now defending itself in 35 to 40 patent infringement suits
simultaneously, and Cisco Systems Inc. faces seven. That in itself is
a sign something is amiss, says Robert Barr, who was chief patent
counsel for Cisco from January, 2000, to July, 2005.

Barr, who now teaches at the University of California at Berkeley
School of Law, says it's too easy for engineers to inadvertently
infringe patents just by doing their normal work. "That's not what the
law is intended to do," he says. "There shouldn't be patents on things
that people will just routinely invent." Barr adds that "the idea of
the obviousness test is to root these things out."

Old Economy companies face similar trouble. Apparel maker VF Corp.,
for instance, regularly gets letters complaining it has infringed bra
patents. "In the old days you would think of these things as the
tinkering of a technician who knew his way around women's
apparel...and wouldn't even think about getting a patent on it," says
Peter Sullivan, the attorney who filed the brief in the KSR case on
behalf of VF and others. "How many bra patents can you possibly have?"

Defeating even a dubious patent can take tremendous resources. After
Storage Technology Corp. () sued Cisco for patent infringement, it
took Cisco six years and $10 million to get a jury to declare last
June that StorageTek's patent was invalid. (StorageTek was purchased
by Sun Microsystems Inc. () a week before the verdict.) Even before
the trial, Cisco believed the disputed technology was obsolete and no
longer used by its customers. But it still had its engineers remove it
from its routers because of the potential for draconian damages or an
injunction if Cisco had lost.

DEFENSIVE PATENTING
Those kinds of litigation-driven business decisions can waste
resources and money. So can another strategy known as defensive
patenting. To ward off claims of infringement from others, companies
pump up their own patent portfolios. Cisco has gone from obtaining a
few hundred patents annually to around 1,000. "A large part of that
investment is to assure that if someone wants to assert patents
against us, we will have some countervailing tools," says Cisco
General Counsel Mark Chandler.

It's the patent world's equivalent of mutually assured destruction.
Instead of suing, companies agree to license each other their
intellectual property. "A network router, a golf club, a software
program...a bra all become more expensive as more and more patent
holders must be paid royalties," notes the brief filed in the KSR case
by Cisco and others.

To many observers, one of the primary culprits in this situation is
the evisceration of the obviousness test by the Federal Circuit Court
of Appeals. That has led to a flood of low-quality patents being
granted, and made it particularly difficult to challenge a patent in
court on the ground of obviousness. In 2001, Microsoft settled a suit
by Priceline.com () for infringing its "name-your-price" auction
patent. Yet to this day, Andy Culbert, Microsoft's top in-house patent
litigation counsel, says the Priceline patent is a prime example of an
obvious combination of two things that already existed: reverse
auctions and the Internet.

KSR initially was able to persuade a court that Teleflex's invention
was obvious. After Teleflex filed suit in federal court in Detroit,
Judge Lawrence P. Zatkoff considered evidence from engineering experts
on whether combining an adjustable pedal with an electronic sensor
would have been obvious to someone having skill in the area. He
concluded that it would and ruled on summary judgment in December,
2003, that Teleflex' patent was invalid. (Teleflex sold its pedal unit
to a private-equity group last August. It now operates in Troy, Mich.,
under the name DriveSol Worldwide Inc.)

But in January, 2005, the Federal Circuit Court of Appeals vacated
Judge Zatkoff's ruling. The court, which hears nearly all patent
appeals, said the judge had not followed its rule for inventions based
on a combination of existing elements. That rule says courts -- and
patent examiners -- can't reject an invention as obvious unless they
can point to specific references suggesting the elements could be
combined. Those references are typically previous patents or technical
literature.

Defenders of the rule say it prevents hindsight bias -- the natural
tendency of a person to regard something as obvious once she sees it
-- by requiring documented evidence that an idea was easily within
grasp. KSR and others who oppose the rule say it is contrary to
guidelines set by the Supreme Court, which last considered the issue
40 years ago. And they say it doesn't square with how the world works.

Microsoft attorney Culbert notes that new technology emerges all the
time that isn't written about in scientific journals or other
published materials, particularly in fast-developing areas such as
software. Other commentators have noted that, in many fields, what
gets written down is precisely what isn't obvious, guaranteeing that
what the Federal Circuit Court requires won't be found. The bottom
line: Rulings rejecting patents on the basis of obviousness are rare,
and massive overpatenting continues to be a thriving business.

By Michael Orey