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<nettime> L. Gordon Crovitz: Jimmy Carter's Costly Patent Mistake (WSJ)
Patrice Riemens on Thu, 19 Dec 2013 19:40:18 +0100 (CET)

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<nettime> L. Gordon Crovitz: Jimmy Carter's Costly Patent Mistake (WSJ)

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Jimmy Carter's Costly Patent Mistake
By L. Gordon Crovitz

His 1979 proposal has led to ill-conceived protection for software ideas
and a tidal wave of litigation.

Washington doesn't agree on much, but all three branches of government now
have plans to reform the country's patent system. What's not widely
understood is that this marks the failure of one of Washington's most
ambitious experiments in industrial policy.

Today's patent mess can be traced to a miscalculation by Jimmy Carter, who
thought granting more patents would help overcome economic stagnation. In
1979, his Domestic Policy Review on Industrial Innovation proposed a new
Federal Circuit Court of Appeals, which Congress created in 1982. Its
first judge explained: "The court was formed for one need, to recover the
value of the patent system as an incentive to industry."

The country got more patents -- at what has turned out to be a huge cost. The
number of patents has quadrupled, to more than 275,000 a year. But the
Federal Circuit approved patents for software, which now account for most
of the patents granted in the U.S. -- and for most of the litigation. Patent
trolls buy up vague software patents and demand legal settlements from
technology companies. Instead of encouraging innovation, patent law has
become a burden on entrepreneurs, especially startups without teams of
patent lawyers.

Until the court changed the rules, there hadn't been patents for
algorithms and software. Ideas alone aren't supposed to be patentable. In
a case last year involving medical tests, the U.S. Supreme Court observed
that neither Archimedes nor Einstein could have patented their theories.

Many software patents simply describe ideas that happen to be carried out
through digital technology. Amazon got a patent for the concept of
"one-click checkout." Apple AAPL -0.80% last year applied for a patent on
the idea of offering author autographs for e-books. There are so many
software patents that smartphones include some 250,000 purportedly
patented processes, which is why Google, GOOG -0.20% Samsung and Apple are
suing one another around the world.

In software, innovations build on one another so seamlessly there is no
way to follow them. There is no national registry of software. Developers
and engineers can't track who claims patents to what processes. In
contrast, drug researchers consult a publication called the Orange Book
that lists all the patents for pharmaceuticals, enabling them to avoid

A system of property rights is flawed if no one can know what's protected.
That's what happens when the government grants 20-year patents for vague
software ideas in exchange for making the innovation public. In a recent
academic paper, George Mason researchers Eli Dourado and Alex Tabarrok
argued that the system of "broad and fuzzy" software patents "reduces the
potency of search and defeats one of the key arguments for patents, the
dissemination of information about innovation."

The Government Accountability Office agrees. "Many recent patent
infringement lawsuits are related to the prevalence of low-quality
patents; that is, patents with unclear property rights, overly broad
claims, or both," it said in a recent report. "Claims in software-related
patents are often overly broad, unclear or both." Boston University law
professors Michael Meurer and James Bessen have estimated the direct and
indirect costs of litigation against technology companies at $80 billion
per year.

Instead of focusing on the problem with software patents, reforms backed
by the White House and Congress would tweak patent litigation for all
industries. The House this month passed a bill requiring more specificity
in claims and limiting costly discovery, but doing nothing about dubious
software patents.

The House rejected a proposal that would have expedited the process for
the Patent Office to review questionable software patents. Lobbyists from
companies like IBM IBM +0.44% and Microsoft, MSFT -0.92% which make
billions of dollars a year from licensing software patents, helped block
this reform.

For now, the best prospect for real reform is in the Supreme Court, which
earlier this month agreed to hear CLS Bank v. Alice Corp., a case about
whether a bank's computerized process for settling transactions via an
escrow can be patented. A judge on the appeals court noted this idea was
"literally ancient," developed during the Roman Empire, and should not get
a patent now just because a computer is involved.

The Supreme Court has invalidated software patents in earlier cases, but
the justices need to draw a brighter line with clear limits for the lower
courts, especially the Federal Circuit. Simply qualifying ideas or
business processes with the phrase "and do it on a computer" shouldn't be

The justices should also acknowledge that creating a special court to
promote patents is an experiment gone awry. Far from helping the economy,
software patents are a litigation tax on new technology. The Constitution
calls for patents "to Promote the progress of Science," not for patents to
undermine innovation.

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