|Reprint permission from the June 5, 2000 issue of Crain's Chicago Business.
Business owners should know that the U.S. Patent Office runs on a pay-as-you-go basis, a place where fee-paying patent applicants are customers to be coveted, and just about any good idea is awarded a 20-year monopoly.
Some might think that easy patent protection should be encouraged as a constructive way to foster innovation and safeguard the innovator's work product. In reality, though, the casual granting of patents stifles entrepreneurship at every turn.
The Patent Office's leniency dates back at least to 1981, when the Supreme Court decided that "anything under the sun that is made by man" can be patented.
Of course, the Court wasn't focused on software and algorithms then. But these days, more software patents are issued than any other kind, and those who run Internet-based companies are forced to state their special claims to special privilege.
When the framers of the Constitution promoted "the progress of science" by protecting discoveries, inventions were limited to machines and chemical processes. And judges and regulators don't seem to have noticed that abstract thoughts have replaced nuts and bolts as the stuff of which innovation is made.
Patents are being awarded at a feverish pace to the benefit of few and the detriment of all. So, for example, Amazon.com owns the "patented One Click feature," which requires barnesandnoble.com–and everyone else, for that matter– to add an extra mouse click to its online order entry system. Priceline.com owns the Internet equivalent of a "reverse" auction.
A patent examiner doesn't have the time, resources, expertise, or inclination to challenge applications. He runs his own little fiefdom where he is encouraged to issue as many patents as he can justify. And, when the time comes, the courts are equally, but unjustifiably, patent-friendly.
The results are horrendous. Truly innovative companies face regulations and restraints on trade that are hostile to the whole spirit of the Internet. And, as the costs of doing business escalate, so do the prices customers pay.
The patent, once a benign shield to protect one's investment in developing a novel invention, has become a weapon of economic warfare. Huge e-conglomerates, carrying enormous patent portfolios on their balance sheets, cross-license rights only to others of their kind.
Worse still, patent envy is forcing consolidation in an embryonic business sector whose productivity should better be driven by free-spirited pioneers. Either way, early-stage companies suffer. Lacking their own patent inventories, they tithe royalties to their imperious brothers and, more and more, operate at their mercy.
Patent Office Director Q. Todd Dickson, who has enthusiastically defended what he calls the "right to exploit," has recently agreed to fine-tune his agency's examination criteria. Shrinking the term of patents and tightening the definition of just what is patentable are also on the table.
But until real reform is written into law, the Patent Office–historically the champion of the entrepreneur–poses one of the greatest threats to innovation.
Marc J. Lane ([email protected]) is a Chicago lawyer and financial planner and an adjunct professor of law at Northwestern University School of Law.
Copyright © 2000 by Crain Communications Inc.