Ever since "business method" patents were blessed by the courts and the U.S. Patent Office, they have been controversial. Like any dramatic change to a system based on precedent, it takes a while for the system to adapt to these new rules. However, after reading a column on the subject of business method patents in the Wall Street Journal, I thought the author had confused quantity with quality- thus this Letter To The Editor which was published on June 25, 2009, as well as some extended comments on patentability.
As an inventor holding nearly 100 patents, and as the former Chief Technical Adviser at AT&T, I completely agree too many trivial patents are issued ("Why Technologists Want Fewer Patents" by Gordon Crovitz, Information Age, June 15). These incremental inventions obscure a company's ability to manage its true freedom to operate/exclude, and legal uncertainty repels investment. But there is nothing intrinsically wrong with business method patents. Inventions can be realized in steel or in the mind- in fact, most physical inventions first originate as mental images, while the reduction to a physical model is pro forma and involves no inventive acts.
There is no fundamental reason a twenty year monopoly on selling a drug is a reasonable limit on the free interchange of ideas, yet we prohibit a bank from selling a financial derivative with a twenty year monopoly. Instead, the problem with business method patents can be traced to the US Patent office and courts, which have lowered the bar to issuance. They've applied a standard where it was "inventive" to move a common ledger book accounting process to an automated software service. It is not. It is obvious to anyone skilled in the art of analogies.
If we simply applied the same high standards to business method patents that we apply to the physical world, the problem would evaporate. Raise the bar, and only the highest quality original ideas will be admitted. Real or virtual.
There are two reasons the patent system offers a short-term monopoly in exchange for revealing what might otherwise be held as trade secret. First, as the American colonists knew only too well, trade secrets were often wielded as a form of repression and control. The English restricted access to ink, paper and typefaces, in order to control our emerging free press. They also made revealing the technology behind industrial looms a treasonable act, again to force their colony to remain a mere exporter of commodity cotton (as well an importer of more expensive finished goods). So the encouragement of a free flow of patentable ideas was clearly in America’s favor, at least from the perspective of a young, developing country. (1) (2)
The second reason is pragmatic. It can be expensive to commercialize any patent- whether a physical product or a business method. There may be too little economic return if that one idea is simultaneously commercialized by dozens of companies. So, under limited circumstances, a temporary monopoly is sound public policy. For example, drug companies often argue they require more than 20 years of monopoly sales to recover their high development costs, in exchange for the expense and uncertainty of trying to cure disease.
That being said, what inventions should be patentable? Here, I think, the court system (and even the USPTO) demonstrate their lack of experience with both the needs of commerce and the process of innovation. The majority of their “rules and tests” are unrealistic and limiting. For example, they prohibit patenting “laws of nature”, and demonstrate an unhealthy preference for inventions realized in physical machinery (thus the odd requirement that business method patents should be realized as part of a mechanical process of calculation).
But do these restrictions make any sense at all? Inventions traditionally arise from three sources- sweat and inspiration (as Edison supposedly remarked "Genius is 1 percent inspiration and 99 percent perspiration."), and serendipity. The patent office and courts seem fixated on the sweat part- the romantic vision of a lone inventor tinkering way for years, gradually perfecting their great invention.
Indeed this view often reflects reality, and should be rewarded with a patent if the idea is truly novel and useful. But it is the idea that is being rewarded, not the sweat and tears or long sequence of physical prototypes. Mere hard work is not an excuse to grant a patent.
Serendipity (often very little sweat, but lots of luck and a prepared mind) can lead to remarkable inventions. Famously, stainless steel was discovered accidentally while trying to develop a better gun barrel, after noticing one steel alloy proved resistant to etching for microscopic examination. Viagra’s effect on sexual potency was an inadvertent side effect of testing a new cardiac drug. This is not so much invention as inevitable discovery- but we still grant a patent if the idea is new and useful.
However, other equally valuable ideas may not require any physical instantiation, yet hold remarkable commercial and social value. Inspiration is the key. Most of my inventions follow this path- I spend days, sometimes years, thinking about a problem, until a solution expresses itself. I build the invention in my head, calculate its properties, seeking inspiration in history and user needs. Implementation is often tedious, and only sometimes yields new, inventive insights. Note this “pure idea” has economic value- I can license an idea even without building a single prototype. In this respect, business methods are really no different than a new gear box concept. True, I can sometimes receive a higher royalty rate or greater investor interest, if I convert the idea to a working prototype (or in the case of a business method, an internet store front). But a raw idea can change the world.
Business method patents are fundamentally no different than any other invention. The issue is not usefulness- clearly the billions of dollars generated by new business methods prove otherwise. Nor should the physical or ethereal nature of the invention matter- they don’t in other inventions routinely granted patents by the USPTO. The burning issue is really one of “obvious to those skilled in the art”.
That is, we should not grant a patent monopoly to the first person to suggest a new idea, if any reasonably skilled person would come up with the same idea when challenged by the same problem. In other words, a monopoly is not justified as a quid pro quo to reveal a trade secret, if the trade secret is obvious and easily discovered without special knowledge.
This is why the hard work behind a “sweat” invention is relied on as a proxy for “obvious”- if it took years to develop, it can’t be obvious. This is why we issue patents for serendipity- while the same idea may reappear eventually for some other lucky inventor, assuming serendipitous events are infrequent, we are all better off encouraging the first inventor to reveal their lucky insight, rather than waiting. In this way we amplify the pace of innovation. This is also why we should have no prohibition against patenting so called “laws of nature”. True, natural laws are there for anyone to discover, but if one inventor’s insight accelerates a discovery of a law of nature by decades, why not grant a short tem monopoly for that advancement?
Few patents will ever issue for natural laws. As I’ve argued in the past, obviousness is subject to experimental test. And most inventions are glaring obvious, though perhaps not to learned judges with only legal training to rely on.
There are also a new class of novel and useful ideas which hardly qualify as inventions- these are produced through automated process with no human insight or intervention . For example, combinatorial chemistry (where hundreds of thousands of new chemicals are tested for usefulness by an automated robot), or genetic software algorithms that design circuits as well as humans. Turn on the machine, and a new, useful invention spits out. Clearly, there are no trade secrets here worth encouraging by granting a monopoly- to do so, is to merely condone a land grab. (3)
The right standard is to grant patents only for new, novel and useful inventions not likely to be discovered by others within, say half the patent grant period (i.e. 10 years). This means, by the way, that neither Alexander Graham Bell or Elisha Gray or Antonio Meucci deserved a patent on the telephone- the very fact that three inventors skilled in the art independently came up with the same idea in the same time frame, implies there was no trade secret to protect. Nor should we grant patents on simple maps to the genome- these maps are generated automatically by anyone with the time or cash. Instead, they should all commercialize their ideas without the benefit of a monopoly, as many other businesses manage to do so successfully.
Establishing obviousness is a matter of tracking the pace of innovation, following product roadmaps, incorporating expert comment, auditing technical publications, drawing analogies with earlier ideas (tempered by new techniques to automate discovery), and so on. Similar to “inevitable discovery” in a criminal case. If the courts and legislature want to improve the patent system, focus on the rules of obviousness first. (4)
Finally, at some point we must ask why a patent monopoly might last 20 years, perhaps saving lives or reinvigorating the economy along the way, but we grant exclusive copyrights to authors which can drag on for a century. Extraordinary copyright protection is a much greater threat to the free flow of ideas, than are business method patents….
(1) An even stronger argument to freely license intellectual property is made by “third world” countries today.
(2) America also suffered under extremely onerous English debtor’s laws. One reason our bankruptcy regulations are so generous, and indirectly, contribute to entrepreneurship and innovation, was a colonial distaste of debtor's prison.
(3) Patents on genetic algorithms techniques or combinatorial chemistry equipment are fine, but inventions generated by using the machines are not inventive acts...
(4) Small inventors should welcome a higher bar and stronger standard of "obviousness". One problem independent inventors face is the reluctance of large companies (e.g. potential licensors) to accept unsolicited inventive submissions. The company is worried the inventor might sue if the firm brings out a similar product they had independently created. But if there is a large gap between inventive patented ideas, rather than a thicket of tiny adjacent differences, the likelihood of a collision is drastically reduced. And thus more foresighted firms would welcome outside inventions.