Is the U.S. Patent System Broken?

The proponents of the most radical changes to U.S. patent laws in 50 years claim that such changes are necessary in order to reform a "broken" patent system. They claim that the patent office is handing out monopolies, in the form of poor-quality patents, to anyone who asks for them. They claim that the system is "rife with abuse" by crafty patentees and their lawyers, who are exploiting vaguely defined and overly-broad patents for their own benefit, to the detriment of the society at large. They evoke the fearful image of the "patent troll," a frightening creature who might drag an unsuspecting victim before a federal court waving an incomprehensible or ill-gotten patent. If the system isn't functioning as well as it could be, then it may make sense to investigate at least a "tune up" of our patent system, if not a complete overhaul. Changes to our patent system to correct abuses are, however, only a good idea to the extent that the benefits outweigh the harms. If the benefits outweigh the harms, they're not.

With respect to the problems discussed in connection with this "patent reform" bill, almost everyone agrees that there's a problem and almost everyone agrees on the best way to solve the problem. What's funny is that this bill would do almost NOTHING to solve the problem and almost everyone acknowledges that this is true. The most logical explanation for this state of affairs is that the proponents of the bill are pushing the bill for their own purposes and using the well-acknowledged "problem" as a scarecrow.

The Problem

The fundamental problem, upon which almost everyone agrees, is that the United States Patent and Trademark Office (USPTO) is overworked, underfunded and understaffed. Many people don't know that the USPTO, though it is a part of the Commerce Department, is funded almost completely by user fees and doesn't receive any substantial funding from the U.S. government. In fact, the USPTO's funding situation is worse than zero. Congress routinely siphons money out of the USPTO to fund other government programs, so that it doesn't even get to keep the user fees coming in.

To compound the problem, the overworked, underfunded and understaffed patent office is forced to deal with ever-increasing volumes of incoming patent applications. The massive and ever-increasing volume of patent applications is a reflection of the ingenuity and innovation that drives the American economy. For America, this paper tsunami represents continuing economic growth and a productive future. Unfortunately, the patent office strains under the weight of this massive daily tsunami of incoming paperwork. Fortunately, fee payments are interspersed with the other papers, making the burden easier to bear financially. As the volume of patent applications goes up, there is corresponding rise in the incoming revenue. If all this money could be retained in the patent office, the burden would be much easier to bear.

A tight money situation translates into problematic patents. As a result of the inadequate funding, the USPTO does not have the time or resources to adequately search the prior references to determine whether a claimed "invention" is really novel. The patent office makes a determination on each patent based on the results of one or more searches of prior references, which are collectively referred to as the "prior art." Inadequate time to search and review translates into relevant prior art references which are not identified and overly-broad patents which are allowed to issue. Further, inadequate funding means lower pay for patent office employees, making it difficult to retain the best and brightest.

Solutions Real and Illusory

While not doing anything to address the funding issue, Lamar Smith's "patent reform" bill attempts to correct the problem of inadequate review of patents by adding additional layers of privately-enforced "quality control" procedures. There are at least two problems to this solution. First, the private enforcement mechanisms built in to the system today are mostly ignored by third parties, as they are seen as a means to immunize, rather than weaken, bad patents. Second, private enforcement mechanisms, to the extent they are used, are themselves completely open to abuse by third parties whose true motivations are to harass and block competitors. These private enforcement mechanisms are most likely to be employed by the well-funded players against the start-ups, rather than vice versa.

In contrast, a fully-funded patent office would mean that patent examiners would have the time and resources to adequately examine the patent applications in front of them. It would mean that there is more time for training and education of patent examiners, and it would mean that patent examiners would have the time to conduct adequate searches of the prior art. These would all be positive developments, and they would dramatically improve the quality of the patents being issued by the USPTO. This would, in turn, serve eliminate the "bad patents" over which so many hands are apparently being wrung. Though this is an almost universally-supported reform which would go far in correcting a set of almost universally-acknowledged problems, it forms no part of the Patent Act of 2005. The controversial "reforms" which Lamar Smith is proposing would have no effect on the underlying problems within the patent office itself. If the problem really is "bad patents," then I suggest we look at, and improve, the patent-generating system itself. Reducing the strength and value of good patents is not a logical solution.