Recall, the U.S. effectively lost the patent wars just before the new millennium.  The governing law for the Patent Office (PTO) was totally rewritten  in November 1999. Consequences. The bill, misnamed as "The Inventor's Protection Act," passed without any debate and before copies of the legislation were publicly available. See below for events from the last days of the fight. Few outside Washington are happy with the results. In effect, the body of law designed to protect innovation and encourage "science and the arts" has been shifted to protect vested interests and monopolies.

The new quality standard: Junk, not diamonds....

The U.S. Patent System continues to deteriorate. The old problems are still there, and some serious new ones have been created. Criticism centers on quality, fairness, and accountability. The result seems acceptable to some in Congress (using patent fees to fund government amounts to a form of global taxation), but it creates problems for many knowledge-based U.S. businesses. The new law has produced a windfall for lawyers and lobbyists, but I don't think it bodes well for innovation in the United States.

The most obvious symptom is that patent quality is dropping fast, with many absurd "junk patents" being issued. The most notorious case is the Amazon.com  patent on clicking a mouse to place an order, but others are worse. A book coming out soon from a large consulting firm discusses business practices. Such books come out often, but this time the authors reportedly have 59 patent applications pending. These silly examples are becoming common, especially for software and Internet business areas. [Note: In February 2001  CAFC reversed the District Court injunction against Barnes and Noble that Amazon had won over their 1-click patent. Litigation continues.]

Other gems cover such topics as asking a person questions to fit them with clothes (#5,930,769, titled "System and method for fashion shopping"), transforming socialist economies  (#6,112,188), teaching music (#6,015,947), etc. Someone actually got patents (#5,806,048 and #6,088,685) on mutual fund trading, put ex-Commissioner Lehman on their board (now there is a coincidence!), and is running around Wall Street trying to legally extort large sums. This nonsense raises the cost of doing business, since it takes years and costs $1.5 million or so to break these junk patents. In general, it tilts advantage away from innovators and toward incumbents, as the courts presume patents are valid and few small firms have the funds and time to contest the issue.

Why not pay more? Double-teaming hammers consumers....

Worse yet is the combination of legal patent monopoly with government mandate, arrogance, and ineptitude to gouge consumers. Few are aware that the combination of regulation and patents is a major factor driving the recent crisis in gas and drug prices. So far, neither campaign has made any mention of this. Without strong political pressure it seems unlikely the government will blame itself for creating these problems.

Masked by the usual OPEC issues, this time much of the surge in U.S. gas prices was because of a patent on an additive the government now requires be used in auto gas. Interestingly, the oil industry even warned the public of this. (Wall Street Journal: "Exxon Mobile CEO says Unocal patents may raise gas prices" 6/1/2000, and "Gasoline joins the information age" 6/21/2000.) This new wonder ingredient has dubious value. It was first required in California. An engineer there reports that it does lower emissions, but only to about the same extent that it lowers gas mileage. Therefore U.S. consumers get to pay more -- about 20-30 cents per gallon more, not counting the 10% or so mileage reduction!

The EPA claims that the law prevents it from considering the costs or cost/benefit ratios for what they decree. That sounds just dumb enough to possibly be true. [Note: In February 2001 an appeal of the 1994 Unocal patent was turned away without comment by the Supreme Court. Wall Street Journal (2/21/01) quoted Unocal as saying that their patents cost consumers "only" about $0.01 per gallon. Others disagree.]

In similar manner, the new law has reduced patent term (from 17 years after issue, to 20 after filing) and times for FDA approvals have about doubled over the past decade. That leaves the drug companies with much shorter time windows to recover their investments, so they raise prices. Since trade agreements and policies cap pricing in foreign countries, U.S. consumers bear the brunt. It seems unfair that the drugs that we invent here are significantly cheaper if purchased abroad.

The drug companies don't really care, since they pass all the costs on to consumers and enjoy being by far the most profitable industry in the United States. They make buckets of money, some of which they reinvest for spin ($13.9 billion in 1999) and to lobby Congress ($83.6 million in 1999) for favors. They are rewarded with special considerations like the astonishing "Claritin relief act of 1999," which extended one single drug patent to protect a firm's revenues and profit margins. Still, how candidates handle soaring drug costs may well have an impact on the next election

Big brother knows best: PTO bureaucrats now overtly "regulate" technology.

Even less noticed is that, concurrently, individuals within PTO management have blocked whole areas of emerging science. The poster child for this bureaucratic blockage is cold fusion, and one result is that this area of research is almost dead in the United States. The Japanese and others are funding it, and those who discovered the phenomena have now left the country to continue their work. Within the PTO the situation is, well, odd. 

Some patents are being granted, some denied, and at least one that had issued, #6,030,601, was withdrawn by the PTO "to permit reopening of prosecution." One examiner was reportedly fired for granting a cold fusion patent (the PTO claimed "for religious reasons"). Some firms entangled in this issue have suffered damage and litigation is in process.

While it will be interesting to see how the courts rule, that will take many years. It seems wrong that emerging firms have to spend their venture capital money suing the government, versus developing and marketing products. Also, the way this issue is being handled has disturbing parallels to the IRS and Eastern Europe. To be sure, cold fusion is controversial. Experts disagree, and experiments are, so far, inconclusive. That's not the point. The real issue is, "Do we want government bureaucrats deciding what science is permitted in a free country?"

Also, other government agencies (e.g., NIST, formerly the National Bureau of Standards) now publicly threaten anti-trust suits against any firms on standards bodies (crypto, in this case) who dare to patent their technology. That will create more friction.

Private and off-the-record (for obvious reasons) correspondence reports that some with years invested in getting their patents processed are being pressured by the PTO to re-file and start over. Most choose to do so "voluntarily" rather than spend a lot of money for a patent that expires soon after it is issued. Therefore, these patents are being slowed down, and in a stealth manner. 

Is there any hope of fixing the PTO? Yes, Congress still has the power to do so.

One of the major concerns about the new patent law was that it would result in "economic harm." Clearly, that's come to pass, and in several ways. Junk patents, blocked patents, and mandated monopolies cause concern, as do government bureaucrats without accountability or oversight. Fortunately, there is still time to fix this, if the right choices are made.

The patent examiners are unsung heroes who have been doing their best under the type of management that makes lesser government workers go postal. They seem to be the only coherent group still trying to resist the dumbing down of the system. Their diligence and dedication has been a bright spot, but, unfortunately, they are overmatched. The Clinton administration, aided by a Congress that has twice approved radical patent legislation without debate, has acted more like baby shakers than baby sitters. 

A September, 1999 letter from the Patent Examiner's Union Chief to the Patent Advisory Committee stated in part, "What examiners are asked to do, and what impact those directed activities will have on the quality of patents, are clearly matters of great concern...." PTO examiners are being pressured to solely use a system called WEST for their patent searches, an "information retrieval system with debilitating flaws; not only is the system frequently incapable of performing even simple word searches, the results are often woefully incomplete and even inaccurate," and that "searches using the new system take longer to perform, produce fewer results than the systems that they replaced, and thus prevent us from doing our jobs." (Source: Washington Post, November 19, 1999). 

Major problems in the PTO potentially puts the whole technology sector of our economy at risk. Neither party mentioned this as a campaign issue. Can anything be done? Maybe. A Senate white paper may offer a glimmer of hope for fixing this disaster at the PTO. 

I regret to inform you that the so-called Patent "reform" legislation has passed into law.  It was embedded in the 2,000-page budget bill that was voted on late on a Friday night as the Senate was adjourning for the holidays in November 1999. See status to learn the sequence of events that led to this.

The house version HR 1907 slipped through WITHOUT DEBATE under "suspension of the rules" (a procedure normally used for such things as naming bridges or building maintenance). It was passed before Members of Congress could even read the legislation that they were voting on! In similar fashion S. 1948 was included in HR 3194, the budget bill. This passed by roll call vote without discussion as the last item of business before adjournment for the Christmas holidays. Section 4001 of this 2,000 page bill is a version of the old HR 1907.

Trudel's famous "Great Patent Sell-Out" Upside column. (Upside, once a prestigious magazine, did not survive the tech wreck.)

Analog Article. Analog Article [For a pdf  file click here -- in Netscape, hold down the shift key]. This article discusses the events and issues surrounding the total rewrite of our patent system. Learn what happened, how, and why.   

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