[A2k] comments on WIPO Report on the International Patent System [under discussion SCLP meeting in Geneva this week]

[Brian Kahin]

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23 June 2008 Draft



Comments on the WIPO Report on the International Patent System


Brian Kahin, Senior Fellow, Computer &
Communications Industry Association / Adjunct
Professor and Research Investigator, University of Michigan


WIPO is to be commended for the scope of this
report.  The report points the way to a more
meaningful and responsible role for WIPO in
assessing the effectiveness of patents in
promoting innovation and economic development, in
improving the functioning of the
global/international patent system, and in
understanding its limitations.  An expanded
patent system is playing out in unanticipated
ways in an increasingly global economy in which
innovation drives competition and knowledge, in
different forms, is the central resource.  The
report does not shy from addressing particular
problems and pointing the way toward
evidence-based policy development.  Its candid
approach establishes WIPO as a resource and forum
for understanding the evolving role of
intellectual property =96 its practice and
principles, uses and abuses, and benefits and costs.

Patent policy has for too long narrowly focused
on technical legal issues issues and abstract
argumentation based on doctrine rather than
evidence.  It has been dominated by stakeholders
with a direct economic interest in patents and
by professionals and institutions with a stake in
perpetuating and growing their own
workloads.  The report=92s contextual approach to
the patent system is a welcome change of
perspective that can bring a new dimension of
credibility and relevance to WIPO.

The report=92s attention to the panoply of economic
and social issues surrounding patents for
biotechnology and pharmaceuticals successfully
exemplifies this contextual approach.  While it
might miss some details such as the issues
surrounding evergreening and data exclusivity, it
provides a reasonably coherent picture of the
challenges facing the patent system in these sectors.

By contrast, the report does not draw a coherent
picture of patent issues in the ICT
sector.  While it mentions a number of
ICT-specific factors and issues individually,
including open source alternatives, standards,
cross-licensing, thickets, patent pools, and
trolls, it fails to provide a coherent picture of
how they interconnected and why the ICT sector
experiences the patent system so differently from
pharmaceutical interests that have historically
exerted the most influence on patent policy.

More generally, the report fails to draw
attention to the growing differences in how
different industries experience the patent
system.  A long line of empirical literature
shows that the relative importance of patents for
appropriating returns on innovation varies
considerably, but the report does not mention the
alternatives of secrecy, complementary assets,
and lead-time.  Competition, while not a
protective factor, is nonetheless a powerful
motivator for inducing innoation.  Innovation is
not invariably dependent on patents, and history
shows that some ICT sectors (semiconductors,
software) have flourished without them.

The analytic perspective most conspicuously
missing is the distinction between discrete and
complex technologies =96 more accurately, the
difference in context between products that are
conspicuously dependent on a single patent
(pharmaceuticals) and products that may embody
thousands or tens of thousands of patents
(ICT).  This creates an entirely different market
dynamic, quite apart from broader policy issues
that the different technologies raise.

Complex products are not new, and some of the
problems they create originate in the 19th
century, but they reach an unprecedented extreme
in ICTs, especially in software.  In conjunction
with other developments, the growing distance
between patents and products in ICTs has
engendered a structural crisis within the patent
system that has become publicly visible only in
the last 5-6 years.  While anecdotal evidence was
heard in the Federal Trade Commission hearings in
2002, today it is directly manifest in the
paralysis over patent reform in the U.S. While
less conspicuous in Europe for a variety of
reasons, the general problem is recognized in the
EPO Scenarios for the Future (=93Blue Skies=94 scenario).

The factors behind the crisis include:

-        Expansion of patentable subject to
include more relatively abstract functions and processes

-        Lower threshold standards for
patentability (=93inventive step=94 or =93nonobviousness=94)

-        Inadequate examination of prior art,
especially in fields such as software where prior
art is not well documented or organized

-        The technological capability and need
for combining greatly increased functionality in
integrated circuits, software, and computers and other IT products

-        Availability of injunctive relief, even
when patented functionality is only a very minor part of a product or servi=
ce

-        A =93customer service=94 orientation in
patent offices, as expressed in the mission
adopted by the U.S. Patent and Trademark Office
in the 1990s: =93To help customers get patents.=94

-        Poorly defined claim boundaries, as a
consequence of abstract subject matter and
problems of claim construction (Federal Circuit)

-        Greatly increased demand for patents as
a result of defensive portfolio building

-        The separation of patents from going
businesses, especially as a consequence of
business failures, and the emergence of
specialized patent assertion and licensing firms

-        The strategic and practical importance
of standards in ICT, which provide attractive targets for opportunists

This leads to an excessive number of poorly
defined, questionable, and trivial patents and to
secondary phenomena such as patent
thickets.  Independent invention is commonplace =96
which necessarily leads to inadvertent
infringement.  Instead of well-defined property
rights, patents are merely =93probabilistic,=94 and
do provide meaningful notice to other
innovators.  Since complex products may contain
thousands of patentable functions at different
levels of abstraction, matching potentially
patentable functions against patents of doubtful
scope and validity is not cost-effective.  The
disclosure function of patents, which still works
for well-defined patents in discrete products,
fails for information technology.  Furthermore,
thickets and the high costs of negotiating
patents create barriers to new entrants.

The failure to acknowledge these systemic effects
results in some misleading statements, such as
the suggestion that standards organizations
consider performing clearance searches
(120).  The failure of the notice function makes
it inappropriate to use loaded terms such as
=93imitation and free-riding=94 (305) that do not
reflect the prevalence of independent invention.

Nonetheless, the report is a landmark effort to
come to grips with the very large number of
issues facing the patent system.  WIPO should
refine it and build on it by expanding its
community of experts, especially economists, and
convening meetings focused on issues in specific
industries.  It should formulate an agenda based
on addressing real problems, such as the growing
conflicts between standards and patents =96 rather
than harmonizing prematurely at a time when the
system is undergoing change and conflict.





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