Innovation Held Hostage by the Patent Office

The June 15, 2009, edition of Business Week has an interesting article about innovation by Michael Mandel, which concludes that during the last decade US innovation has failed to deliver on the hyped promises, and this failure of innovation may have contributed to the economic woes we are now experiencing. Indeed, this article is interesting for many reasons. First, how is it possible that an article that questions American innovation could never once mention the crisis facing the Patent Office? Second, it is not accurate to say that the failure of US innovation “may have contributed,” the failure of innovation definitely contributed to the economic mess we face now because there has been no sustained technological growth that lead to an expansion of jobs. Third, the primary reason innovation has not come through for us is because the Patent Office has for years held innovation hostage, refused patents, extraordinarily delayed even making a decision on patent applications, and this lead to the evaporation of venture funding for many US companies, and prevented many other companies from being able to interest those with capital because no exclusive rights had been obtained, or could be predicted in any relevant time frame.

Don’t get me wrong, I think it is excellent that Business Week ran this article, and it is obvious that Mandel thoughtfully considered the topic.  I hope it gets people thinking, but I wish it has at least mentioned patents. As IPWatchdog.com readers know, I have been writing about this in almost Chicken Little fashion for nearly a year. I just wish economic journalists would become a little more intrigued by the failure of the US patent system over the last decade. As observers of the Patent Office know, about 4 or 5 years ago things went from bad to worse, and that is also about the time that the economy started to show its first signs of unraveling. Is this coincidence? I doubt it, but those who know me know that I am not a believer in coincidence. I believe coincidences happen for a reason, and about 4 years ago the US Patent Office decided that before any patent would issue it had to be reviewed and approved twice under a “second pair of eyes” review. This increasingly lead to fewer and fewer patents issuing, and longer and even ridiculous delays in getting a decision from the Patent Office.

The Business Week article starts off by asking what if the “era of rapid innovation” we were told about is simply not true. The article starts off asking:

But what if the conventional wisdom is wrong? Whit if outside of a few high-profile areas, the past decade has seen far too few commercial innovations that can transform lives and move the economy forward? What if, rather than being an era of rapid innovation, this has been an era of innovation interrupted? And if that’s true, is there any reason to expect the next decade to be any better?

These are all good questions, and unfortunately the answers will provide a wake-up call for the many who have not been paying attention to technology being held hostage at the USPTO. In fact, the engine that could recognize assets out of thin air, the United States Patent Office, simply stopped recognizing rights in many cases, despite the law setting forth a presumption that patents should issue unless a patent examiner can articulate a justifiable reason. Section 102 of Title 35 of the United States Code explains that an inventor is entitled to a patent unless the invention is not new. This sets up a structure whereby the patent examiner has the burden to articulate a rational reason for denying a patent. Simply put, if the invention is new and not obvious a patent is owed to the applicant.

At what time must the Patent Office either put up or shut up? How long can the Patent Office simply refuse to issue a patent without articulating a justifiable rationale, as required by the patent laws? Increasingly I have been talking with patent attorneys and inventors about the prospect of filing a writ of mandamus to order the Patent Office to issue patents, or at the very least treat inventors equally, as is required by the US Constitution. In fact, it is not just the Patent Office that must treat people equally. Both the Federal and State governments must treat similarly situated individuals similarly. While I think a good policy argument can be made to have the Patent Office ordered to issue patents on inventions that are stagnating, an excellent and winning argument can be made with respect to forcing the Patent Office to treat inventors the same and stop showing favoritism.

But what favoritism is the Patent Office showing? In some areas at the Patent Office if you were to file a patent application today you would not anticipate hearing from the Patent Examiner for the first time with respect to a substantive review for about 120 months. For those doing the math, yes, that is 10 years. Notwithstanding, I recently learned of a patent that the Patent Office has issued on a business method at near light speed.  The patent in question, US Patent No. 7,228,226, was filed on November 29, 2006 and issued on June 5, 2007, and the assignee was Lehman Brothers, Inc., the now defunct Wall Street giant that filed for bankruptcy in September 2008.  It would seem that somehow the patent application was classified in a technology area that is not very active, and issued in just 7 months. Exactly how is that fair?  The attorney who brought this to my attention said this is very hard to handle given a client of his has a patent pending on a similar innovation and is scheduled to receive a first action some 117 months from now.  How can one explain a business method patent being issued in 7 months, other applications getting first treatment by a patent examiner in 4 to 6 months, and other applicants having to wait nearly 10 years for consideration by a patent examiner? Something is terribly wrong! I know that Commissioner Focarino is trying to streamline the application process, and I applaud her efforts, but there is a systematic problem on what appears to be a fundamental level.

The technology area where you are likely to not even hear from an examiner for 10 years is in the Internet, e-commerce and business method area. It is extremely ironic that the technology fields that most directly relate to commercialization and the growth of GDP are those areas where the wait is ridiculously long. There is no great mystery why our economy is in trouble. Those companies with innovative ideas in this crucial area simply cannot protect their inventions and simply cannot move forward with innovation. This causes those who have money to fund the development of innovation to withhold providing capital. Without capital expansion cannot and does not occur, so it is hard to know whether the promised of innovation over the last decade, particularly over the last half of the last decade, were due to a string of over blown and over hyped innovations, or because of an accute lack of funding to turn ideas into inventions and ultimately into products that would fuel the development of industry and the creation of jobs.

Something needs to be done and innovators need to stand up and demand action!