Patent reform: The spluttering invention machine

Economist
March 17, 2011

For all America’s anxieties about its decline as a superpower, its deficits and its weak economy, it can still be proud of its strength as an innovator. Americans make four times as many patent applications per head as Europeans. Patents spur innovation and lay the foundations for future growth, by assuring inventors that they will reap the rewards of their effort and by publicising their discoveries.

But worries have grown that excessive patenting may now be having the opposite effect: businesses and other researchers may be discouraged from innovating in areas that depend heavily on prior discoveries, for fear of being sued for patent infringement. Besides making it too easy to bring patent lawsuits, it is argued, America hands out patents too readily: an often-quoted example is the one granted to Amazon for its “one-click” online-shopping button. Last year the Supreme Court restricted the scope of such business-process patents, but not by enough to satisfy critics.

Big technology companies complain of “patent trolls”—companies that buy lots of obscure patents and then bombard alleged infringers with lawsuits. (The “trolls” argue that by making patents valued they are helping to create a market in invention that will encourage inventors.) Surging patent activity has overwhelmed the US Patent Office, which is taking ever longer to process applications (see chart).

After years of failed attempts to remedy the situation, on March 8th the Senate passed the biggest overhaul to patent law since the 1950s. Its bill would give the patent office the right to set its own fees, and keep all the proceeds (the Treasury swipes some of these now), so it can hire enough examiners to cut its backlog. It would also align America with international practice by granting patents to the first person to file them. Now, they are awarded to the first to invent a product or idea. This was intended to give small inventors a fair chance against big companies better equipped to file applications. But businesses complain about having their patents challenged, years after they were granted, by people claiming to be the original inventor.

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