Weapons of business destruction.

The law, lawyers, and the court.
Feb. 6 2006 3:04 PM

Weapons of Business Destruction

How a tiny little "patent troll" got BlackBerry in a headlock.

(Continued from Page 1)

About the best that might be said of trolls like NTP is that they've inspired a serious patent-reform debate. A growing crowd—including major firms like Amazon, IBM, Intel, Yahoo!, and Microsoft, and academics like Mark Lemley, Douglas Lichtman, Bhaven Sampat, Arti Rai, and others—now advocate some form of major patent reform. They want to fix the PTO to ensure that only the best, truly novel inventions get a patent, and they want to change aspects of patent procedure that currently make harassing litigation too easy. Ex-FCC-chairman Reed Hundt, for example, proposes reducing the number of patents by 90 percent and handing over a lot more money to those overworked patent examiners.

But for reasons both political and theoretical, the more important answer may be to face the software-patent problem head-on,  as some groups have been urging for years. It may be better to recognize software patents as an unfortunate economic experiment and to either abolish software patents altogether or place stringent limits on their assignment.

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Politically, while the idea of general patent reform is laudable, it faces inevitable opposition from industries like the pharmaceutical industry, where the patent system seems to be working. A broad-based Patent Reform Act, now in Congress, has been watered down considerably because of pharmaceutical opposition. Pharma has a point. In their industry, patent does what it should—the software insanity isn't their fault. That's the political problem with one-size-fits-all patent reform—you're always getting under someone's thin skin.

Many theorists favor the one-size-fits-all solution because they think that over time, the same arguments for drug patents must also justify software patents. But that isn't necessarily so. Everyone agrees there are some goods that benefit from patents and others that just don't. No one (well, almost no one) argues that we need patents on books or films to create a successful publishing or film industry. There is no reason to assume all goods will be equally uplifted by patent's magic.

Somewhere in patent heaven there's an economic line dividing things that do and don't benefit from patent, and the last decade has provided good evidence that software is on the wrong side of that line. The reason is that the nature of software will always make it hard to draw borders around software inventions—and a property system without clear borders is invariably a disaster. The whole case for property rights generally, as Columbia Law patentista Clarisa Long points out, depends on how hard it is to know when you're trespassing. In the case of real estate, for instance, fences and deed maps make ownership clear. In other areas of intellectual property, we know by the tangible product alone who owns Prozac and who owns Harry Potter. But intangible code is by its nature hard to draw boundaries around. The "measurement costs" of software's boundaries—defining where one algorithm begins and another ends—are inescapably high.

This point about measurement costs is borne out in practice. As anyone in the industry will tell you, and as Ronald Mann has documented, most programmers or firms cannot figure out whether they're infringing software patents or not and simply always assume they are. The point is simple: Property without discernable borders brings all the costs and none of the benefits.

Why, then, does the software industry want patents at all? Software firms, in the main, don't rely on software patent in fundamental ways—they innovate to make a better product. Instead the patents are employed for secondary purposes—like trying to show investors how smart one's engineers are, or sometimes for low-key money-laundering (fake sales of worthless patents can be used to move money around). Many companies keep their patents on display, in a trophy case—realizing that this is their main value. Perhaps large firms hope to use a portfolio of software patents to stall smaller rivals—yet so far the news is all about David using patents to beat up on Goliath, and not vice versa.

In this debate it must be remembered that the regime of easy patenting of software is not natural law but an experiment—a judicial flight of fancy in an area of difficult economic policy. To remain healthy, the U.S. legal system should experiment, but it also needs to recognize when its experiments have failed. Both Congress and the Supreme Court have a chance to do something about the problem this year. The rise of the patent trolls is, in this sense, telling us something—that it may be time to end a system that is doing no one any favors.

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