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Saturday, April 26, 2014

When the status quo stinks

The U.S. Congress is considering proposals for more patent reform. Patents are fundamental to our society, as recognized by the U.S. Constitution at Article I, Section 8, Clause 8. Unfortunately the process of obtaining and using patents has become perverted over the last 25 years. Patents of poor quality have been granted; the scope of patents was extended to software under a questionable rationale and despite accurate warnings about opening Pandora's box; companies are flourishing that do not use patents to make anything but simply seek to extract payments from companies that do. I'm sure you have read press reports of patent litigation such as Apple Inc. v. Samsung Electronics Co., Ltd.. After decades of patent detente, or more accurately of restraint from launching nuclear war between major holders of patents, we have entered the golden age for patent litigation. There are so many patent lawsuits underway at present that bloggers and patent professionals struggle to keep up with them all. Patent litigation lawyers are getting windfall incomes.

I support further patent reform; the circumstances clearly call for it. As one might expect, many patent lawyers oppose it. I read increasingly shrill justifications of the status quo from those whose incomes depend on the status quo. Not every aspect of every proposal for patent reform is a good idea, so Congress must be selective about what they enact. But the sheer volume of opposition to patent reform tells me that Congress is on the right track. The status quo stinks.

Meanwhile another problem has materialized: the practice of including patentable innovations in international standards. Almost all standards organizations require that patentable innovations be disclosed during the process that finalizes standards and further require that such patents be made available to licensees under fair, reasonable, and non-discriminatory (FRAND) terms. Those seemed like good protections at the time. What has eventuated, however, is a cabal of companies that collectively write international standards and then enjoy many years of incredibly lucrative FRAND royalties among them. You pay the royalties when, for example, you buy a smartphone. Of course, you don't see the royalties broken out in the retail price, but they're embedded in it -- trust me. The next step is for governments around the world to reexamine the notion of FRAND royalties arising from standards. But first, let's get the best of the current proposals for patent reform through Congress despite those who love the status quo.