Is the U.S. patent system broken?

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In November 2012 a U.S. judge dismissed Apple's lawsuit against Google, which claimed its Motorola unit charged excessive royalties on its patents. Earlier this year Apple won a patent lawsuit against Samsung, resulting in an injunction eventually overturned by an appeals court. These lawsuits have called into question the effectiveness of the current patent system. This could ultimately affect the marketing industry, which has become increasingly focused on consumer mobility and mobile technologies.

William G. Barber, The New York Times

By offering exclusive rights for a limited period, our patent system enables inventors to recover their research and development costs and their investments in commercializing new technologies….Even more to the point, the system nurtures small start-ups, the life blood of innovation, by securing the value of their innovation for investors, be they venture capitalists or large companies looking to acquire the next big thing….Most important, the law requires complete disclosure of the invention as a condition of granting a patent. This means the public benefits from this knowledge when the patent expires, as others can build upon the idea.

Charles Duhigg and Steve Lohr, The New York Times

Last year, for the very first time, spending by Apple Inc. and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products, according to public filings.

However, many people argue that the nation's patent rules, intended for a mechanical world, are inadequate in today's digital marketplace. The patent office routinely approves patents that describe vague algorithms or business methods, like a software system for calculating online prices, without patent examiners demanding specifics about how those calculations occur or how the software operates.

As a result, some patents are so broad that they allow patent holders to claim sweeping ownership of seemingly unrelated products built by others.

Erik Sherman, CBS MoneyWatch

Two of the more popular arguments against the current patent system is that it makes it more difficult for companies to innovate and that it adds an effective tax to goods that consumers buy. But neither stands up well to some application of common sense.

It might be that some innovation is stifled, and many smaller businesses do worry about ending up on the wrong side of a patent dispute. But the number of patent applications filed continues to increase…. Perhaps the activity of larger companies masks the problem, but it is difficult to persuasively argue that innovation as a whole is decreasing.

As for the threat of the patent suit tax, look at an area like smartphones. For all the billions being spent in litigation, the products continue to either stay steady in price or drop, so consumers don't seem to be feeling the pinch.

Matthew Castle, Columbia Business Law Review

Judge Richard A. Posner of the United States Court of Appeals for the Seventh Circuit…believes that the current patent system is operating inefficiently. Coming fresh off his June dismissal of Apple and Motorola's patent infringement suits, on September 30, Posner [argued]…that for certain industries, the patent system provides too much protection, creating high transaction costs and market inefficiencies.

Based on the staggering amount of litigation in the smartphone industry, it seems like a stretch to argue that the patent system is operating efficiently….High tech firms are most efficient when they are producing new value generating technology, not when they are spending exorbitant sums of money and resources on allocating the rights to technology that has already been developed.

OUR VIEW:

A technological device like a mobile phone or tablet isn't a single invention, but an aggregation of numerous inventions. These include everything from device design, operating systems and factory-installed software, semiconductors, processors, and even the swipe gestures that constitute the user interface. Occasionally it seems as if the lawsuits make as much sense as auto manufacturers suing each other for infringing on each other's window-rolling innovations. Some legal experts have wondered if all of these distinct features should be offered patent protections. Quite simply: The patent system needs to be updated to accommodate these considerations. The bickering between manufacturers results in inferior products, hurting consumers and marketers.

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