This article was taken from the October 2014 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online.
Intellectual property is the 21st century's global commercial battleground, replete with intellect but also property and theft.
Three types of IP dominate. Trade designs and marks are aimed at the clear offence of "passing off", ie fraud and plagiarism.
Copyright gives exclusive rights, though for a limited time.
Artists and corporations, especially ICT and media corporations, lobby to stretch and extend these rights to the limit.
However, the big, messy, wasteful battlefield is patents.
Unclear IP boundaries collide with national borders. Tim Berners-Lee has said: "Patents are often used by large companies who can afford the legal fees, or some one-man bands who have nothing to lose and [are] hoping for a pay off from a larger company." We've had recent announcements that Tesla is opening or freeing up its patent portfolio, the US Supreme Court again questioning software patents, and the Chinese government publishing a revealing list of patents that a western firm allegedly used to bully Android-based firms into licensing deals.
Society grants inventors temporary monopolies as patents in return for full disclosure. In this way IP is not lost, and at some future point is shared. It is not about "intellectual rights"; rather it is about economic advantage. US patent numbers grow steadily at over four per cent compound per year since 1990. Yet we find that the creative periods in many industries -- chemicals in the early 20th century, computing in the 60s or biotechnology in the 80s -- precede, not follow, the appropriation of IP.
Some argue that more invention occurs after patents come into existence, but this is typically measured in patents. Microsoft files around 3,000 patents a year. In 1990 it had five. The success rate of applications is fairly stable, roughly 50 per cent over the course of the century. Patent awards are not a measure of success; they're a measure of people's belief that they can make money from them. Frivolous lawsuits, bullying by patent trolls, patent portfolios barring market entry and no proof of increased innovation all undermine the case for the patent regime.
Patent offices are 19th-century, fixed-fee stamping machines.
There is no redress against a patent office if a patent is poorly awarded. Patent offices ration resource inputs (bureaucratic time) rather than balance supply and demand with risk. Instead of maintaining quality when things get busy, patent offices do poorer work. Poor quality patent issuance is an economic externality borne by society through the legal system and innovation forgone.
To fix this, patent offices should be forced to offer a legal indemnity for each patent. If a patent office issues a patent that is overturned, it pays up to a certain amount towards legal costs.
The indemnity is a recourse to the inventor for the patent office failing to ensure the invention is novel and non-obvious. Patents would be worth significantly more with such an indemnity, especially to smaller players, because potential litigators would know that the smaller player will be supported by the patent office, and with some money.
The failures of patent offices should not be dumped on the legal system but, equally, patent offices need to show the value that they add. It's now time for patent offices to put their money where their mouths are.
Michael Mainelli is emeritus professor of commerce at Gresham College and co-author of The Price of Fish (Nicholas Brealey)
This article was originally published by WIRED UK
