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Has the US patent system gone too far?

Reformers push to limit what is protected.

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“We believe that companies that don’t make a significant contribution, in terms of innovation, have exploited the existing patent system to play hold-up games with those who are, in effect, innovating in the marketplace,” says Rob Tiller, assistant counsel and vice president for intellectual property for softwaremaker Red Hat.

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Part of the problem is that the current system is overloaded. Patent examiners work under essentially a quota system, and in most cases only have about 10 to 20 hours to review each application.

“The flood of patent applications has overwhelmed the resources of the patent office,” says Mr. Tiller. “I think that there have been many grants of patents that a fuller, more careful review would probably show should not [have been] granted.” Unscrupulous submitters can game the system by loading up a single application with a hundred claims, or resubmitting one over and over, says Ravicher.

Congress has made multiple attempts to clear the patent logjam. Last week, both houses submitted legislation that would change patents from a “first to invent” to “first to file” test (an arguably more efficient standard preferred by many other countries because it saves patent officers from the hassle of confirming that an applicant came up with the idea first). The bills would also create a 12-month post-issue period, during which patents could be challenged. Patent-reform advocates such as Ravicher don’t see the bills making much of an impact.

Last October brought one of the most significant and still evolving changes to the patent landscape. In a case known as In re Bilski, a court rejected a patent for a business method of hedging investment risks. In its decision, the US Court of Appeals for the Federal Circuit restricted patents to two specific areas: an improvement “tied to a particular machine” and a method that “transforms a particular article into a different state or thing.” This standard creates a lot of uncertainty for companies innovating in less tangible industries.

“It’s a pretty sweeping decision, which seems to, in most reasonable minds, eliminate most software and business method patents,” says Ravicher. “And in fact we’re seeing decisions now coming from the PTO ‘post-Bilski’ that uphold that belief – that they are now rejecting patents on pure software and business methods.”

Even if this is the new standard, each existing patent must be challenged individually, meaning that it could take years or decades to clear out the patent system.

Meanwhile, companies will continue to run afoul of old patents, ones that would fail to meet the new criteria. And patent-rights advocate Herbert Wamsley, executive director of the Intellectual Property Owners Association, makes the point that there will need to be further refinement through future court decisions about exactly what does and doesn’t fall into the patentable category.

The PTO has taken one step to reduce the workload on examiners. Its new “Peer to Patent” program allows anyone who is interested to look at patent applications and make comments (including claims of prior art) before the patent goes to the examiner. “The limiting factor for the Peer to Patent model is that the applicant has to willingly participate,” says Ravicher. The pilot program of 400 patents shows some initial success. Of the first 23 applications considered under Peer to Patent, nine were weeded out based on prior-art claims filed through the program.

Mr. Wamsley points out there may be a silver lining to the country’s current economic problems, at least for the patent office. “A lot of people are expecting that the number of patent applications to decline this year, and that may help the PTO get control of its workload.”