Monday, March 27, 2006

Innovation and its dicontents

Adam Jaffe and Josh Lerner had a nice article in the WSJ last week(unfortunately behind a paywall) on the US patent system. It basically follows the theme of their book, Innovation and Its Discontents, published a couple of years ago by Princeton University Press.

"The problems of the U.S. patent system are under discussion today with an urgency not seen in decades. The Supreme Court will soon hear oral arguments in /eBay v. MercExchange LLC/, which promises to be its most far-reaching examination of patent law in many years. Today the court will also consider /LabCorp v. Metabolite Laboratories/ -- the contested matter is whether a patent can be issued for the correlation between a disease and a naturally occurring substance in the human body. That is: Can you actually patent the laws of nature? And shockingly, Research in Motion has been forced to pay $612 million to prevent all of our BlackBerry handhelds from going dark, even though the U.S. Patent and Trademark Office (USPTO) has indicated that it is likely to find all of the patents behind this ransom demand invalid. Congressional subcommittees, with good reason, have recently held hearings asking fundamental questions about developments like these in the patent system...

The combination of making patents easier to get and simultaneously more potent when enforced has led to an explosion in patent litigation. Holders of dubious patents -- be they established firms or "trolls" whose only business is patent enforcement -- routinely threaten firms that sell valuable products with shutdown based on alleged patent infringement. Even if the target firm believes that it does not infringe, or that the patents at the basis of the claim are invalid, the cost and risk of proving this in court may be too high. Innovators may choose simply to drop the allegedly offending product, or to settle and pay ransom rather than fight."

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