Will patent reform diminish or restore the value of originality?

The era of the digital machine in human history -- an era which has only spanned the interval of our own lifetimes, if that long -- has seen the difference between a concept and a mechanism narrowed to a barely negligible dividing line. For a concept to be patentable, it need not yet physically exist, yet it must be sufficiently demonstrable -- that is to say, the concept must be so meticulous as to describe something which could, if only for need of a little workmanship, be made real. The legal phrase for this is reduction to practice -- a demonstration of the workability of the concept, which can in most cases (one notable exception being genes) be simply theoretical.

What so few individuals understand about the ideal of the patent is that it is principally an instrument with which you as an individual may attest that a workable concept is yours. It does not calculate a concept's commercial value or practicality or efficiency or usefulness; rather, that as an ideal of a mechanism, it specifies that it is original, that it came from someone in particular, and that it is workable. Ideally, a concept should be attributable to its source, just as this paragraph and this essay will, for whatever it's worth, be attributed to me.

But intellectual property in the modern age is, and forever shall be, property; and one thing that a patent bestows upon a concept is trading value. Only in Ben Franklin's or Thomas Edison's era could an inventor, once accredited with an idea, be expected to personally bring it into fruition through the sweat of his own labor; today, separated from the expectation of being born after it's conceived, an invention need only be a novel way of explaining something. And it's the explanation, not the culmination, which has market value, principally because the inventor -- or, more often, the person or entity to whom the inventor has sold his idea -- can claim that by holding title to an explanation of an idea that's older than anyone else's, he/she/it is entitled to not only whatever fee may come out of somebody else having brought the idea to fruition, even by accident, but also damages on account of having successfully avoided being discovered prior to the idea's culmination.

Thus a patent any more is no longer a creation; rather, it has become a tool...or rather a weapon for litigation. And it is for that reason that people and companies that depend on the exchange of ideas -- especially the open source community -- have grown skeptical of anyone whose business it may be to defend itself, or even substantiate itself, by means of claiming infringement. That skepticism, left to its own, can run amok, to the extent where the very use of the patent instrument can be attributed some sinister purpose.

In the modern era, entire businesses are based on a model of cultivating IP portfolios to execute and to win lawsuits, and potentially gain treble damage awards by jumping through the low-grade hoop of "willful infringement." Memory maker Spansion became one such company; another is Transmeta, both of which were heralded by analysts for having assembled aggressive portfolios and made convincing initial threats against prospective defendants...but not too aggressive, because it wouldn't be profitable for them if their targets were to reach settlements too early. Now, both institutions are fighting for their very survival; and another, Visto, sought to avoid sharing their fate by acquiring a company capable of actually manufacturing real goods (no pun intended) based on the portfolio it's been defending this entire decade.

Left to right, Sen. Orrin Hatch (R - Utah), Rep. John Conyers (D - Mich.), Sen. Patrick Leahy (D - Vt.), and Rep. Lamar Smith (R - Tex.), reintroducing the Patent Reform Act of 2009, March 3.

Earlier this week, US Senators Patrick Leahy (D - Vt.) and Orrin Hatch (R - Utah) re-introduced the latest edition of a bill (PDF available here) whose ideal purpose (for those of us who still believe in ideals) is to restore the basic value system of the patent. It's a tricky business because if the bill reveals that purpose too explicitly, a very aggressive lobbying effort could lay it back upon the same table where every other Congress' effort ended up languishing since the 1980s.

Largely unchanged since 2005, the current bill's nucleus would rewrite US patent law so that a patent holder claiming infringement would only be entitled to the reasonable value of a royalty agreement for the patent's given market, had such an agreement been worked out beforehand, unless a much higher standard of willful infringement can be proven. The market value of a royalty in the context of the market that the invention might have opened up -- had the invention been allowed to establish its value in the open market rather than a closed courtroom -- is an entirely different metric from the value of a patent established through successful litigation.

"The court also is required to identify the factors that will be considered in determining a reasonable royalty, ensuring that the record is clear on what considerations the judge or jury assessed in awarding damages," reads an explanation from Sen. Leahy's office earlier this week. "The court must also consider any non-exclusive marketplace licensing of the invention, if there is such a history, in determining a reasonable royalty."

This provision of the bill would achieve the goal of relocating the headquarters of the patent market from the courtroom to the boardroom. For this reason, advocates who would appear to be representing the interests of the people whom this bill should most directly benefit, continue to speak out in opposition to the bill. At least in the courtroom, they feel, they may have a fighting chance.

Earlier this week, the Coalition on 21st Century Patent Reform issued a statement that read in part: "The damages methodology in this bill heavily favors infringers over inventors. At a time when we need to stimulate our innovation and aid US manufacturers, this bill sends an international signal that patented American technology can be copied with little or no consequence. We will erode our global leadership in research and invention if we eviscerate this cornerstone of our patent system."

The value of a patent in the modern market is often determined by its ability to prove willful infringement -- a fact that portfolio holders today don't hide, but display in full regalia, like street dogs marking their territory. If private enterprise had the audacity, to borrow a term from our new president, to take responsibility for its own property rather than rely on the big hand of government -- the way business leaders say things should be -- then ideas would be answerable to market forces such as supply and demand. And no longer would it be practical for someone to patent something like the order of programs in an on-screen menu, or the way a sensor reading is subtracted from another to obtain a degree of tilt. The true market value of such things is minuscule, perhaps even zero -- no one would think to need to license a rectangle or a minus sign. The only reason such patents are applied for in the first place is in hopes of claiming infringement in the future -- or, in the curious case of the sensor readings, in the past.

So indeed, existing patents everywhere would be devalued, and it is that which opponents of market reform fear most. Individuals who truly do believe they've been infringed upon are instead given a one-year window in which to voice their opposition. But the effect of a successful derivation proceeding, it turns out, would be an invalidation of the patent rather than that "3X" bonus -- treble damages -- that serves as the current system's brass ring.

In an ideal system where patent reform prevails, fairness would be something we'd all just have to learn to live with. What has successfully stymied reform to this point is a fear of fairness that can only best be excised in the light of day. In the modern era, the system of values into which patents presently play can indeed be profitable. But when reduced to practice, this method of business is no longer workable.